The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted the addition under Section 68 of the Income Tax Act, 1961 as the source for deposits made during the demonetization period has been substantiated.
The Assessee is engaged in the business of wholesale and retail trading of cloth. The year under consideration, the Assessee has declared an income of Rs.3,31,710/- by filing the return of income on 1.7.2017. The case was selected for scrutiny under CASS and the statutory notices were duly served on the Assessee. During the course of assessment the AO noticed that the Asseessee has deposited a sum of Rs.39, 34,000/- in the bank account maintained with Axis Bank during the demonetization period in Specified Bank Notes (SBN).
Mr. Vimal Punmiya representing the assessee submitted that the Assessee is engaged in the business of wholesale as well as retail trading in cloth and in retail trading the Assessee does cash sales. Further submitted that the AO has not disputed the sales figure of the Assessee and has not rejected the books of accounts of the Assessee. Given this the AO making addition towards cash deposits which is generated from cash sales would result in double addition. And also submitted that working explaining the details of the cash deposited during the demonetization period.
The bench noticed that the assessee has submitted cash book, sales account, purchases account, stock statement, Bank statement etc., before the lower authorities for AY 2016-17, AY 2017-18 and AY 2018-19 to substantiate that the cash deposit is from the cash generated out of business. The assessee has also submitted details of cash sales, receipts from debtors and cash withdrawals etc. (page 14 to 16 of paper book) for AY 2016-17, AY 2017-18 and AY 2018-19 in support of the claim the source for deposit of Rs 39, 34,000/- was from cash sales, withdrawals from bank and receipts from parties
The two member bench of the tribunal comprising Aby T. Varkey (Judicial member) and M.S.Pathmavathy S (Accountant member) viewed that the assessee has discharged the onus of substantiating the source for the deposits made in SBN during demonetisation period and that the addition made by the revenue without disputing the business income of the assessee is not tenable. In view of the above discussion, ITAT considered that the addition of Rs 33,40,327/- made under Section 68 of the Income Tax Act cannot be sustained and is therefore deleted. Accordingly the appeal of the assessee is allowed.
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