ITAT Quashes Part of Income Tax Addition u/s 69A on Cash Deposits During Demonetization Based on Sales Evidence [Read Order]

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has partly deleted an income tax addition of ₹59,78,000 made under Section 69A of the Income Tax Act, 1961, on cash deposits during the demonetization period. The Tribunal noted that the deposits were explained by the assessee through sale records and Value Added Tax (VAT) returns and sustained only ₹2,53,000 as unexplained cash.

The assessee-appellant, Manglam Sales Corporations, had declared income in its return for Assessment Year (AY) 2017–18. During scrutiny, the Assessing Officer (AO) observed that the assessee had deposited cash of ₹59,78,000 in its bank account during the demonetisation period.

The AO treated the entire cash deposit as unexplained money under Section 69A of the Act and alleged that the assessee had failed to produce books of account or documentary evidence to substantiate the source of cash.

The Commissioner of Income Tax (Appeals) ( CIT(A) ) upheld the decision of AO.

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Before the Tribunal, the assessee submitted that the cash deposits were out of sales made during the period and were duly supported by tax invoices and reflected in VAT returns. The assessee argued that it had furnished details of parties to whom the sales were made, along with addresses, and that all the sales were disclosed in the return of income.

The Tribunal noted that out of the total deposit of ₹59,78,000, the assessee had explained ₹57,25,000 by producing tax invoices, VAT returns, and buyer details. The Bench found that this part of the cash deposit had been properly accounted for as sales in the regular course of business.

The Tribunal observed that AO has made the entire addition without verifying the documentary evidence submitted. The assessee has furnished VAT returns and sales bills, which cannot be brushed aside without proper rebuttal.

The Bench comprising Mahavir Singh (Vice President) and Brajesh Kumar Singh (Accountant Member) deleted the addition to the extent of ₹57,25,000 and sustained the balance ₹2,53,000 under Section 69A due to lack of sufficient supporting documents.

The assessee was represented by Rushabh Mehta, while Krishna K. Ramawat represented the revenue.

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