Mere basis of sales being made through cash not enough reason addition: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that there is no justification in making any addition since nothing adverse was found in the books of accounts.

The effective ground in this appeal is against the sustaining of addition of INR 15,08,401/- made by the Assessing Officer (“AO”) on account of unexplained cash deposits.

The assessee filed its return of income through e-mode on 30.10.2017, declaring total income of INR 1,94,910/-. The case was selected for compulsory scrutiny for the reasons large value of cash deposited. The assessee is running a petrol pump in the name and style of petrol Metro filling station. During the course of assessment proceedings, the assessee was asked to explain the source of cash deposited in his bank accounts maintained with HDFC Bank & Axis Bank. In response to the notice, it was stated that the amount was deposited out of cash sales of petrol products.

However, the AO on the basis of some inquiry, treated the sum of INR 15,08,401/- being unexplained and added the same into the income of the assessee. Thus, he framed the assessment vide assessment order dated 28.12.2019 under section 143(3) of the Income Tax Act, 1961 (“the Act”) and assessed the income of the assessee at INR 17,03,310/-.

Aggrieved against this, the assessee preferred appeal before CIT(A), who after considering the submissions, sustained the addition and dismissed the appeal of the assessee. Aggrieved, the assessee appealed before the tribunal.

After hearing both the parties, the two member bench consisting of B.R.R Kumar (Accountant member) and Kul Bharat (Judicial member) held that the assessee’s accounts are duly audited and book results have not been disturbed. Therefore, merely because the sales have been made in cash ought not to have been the basis for making the addition. Moreover, the business of the assessee was exempted in respect of pecuniary limit despite of deposit of demonetize currency. It is not the case where the AO found any discrepancy related to stocks. If the sales were matched with purchases no addition was called for.

Therefore the AO was directed to delete the impugned addition of INR15,08,401/- and the appeal was allowed.

To Read the full text of the Order CLICK HERE

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