The Lucknow Bench of Income Tax Appellate Tribunal(ITAT) upheld the Commissioner of Income Tax(Appeals)[CIT(A)]’s deletion of the ₹1.22 crore addition made under Section 68 of Income Tax Act,1961 for cash deposits during the demonetization period.
The Revenue-appellant appealed against the order of the CIT(A).In this case,Sachit Kumar Agarwal,respondent-assessee, was assessed under Section 143(3) of the Act through an order dated December 30, 2019. The total income was determined at ₹2,75,41,208, with an additional ₹5,93,000 as agricultural income. The Assessing Officer(AO) added ₹1,22,00,000 under Section 68 for cash deposits made during the demonetization period and increased the gross profit rate, leading to another addition of ₹1,01,54,618.
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The assessee appealed to the CIT(A), who deleted the ₹1,22,00,000 addition in an order dated September 23, 2020. It was held that deposits from cash sales made in a staggered manner could not be viewed negatively, as security concerns and banking advice often influenced such deposits. The CIT(A) also noted that the last deposit was made on November 21, 2016, shortly after demonetization was announced.
The Departmental Representative (DR) relied on the AO’s order, pointing out that the deposits were made in parts. However, he did not explain how the CIT(A)’s reasoning was incorrect.
The assessee’s Authorized Representative (AR) argued that ₹1,22,00,000 was deposited in demonetized currency within a few days of the November 8, 2016 announcement. She stated that the amount came from cash sales, a common practice in this business, and that the assessee had enough stock to support these sales. No discrepancies were found in the stock register.
She contended that the AO made the addition based on doubts and assumptions rather than actual evidence. Supporting the CIT(A)’s decision, she maintained that the deposits alone did not justify the addition. The DR reiterated reliance on the assessment order but did not counter the assessee’s arguments.
The two member bench comprising Subhash malguria(Judicial Member) and Anadee Nath Misshra (Accountant Member)reviewed the records, the assessee’s submissions, and the CIT(A)’s reasoning. It found the deletion of ₹1,22,00,000 to be fair and lawful. Since the Revenue failed to provide valid grounds for interference, the Tribunal upheld the CIT(A)’s order.
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In conclusion the appeal filed by the revenue was dismissed.
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