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Facts
The assessee, an Airtel DTH distributor, challenged the confirmation of an addition of Rs.3,87,718/- made under Section 69A of the Income Tax Act for cash deposits during the demonetization period. The Assessing Officer had added this amount as unexplained income after accounting for the cash balance as per the assessee's cash book, which was subsequently confirmed by the CIT(A) with a reduction in Gross Profit.
Held
The Tribunal observed that the assessee's business predominantly involved cash sales and the cash deposits were duly recorded in the business cash book. Consequently, the addition of Rs.3,87,718/- as unexplained income was not sustained and was deleted. The reduction in Gross Profit directed by the CIT(A) was also reversed.
Key Issues
Whether cash deposits made during the demonetization period, duly recorded in the business cash book of a cash-intensive business, can be treated as unexplained income under Section 69A of the Income Tax Act.
Sections Cited
143(3), 69A
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Income Tax Appellate Tribunal, “SMC” BENCH, AMRITSAR
O R D E R
Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of an order of learned Addl./Joint Commissioner of Income Tax (Appeals)-7, Mumbai, [CIT(A)] dated 09-12-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s 143(3) of the Act on 19-12-2019. The only grievance of the assessee is confirmation of addition of cash deposit for Rs.3,87,718/- during demonetization period. Having heard rival submissions, the appeal is disposed-off as under.
Upon perusal of assessment order, it could be seen that the assessee is engaged as Airtel DTH distributor. Almost all the sales are in cash. It transpired that the assessee deposited cash of Rs.29,97,410/- during demonetization period out of which Rs.5,32,000/- was deposited in Specified Bank Notes (SBN). The cash balance as per assessee’s cash book as on 08.11.2016 was Rs.1,44,282/-. The benefit of the same was granted by Ld. AO and the remaining deposits in SBNs for Rs.3,87,718/- was added as unexplained income u/s 69A of the Act. Upon further appeal, Ld. CIT(A) confirmed the addition but reduced Gross Profit by Rs.4,032/- as earned by the assessee on purported sales. Aggrieved, the assessee is in further appeal before Tribunal.
It is quite clear that the assessee carries out substantial sales in cash only. The business is the only source of income for the assessee. The assessee deposited sales proceeds in his bank account. However, only a small portion of the same has been added as assessee’s income simply because the same was accepted in first few days of demonetization period. It could be seen that the cash deposits are duly been recorded in the business cash book of the assessee. This being so, the impugned addition could not be sustained. The addition of Rs.3,87,718/- stand deleted. The reduction in Gross Profit as directed by Ld. CIT(A) stand reversed.