The Hyderabad bench of the Income Tax Appellate Tribunal (ITAT) held that addition under Section 69A of the Income Tax Act, 1961 when the specific notes form a part of the gross sale.
The assessee filed e-proceedings, stating that he is running the business in the name and style of Balaji Fertilizers, Bachannapet, and furnished computation of income statement, P&L account, and other financial statements, but failed to file the return of income. As per the P&L account furnished gross sales of Rs. 1,24,57,139/- was admitted by the assessee with a net profit of Rs. 3,39,879/-.
The Assessing Officer (AO) felt constrained to estimate the income of the assessee at 8% on the gross sales admitted as per the submission which amounts to Rs. 9,40,811. He further found that during the year assessee has deposited into bank cash of Rs. 40,27,750/- including demonetized currency of Rs. 6,97,000/- deposited during the period of demonetization. He treated the cash deposited during the year as ‘unexplained’ and brought this amount to tax under Section 69A of the Income Tax Act.
The Authorized Representative submitted that the gross sales of the assessee during the year were Rs. 1,24,57,139/-, assessee deposited into bank cash of Rs. 40,27,750/- in the entire year including Rs. 18,88,000/- during demonetization period and out of this amount, a sum of Rs. 6,97,000/- was in specified notes. He, therefore, submitted that the money deposited in specified notes is part of the sales and, therefore, it cannot be brought to tax separately.
The Departmental Representative submitted that the assessee did not submit any material to show that the amount deposited in specified notes is also part of sales in cash. He, therefore, prayed to dismiss the appeal.
The Single-member bench comprising of K. Narasimha Chary (Judicial member) held that there was no reason for the AO to dispute the genuineness of Rs. 6,97,000/- merely because it was in specified notes. Revenue does not say that there was no cash in hand in the business conducted by the assessee.
In these circumstances, having regard to the volume of business and also cash deposits in the entire year and also during the demonetization period relating to such business, the bench was of the considered opinion that there was no reason not to believe that the deposits in specified notes was also part of cash sales. Since the net profit was estimated, this particular deposit cannot be brought to tax separately. Hence, the Assessing Officer was directed to delete the same.
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