The Bangalore Bench of Income Tax Appellate Tribunal (ITAT) deleted the ₹12 lakh addition made on cash deposits of Specified Bank Notes (SBNs) post-demonetization, accepting recorded sales as the source.
Raju Rajesh, appellant-assessee, was in the business of selling and servicing computers. For AY 2017-18, a return was filed on December 7, 2017, declaring an income of ₹17,58,870. The case was selected for scrutiny, and notices were issued under Sections 143(2) and 142(1).
During assessment, the assessee’s counsel submitted the cash book and sales ledger. The Assessing Officer (AO) found that ₹12 lakh was deposited during the demonetization period. The assessee claimed it came from recorded sales, but the AO rejected this, noting that the cash balance was nil on November 8, 2016.
The amount was added as unexplained cash credit under Section 68, applying Section 115BBE. The total income was determined at ₹29,58,870 in the order dated December 16, 2019.
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The assessee appealed to the Commissioner of Income Tax(Appeals)[CIT(A)], claiming the cash deposit came from sales. The CIT(A) rejected the explanation, stating the source remained unexplained and cash acceptance was not allowed. The addition was upheld.
The assessee appealed before the tribunal.
The two member bench comprising Prashant Maharishi(Vice President) and Soundararajan K(Judicial Member) reviewed the case and found that the assessee, engaged in the computer peripherals business, had deposited ₹12 lakh in SBNs after demonetization. The assessee submitted the cash book and sales register during assessment, showing the deposits as recorded sales. The AO added the amount, stating that the assessee was not authorized to receive SBNs.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The appellate tribunal noted that neither the AO nor the CIT(A) questioned the reported sales. Since the deposits were accounted for as income and linked to sales, no further addition was justified. Citing the Supreme Court’s decision in Sreelekha Banerjee (1963) 2 ITJ 78, the bench ruled that undisputed sales of SBNs could not be added as income. It reversed the CIT(A)’s order and directed the AO to delete the ₹12 lakh addition.
In short,the appeal filed by the assessee was partly allowed.
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