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Facts
The assessee, engaged in timber trading, filed its return declaring an income of Rs. 13,08,230. During scrutiny, the Assessing Officer (AO) questioned cash deposits of Rs. 69 lakhs made during the demonetization period. The AO treated these deposits as income from undisclosed sources and made an addition under Section 69A and Section 115BBE of the Income Tax Act.
Held
The CIT(A) deleted the addition, finding that the cash deposits were duly recorded in the assessee's books of account, which were maintained in the ordinary course of business, audited under various laws, and supported by documentary evidence like invoices and VAT returns. The Tribunal concurred with the CIT(A), noting no defect or infirmity in the assessee's books and upholding the sales as accepted by VAT authorities.
Key Issues
Whether the cash deposits made during the demonetization period were unexplained income from undisclosed sources, warranting addition to the assessee's income.
Sections Cited
69A, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI ‘B’ BENCH,
Before: SHRI N.K. BILLAIYA, & SHRI YOGESH KUMAR U.S
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the Revenue is preferred against the order of the ld. CIT(A) Karnal dated 10.07.2020 pertaining to A.Y. 2017-18.
The sum and substance of the grievance of the Revenue is that the ld. CIT(A) erred in deleting the addition of Rs. 69 lakhs made on account of unexplained cash deposits during the demonetization period when the assessee failed to explain the source thereof satisfactorily during the assessment proceedings.
Representatives of both the sides were heard at length. Case records carefully perused. Relevant documentary evidence brought on record duly considered in light of Rule 18(6) of the ITAT Rules.
Briefly stated, the facts of the case are that the assessee electronically filed its Return of Income on 28.09.2017 declaring an income of Rs. 13,08,230/-. Return was selected for scrutiny assessment through CASS and accordingly, statutory notices were issued and served upon the assessee.
The assessee is engaged in the business of sawing and wholesale trading of timber. During the course of scrutiny assessment proceedings, the assessee was asked to explain the source of cash deposits of Rs. 69 lakhs in its bank account during the F.Y. 2016-17.
In its reply, the assessee explained that it is engaged in the business of trading wood and during the months of October – November 2016, the assessee has sold wood to various parties and sales were made in cash, which has been deposited during demonetization period.
It was explained that the assessee has paid VAT on the sales made and reported the same in its books of account.
In support, the assessee filed copy of bills, Sale/VAT return, stock register and VAT assessment order.
The detailed reply of the assessee and documentary evidences were dismissed by the Assessing Officer solely on the observation that there was a substantial increase in the cash deposits during the demonetization period as compared to the pre-demonetization period.
The Assessing Officer also dismissed the claim of sales and went on to make addition of Rs. 69 lakhs u/s 69A of the Act treating the deposits of Rs. 69 lakhs as income from undisclosed sources and computed the tax as per provisions of section 115BBE of the Act.
Addition was challenged before the ld. CIT(A). It was strongly contended that cash deposit is duly reflected in the books of account maintained in the ordinary course of business both under the Companies Act and under the Income Tax Act. It was explained that the assessee was having sufficient cash in hand available with it which was received out of cash sales made during the period.
Once again, the assessee filed necessary evidences and after considering the facts and submissions and documentary evidences, the ld. CIT(A) observed that the amount of Rs. 69 lakhs is duly recorded in the books of account which were audited under various laws applicable and supported by credible evidence like copies of invoices, stock register maintained on a day to day basis, VAT returns filed from time to time and order of VAT authorities accepting the sales made by the assessee during the year under consideration.
Having satisfied himself with the explanation of the assessee supported by documentary evidence, the ld. CIT(A) deleted the impugned addition.
Before us, the ld. DR strongly supported the findings of the Assessing Officer but could not point out any factual error in the findings of the ld. CIT(A).
Per contra, the ld. counsel for the assessee reiterated what has been stated before the lower authorities.
We have given thoughtful consideration to the factual matrix discussed hereinabove. The undisputed fact is that there is not even a whisper of any defect, error or infirmity in the books of account maintained by the assessee which were audited both under the Companies Act and under the Income tax Act. The books of account have been maintained in the regular course of business and cash deposits in the books of account are duly reflected in the books of account
Sales made by the assessee and shown in the regular books of account have been accepted as such by VAT authorities while framing the VAT assessment. The assessee was having sufficient stock in hand for making the impugned sales during the demonetization period and it is not the case of the Assessing Officer that the assessee has shown bogus purchases to show bogus sales to cover up cash deposited during the demonetization period.
Considering the facts in totality, we do not find any reason to interfere with the factual findings of the ld. CIT(A).
In the result, the appeal of the Revenue in is dismissed.
The order is pronounced in the open court on 03.01.2024.