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Facts
The Revenue appealed against the deletion of an addition of Rs. 82.40 Lacs made by the Assessing Officer (AO) on account of cash deposits during the demonetization period. The AO alleged that the deposits were unexplained cash credits and added them to the assessee's income under Section 68 of the IT Act.
Held
The Tribunal held that the deletion of the addition by the CIT(A) was justified. The CIT(A) noted that the percentage of cash sales remained consistent and the AO had not doubted the purchases or rejected the books of accounts. The Tribunal agreed that adding the sales proceeds again would amount to double taxation.
Key Issues
Whether cash deposits during demonetization, claimed to be from cash sales, are unexplained cash credits under Section 68 of the IT Act.
Sections Cited
68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, CHANDIGARH
Before: HON’BLE SHRI RAJPAL YADAV & HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM
O R D E R Manoj Kumar Aggarwal (Accountant Member) 1. Aforesaid appeal by revenue for Assessment Year (AY) 2017-18 arises out of an order of learned Commissioner of Income Tax (Appeals), NFAC [CIT(A)] dated 12-09-2025 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) of the Act on 22-12-2019. The sole grievance of the revenue is deletion of addition of Rs.82.40 Lacs as made by Ld. AO on account of cash deposit during demonetization period. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. The assessee being resident firm is stated to be engaged in manufacturing and trading of garments and hosiery goods.
To verify the sources of cash deposits of Rs.82.40 Lacs during demonetization period, the return of income of the assessee was scrutinized. The assessee, inter-alia, stated that the deposits were sourced out of cash sales. In support, cash book was furnished. The total sales during this year was Rs.23.01 Crores out of which cash sales was for Rs.1.53 Crores. In immediately preceding year, total sales were for Rs.11.86 Crores out of which cash sales were for Rs.90.47 Lacs. The sales increased substantially and the deposits were sourced out of cash sales. However, Ld. AO noted that the assessee had regular cash deposits from 01-10-2016 to 28-10-2016. The cash was deposited on 02-11-2016 and again withdrawals were made on 03-11-2016 to 05-11-2016 which would reflect that the assessee was not having sufficient cash-in-hand as stated by him. The closing cash-in-hand during October, 2016 increased substantially to Rs.107.54 Lacs whereas the same in the corresponding period of last year was Rs.6.84 Lacs. Therefore, it was alleged that the assessee manipulated its cash-in-hand. The cash sales bills as furnished by the assessee did not bear the name of the party or their addresses. Finally, the impugned deposits were alleged to be unexplained cash credit u/s 68 and added to the income of the assessee. Aggrieved, the assessee preferred further appeal.
The Ld. CIT(A) accepted the claim of the assessee on the ground the percentage of cash sales in this year was 6.67% of total sales as against 7.26% in earlier year. The Ld. AO did not doubt the purchases and the books of accounts were not rejected. There could be no sales without corresponding purchases. The assessee filed VAT returns which reflected sales turnover which was accepted by state revenue authorities. During winter season, the sales would be high in September & October considering the nature of assessee’s business. The Ld. AO tried to put himself into the shoes of the assessee by questioning the deposits and withdrawals. The impugned deposits represent sales proceeds which could not be taxed again. Finally, the impugned addition was deleted. Aggrieved, the revenue is in further appeal before us.
We are of the considered opinion that the impugned issue has been clinched in correct perspective by Ld. CIT(A). The findings of Ld. CIT(A) remained to be controverted before us. The percentage of cash sales in this year is significantly lesser than percentage of cash sales in earlier year. The Ld. AO has not doubted the purchases and the books have not been not rejected. There could be no sales without corresponding purchases. The assessee had filed VAT returns which reflected sales turnover which was accepted by state revenue authorities. The cash sales have been reflected as sales turnover and adding the same again would amount to double taxation which is impermissible. Therefore, we find no reason to interfere in the impugned order.
The appeal stands dismissed. Order pronounced on 6th April, 2026.