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Facts
The assessee deposited Rs. 1,80,90,330 in cash during the demonetization period, claiming it originated from cash sales and recovery of old debtor amounts in Specified Bank Notes (SBNs). The AO, invoking Sections 68 and 115BBE, made an addition for unexplained cash credit, asserting the assessee failed to explain the sources adequately and that the deposits were excessive compared to prior years. The CIT(A) subsequently deleted this addition, leading to the Revenue's appeal before the ITAT.
Held
The ITAT upheld the CIT(A)'s order, affirming that since the assessee's books of account were not rejected and purchases were accepted, the corresponding cash sales could not be disputed. It was also noted that the large volume of the assessee's glass bangle trade justified high cash transactions and that repayment of old outstandings in SBNs during demonetization was a common phenomenon. Consequently, the addition of Rs. 1,80,90,330 made under Section 68 was confirmed to be deleted.
Key Issues
Whether a cash deposit during demonetization, claimed as sales and recovery from debtors, can be treated as unexplained cash credit under Section 68 when the assessee's books are accepted and sales are supported by VAT records.
Sections Cited
68, 115BBE, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH: ‘A’: NEW DELHI
Before: SHRI VIKAS AWASTHY
Date of Hearing :13.03.2025 Date of Pronouncement : 21.03.2025 ORDER
PER AMITABH SHUKLA, AM:
The Revenue is contesting order u/s 250 dated 12.08.2024, passed by NFAC confirming addition of Rs.1,80,90,330/-made by the Ld. NFAC.
The only issue rising in the present appeal of the revenue is regarding an addition of Rs.1,80,90,330/- made by the Ld. AO under Section 68 of the Act. None appeared on behalf of the ITA No.- 4741/Del/2024 Adarsh Kanch Udyog assessee. As per brief factual matrix of the case the assessee was found to have deposited in cash the impugned amount in his bank account during the demonetisation period. Before the Ld. AO the assessee had submitted that the impugned cash represented his sales made in cash as well as return of old debtors amount in SBNs. The Ld. AO invoked provisions of section 115 BBE of the Act. While making the impugned addition the Ld. AO held the view that the assessee had failed to explain the sources of said cash. It is the case of the Ld. AO that the cash deposited by the assessee was far in excess when compared with the corresponding cash deposits in earlier years. The Ld. DR would like to make us rely upon the order of the Ld. CIT(A).
We have heard the arguments made by the Ld. DR in the light of material available on record. We have noted that the Ld. CIT(A) has extensively analysed the issue as evident from page 2 to page 12 of his order. At this stage we deem it appropriate to reproduce para 9 / 10 of his order on page 12 as under :- “………….In the present case, the books of accounts of the appellant have not been rejected by the AO and hence, the purchase of the appellant are accepted by the AO and Page 2 of 6 ITA No.- 4741/Del/2024 Adarsh Kanch Udyog when the purchases stand accepted, corresponding sales can notbe denied. The AO has ignored the fact that the appellant derived cash sales and realization of cash from debtors mainly out of its Glass bangle trade in which, mostly the buyers are of unorganized sector and deal in cash only. The AO guided by surmise and conjecture while disputing the cash deposit in bank on account of having done in piecemeal manner instead of in one go. The AO was not justified in not considering the fact that during festive occasions such as Diwali, sales are increased. The AO was also not justified in not accepting realization of cash from old debtor by the appellant. It was a common phenomenon to pay the old outstandings in cash in SBNs to get rid of demonetized currency. Further, the AO was not justified in disputing the existence of Debtors from whom cash was realized. The appellant has submitted copy of UP VAT order for F Y 2016-17 in instant appellate proceedings and as per the said order, no discrepancy in salesor purchase is noticed. Considering the large volume of sales of Glass bangle trade of Rs. 17.68 Crores during Page 3 of 6 ITA No.- 4741/Del/2024 Adarsh Kanch Udyog the year as evidenced by UP VAT order submitted by the appellant, the cash sale component claimed to be appellant appears to be justified. The large volume of Glass Bangle sales also justifies high level of debtors who generally pay in cash.
In view of the above discussion, I hereby allow Ground No. 1 to 8 of the appellant and the addition of Rs. 1,80,90,330/- made u/s 68 of the Act is deleted.
Ground No. 9 to 12 are related to interest and penalty and since I have deleted the quantum addition, the grounds become academic in nature and does not need any adjudication.
Ground No. 13 is general in nature and does not need adjudication. In the result, the appeal is disposed of as allowed……”
The Ld. CIT(A) has rightly held that the books of accounts of appellant have not been rejected and the purchases stand accepted. We find sufficient force in the argument that corresponding sales cannot be suspected. We also find force in the argument that assessee’s VAT orders for F.Y 2016-17 also support his case of genuine sales having undertaken. Accordingly, we are of the considered view that there is no case for any interference to the Page 4 of 6 ITA No.- 4741/Del/2024 Adarsh Kanch Udyog order of the Ld. CIT(A) at this stage. The same is, therefore, confirmed and all the grounds of appeal
raised by the revenue are dismissed.
5. In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 21.03.2025.