The Income Tax Appellate Tribunal (ITAT), Chandigarh bench held that addition in respect of unexplained cash credit under sections 68 and 69A of the Income Tax Act, 1961 cannot be made when documents and books of account submitted by assessee accepted by Assessing Officer (AO) in respect of cash credits during demonetization period.
The assessee, Arun Garg is engaged in the business of manufacturing steel. The Return of income for the year under consideration was filed declaring an income of Rs. 27,80,120/-. The case was selected for scrutiny under CASS for the following reason: “Abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period.”
As per the Annual Information Report (AIR), the assessee had deposited cash in two bank accounts (both with Union Bank of India) to the tune of Rs. 82,50,000/- between the period 09.11.2016 and 30.12.2016 and the assessee was required by the Assessing Officer (AO) to explain the same. Thereafter, after considering the submissions of the assessee in this regard, the assessment was completed at an income of Rs. 1,05,50,120/- after making addition on account of cash credits u/s 68 and 69A read with section 115BBE of the Income Tax Act, 1961 to the tune of Rs. 77,70,000/-.
Aggrieved, the assessee preferred to appeal before the NFAC which was dismissed and the assessee approached the Tribunal challenging the dismissal of the appeal.
The Bench consisting of NK Saini, Vice President, and Sudhanshu Srivastava, Judicial Member observed that “the opening stock, purchases, sales and closing stock in the hands of the assessee have been accepted by the Assessing Officer and the books of accounts of the assessee have also not been rejected u/s 145(3) of the Act and as such the entries relating to the related parties in effect stand accepted and, as such, the confirmation of the two additions i.e. both in regard to the number of Rs. 28 lacs and Rs. 48.50 lacs are not justified.”
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