The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) directed the Commissioner of Income Tax (Appeals) to conduct fresh adjudication in the matter where the assessee failed to produce evidence of cash sales to substantiate the genuineness of cash deposits made during the demonetization period.
Premier Wholesaler Pvt. Ltd, a wholesaler of audio systems filed its income tax return for the assessment year 2017-18 declaring Rs.7,34,910 as total income. The assessing officer noted that the assessee had deposited cash of Rs. 53,13,000 during the demonetization period in two bank accounts maintained under Punjab National Bank on various dates. The AO asked the assessee to furnish details about the cash deposit. The assessee submitted a copy of the cash book showing the daily balance for the year under consideration.
The assessing officer issued another show-cause notice, asking the assessee to furnish various details. The assessee complied with the request and submitted a copy of the cash book, bank book for Assessment Years 2015-16, 2016-17, and 2017-18, details of sales and purchases every month for A.Y. 2017-18, and a copy of sale bills about goods sold to customers for A.Y. 2017-18.
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The Assessing Officer (AO) noted discrepancies as the assessee failed to produce original cash bills and other supporting documents like delivery challans. The AO considered the cash deposits unexplained and made an addition of ₹53,13,000 under Section 68 of the Income Tax Act, taxed under Section 115BBE at 60%.
Aggrieved by the AO order, the assessee appealed before the CIT(A). Regrettably, the appeal was dismissed for non-appearance and upheld the AO order. After that, the assessee appealed before the ITAT, Pune. The assessee’s counsel represented by Hem Chhajed submitted that the cash deposited during the demonetization period was from cash sales and debtor collections.
The Counsel argued that the assessee maintained audited books of accounts, supplemented by supporting documents such as bank statements, cash books, and sales records. The Counsel further submitted that the assessee achieved a substantial turnover of ₹3.75 crores from sales, which aligns with the VAT returns, thereby validating the assessee’s claim of genuine business transactions.
In response, the revenue counsel represented by Ashok Kumar Suthar argued that the assessee failed to submit the original cash bills concerning goods sold to customers in cash, and no delivery challan had been produced for verification which made it impossible to verify the source of cash deposits. The revenue highlighted that the CIT(A) noted the assessee had promised to submit debtor confirmations during the appellate proceedings, but failed to do so. Therefore, the counsel concluded that the statements submitted by the assessee before the AO were factually inaccurate.
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The two-member bench comprising Ramit Kochar (Accountant Member) and Siddhartha Nautiyal (Judicial Member) heard both side’s arguments and observed that the CIT(A) ex-parted that assessee’s appeal due to non-appearance. The tribunal secondly observed that the assessee had submitted all the required documents and the assessing officer accepted the source of the cash deposits.
The tribunal further stated that there are certain differences/discrepancies between the assessment and the assessee’s records placed for consideration. Thus, the tribunal restored the matter to the file of CIT(A) and directed it to verify the documents and adjudicate the case based on its merits.
The appeal of the assessee allowed for statistical purposes.
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