Deposit Made as a Reserve Amount for Business During Demonetization Period not amount to Unexplained Income: ITAT Deletes Addition [Read Order]

The Kolkata bench of the Income Tax Appellate Tribunal (ITAT) held that deposits made as a reserve amount for the business during the demonetization period do not amount to unexplained income.

The assessee filed its return of income by declaring a total income of Rs. 3,21,920/-. The case of the assessee was selected for scrutiny for the issue of cash deposits during the demonetization period. Statutory notices were issued and served upon the assessee.

The Assessing Officer completed the assessment by holding that the deposits made by the assessee during the period of demonetization of Rs. 24,07,000/- were unexplained money and added to the income of the assessee.

The counsel for the assessee submitted that the assessee has always been regularly filing his return of income with a substantial amount of income since the assessee did not maintain any books of accounts as the assessee filed its return of income under Section 44AD of the Income Tax Act on a presumptive basis.

The Assessing Officer without considering the fact of the case arbitrarily added the whole sum of the deposit made by the assessee during the period of demonetization as unexplained income under Section 69A of the Income Tax Act.

The Authorized Representative submitted that the arbitrary view taken by the Assessing Officer is not correct because while doing business, the assessee has to go through various transactions with different customers which are sometimes paid their dues in cash and sometimes remain credited for a couple of months.

During the period of demonetization, various customers preferred to clear their earlier dues in specified notes and those deposits are nothing but those were collected from sales only made by the assessee doing his business.

Therefore, the view taken by the Assessing Officer and subsequently upheld by the Commissioner of Income Tax (Appeal) [CIT(A)] by making an addition of Rs. 24,07,000/- in the hands of the assessee by treating as unexplained cash needs to be deleted.

The two-bench member comprising of Sonjoy Sarma (Judicial member) and Girish Agrawal (Accountant member) that the approach taken by the Assessing Officer while making the addition of Rs. 24,07,000/- in the hands of the assessee by assuming that deposits made during the demonetization period are unexplained money was not correct.

The order passed by the Assessing Officer by sustaining the addition of Rs. 24,07,000/- was not in accordance with the law as the Assessing Officer never discussed any other surrendering facts and not taking into consideration while framing the assessment order. The Assessing Officer was directed to delete the addition of Rs. 24,07,000/-

Thus, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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