DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1(1), CHANDIGARH vs. ALLIED NOVATECH PRIVATE LIMITED, CHANDIGARH

Facts

The assessee, engaged in retail trade, faced an addition of Rs. 1,83,95,000/- under Section 69A by the Assessing Officer for unexplained cash deposits made during October/November 2016 (demonetization period). The AO alleged these deposits were from unexplained sources and the assessee booked bogus sales. The CIT(A) deleted this addition, stating that the AO was wrong in not accepting the declared cash sales recorded in the books of account without formally rejecting the books.

Held

The Tribunal upheld the CIT(A)'s decision, confirming the deletion of the addition. It was observed that the Revenue had accepted the assessee's purchases, stock, books of account, and sales. Therefore, when the sales generating cash were accepted, depositing these proceeds into the bank account cannot be treated as unexplained, especially when the books were not rejected.

Key Issues

Whether an addition under Section 69A for cash deposits from cash sales is justified when the assessee's books of account, including purchases, stock, and sales, have been accepted by the Assessing Officer.