Cash Withdrawals During Demonetisation Taxed u/s 68: ITAT Deletes ₹62 Lakh Addition treating them as Business Turnover [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) deleted ₹62 lakh addition under section 68 of Income Tax Act,1961, holding that cash withdrawals during demonetisation formed part of business turnover.

Bhai Bhai Co,appellant-assessee, was a commission agent in the fruit business. The Assessing Officer (AO) added Rs. 62,00,000/- under section 68 of the Act, treating cash withdrawals from the assessee’s own bank account during the demonetisation period as unexplained.

The case was taken up for scrutiny to verify large cash deposits, and the officer questioned the need for such heavy withdrawals for business purposes.

The assessee’s appeal before the Commissioner of Income Tax(Appeals)[ CIT(A)] was dismissed, as the claim that the withdrawals were for business use and part of turnover was not accepted. The assessee then appealed before the ITAT.

The assessee counsel stated that the assessee worked as a commission agent in the fruit business where cash dealings were common. It was explained that during the period in question, Rs. 62,00,000/- was withdrawn and Rs. 45,43,365/- was deposited in the bank accounts.

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The counsel argued that the AO was wrong in treating the amount as undisclosed income since it was only a cycle of withdrawals and deposits required for business operations. It was also pointed out that the transactions were part of the business turnover, properly recorded in the books, and that section 68 of the Act could not apply to withdrawals from the bank.

The departmental representative, however, supported the findings of the lower authorities.

The two member bench comprising George Mathan(Judicial Member) and Sanjay Awasthi (Accountant Member) reviewed the submissions and records, including the paper book filed by the assessee counsel.

It held that the AO wrongly doubted the withdrawals while accepting the deposits, even though both were part of regular business turnover. It further found that section 68 was wrongly applied to normal business transactions. The tribunal therefore deleted the addition.

Accordingly the appeal was allowed.

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