Sec 69A not applicable on cash deposited during demonetization basis past trend of regular deposits: ITAT

Sec 69A not applicable on cash deposited during demonetization basis past trend of regular deposits: ITAT

The facts of the case, in brief, are that the assessee is an individual and filed his return of income on 20.10.2017 declaring a total income of Rs.11,39,450/-. During the course of assessment dates, the Assessing Officer noticed that the assessee has deposited an amount of Rs. 30.00 lakhs in cash during the demonetization period in old denomination ie Rs.1000 currency notes in his bank a/c held with Indian Overseas Bank. On being asked by the Assessing Officer to explain the source of such deposit, the assessee explained the same as out of sale proceeds of the business. According to the Assessing Officer, since the old denomination currency ie Rs.1000 and Rs.500 notes were banned by the Govt. of India from 08/11/2016 midnight, therefore, the sale proceeds received in old denomination, as admitted by the assessee himself cannot be treated as receipt from the business. He, therefore, held that the amount to the tune of Rs.30.00 lakhs stand unexplained.

Rejecting explanations given by the assessee, the Assessing Officer held that there was no sale to the extent of Rs. 30.00 lakhs which the assessee explained to be the source of deposit made in the Bank A/c. The Assessing Officer therefore, rejected the book result and computed the net profit at Rs. 12,27,647/-

According to the Assessing Officer, the drawings shown by the assessee is very low as compared to the expenditure claimed at Rs. 24,96,743/- in the P&L A/c. He, therefore, made an addition of Rs.2,40,000/- to the total income of the assessee on account of low withdrawal. Since the Assessing Officer had reduced the sale proceeds in old denomination of Rs.30.00 lakhs, he made addition of the same u/s 69A of the IT Act. Thus, he determined the total income of the ass at Rs. 43,79,450/-.

In appeal, the learned CIT (A) sustained the addition of Rs. 30.00 lakhs made u/s 69A of the Income Tax Act and the addition of Rs.2,40,000/- on account of low withdrawal.

Aggrieved with such order of the CIT (A), the assessee is in appeal before the Income Tax Appellate Tribunal (ITAT).

The Counsel of Assessee submitted that the cash deposits made by the assessee in the Bank A/c during the period from 11.11.2016 to 23.11.2016 are commensurate with the sales made during the previous year and therefore, the same should not have been disbelieved .

Referring to the decision of the Hon’ble Delhi High Court in the case of Pr. CIT vs. Agson Global (P) Ltd reported in 441 ITR 550 (Del), he submitted that under identical circumstances, the H’ble Delhi High Court has dismissed the appeal filed by the Revenue, where the Tribunal had deleted the addition made by the Assessing Officer u/s 68 on account of cash deposits made by the assessee post demonetization since the assessee placed material on record to prove that the cash deposits made with the Bank were in correspondence with cash sales and growth in sales compared to the earlier two years showing a similar trend. Therefore, it could only be concluded that there was growth in the assessee’s business and therefore, the addition is to be deleted.

ITAT relying on the decision of the Delhi High Court allowed the appeal of the Taxpayer and set-aside order of NFAC.


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