The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that there is no abnormal jump in cash sales during demonetization period and all these facts clearly proved the genuineness claim made by the assessee that cash deposits has been made out of cash balance available with the assessee, thus deleted the addition made under Section 68 of Income Tax Act,1961.
The assessee J.R. Rice India Pvt. Ltd. is engaged in trading and processing of food grains. The assessee filed its original return of income declaring total income of Rs.1,38,97,643/-, a revised return was further filed showing the same total income of Rs.1,38,97,643/-. The Assessing Officer (AO) observed that the assessee had deposited specified bank notes (SBN) of Rs.52,60,000/- in bank during the demonetization period .
The AO directed the assessee to furnish the details of the same together with the sources. The assessee, submitted the reply by stating that it is engaged in the business of trading and processing of food grains and it has been doing regularly cash sales over the last several years since inception of its business.
The AO observed that the cash deposited by the assessee during the year to the tune of Rs.15.51 crores includes cash of Rs.15,43,49,743/- received from debtors during the year. Accordingly, the AO sought to examine the veracity of the debtors and cash received from them.
The assessee was asked to provide the names and addresses of the debtors from whom the cash was received. In response, the assessee submitted confirmations from 12 parties out of total 1624 debtors. In respect of the remaining 1612 cases, neither any details of PAN nor complete addresses of the debtors were furnished. Accordingly, the AO disbelieved the entire explanation given by the assessee and proceeded to make an addition of Rs.52,60,000/- in respect of cash deposits made in specified bank notes during the demonetization period as unexplained cash credit under Section 68 read with Section 115BBE of the Income Tax Act.
Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax Appeals [CIT(A)] which confirmed the addition made in the sum of Rs.52,60,000/ under Section 68 of the Act read with Section 115BBE of the Income Tax Act in respect of cash deposits made during demonetization period.
The Bench comprising of Saktijit Dey, Vice-president and M. Balaganesh, Accountant Member observed that the nature and source of credit being sale proceeds received from the customers stands duly proved and explained. Hence, prima facie, no addition could be made under Section 68 of the Income Tax Act.
After the examination of the cash book of the assessee, it was found that the assessee had cash balance of Rs.55,93,580/- on the date of announcement of demonetization, which sufficiently explains the source of deposit of Rs.52,60,000/- in specified bank notes. Apart from this, the assessee had duly furnished the month wise details of sales, month wise details of purchase, corresponding freight charges incurred month wise, month wise power and fuel expenses and month wise selling expenses in the form of rebate and discount.
All these facts clearly proved the genuineness claim made by the assessee that cash deposits of Rs.52,60,000/- has been made out of cash balance available with the assessee and, hence, in our considered opinion, there is absolutely no case made out by the Revenue for making addition under Section 68 of the Income Tax Act.
It was held that, “There is no abnormal jump in cash sales during demonetization period as compared to earlier history; there is no abnormal jump in percentage of cash sales; the cash deposit was made only on two dates, i.e., on 10.11.2016 of Rs.20,60,000/- and on 11.11.2016 of Rs.32,00,000/- in specified bank notes in two different bank accounts; there is sufficient stock available with the assessee; and there was no occasion to inflate the stocks by introducing fictitious purchases by the assessee ; there was no transfer of deposited cash to another account or other entity which are not relevant for the assessee.”
Therefore the Tribunal held the addition made in the sum of Rs.52,60,000/- in the instant case in the hands of the assessee is grossly unjustified and, hence, were directed to be deleted.
Hence, the appeal of the assessee was allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
