ITAT rules PAN Not Mandatory to Prove Cash Sales, orders Fresh Look at Aadhaar Details [Read Order]

The Income Tax Appellate Tribunal (ITAT) Ahmedabad bench has held that the absence of PAN card details of customers cannot be the sole basis for treating cash sales as unexplained income under Section 69A of the Income Tax Act. The tribunal emphasized that Aadhaar details can serve as valid proof for establishing the genuineness of transactions and directed the Assessing Officer to conduct a fresh verification.

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Vijaykumar Jagannath Agarwal, a textile trader, who had deposited Rs. 27,76,460 in his business account and an additional Rs. 2,50,000 in his personal savings account during the 2016 demonetization period. The Assessing Officer had treated the entire sum as unexplained money because the assessee could not furnish the PAN details of his customers, rejecting the Aadhaar cards that were provided as proof of identity. This addition was later upheld by the Commissioner of Income Tax (Appeals).

Overturning the lower authorities' orders, the ITAT bench noted that the assessee had maintained audited books of accounts where the cash deposits were duly recorded as sales revenue. The tribunal observed that the revenue did not find any discrepancy in the books, cash ledger, or bank statements. It ruled that the rejection of transactions purely for lack of PAN, while ignoring the submitted Aadhaar details, was not justified. The bench cited the Supreme Court's ruling in Lakhmichand Bajinath (1959), which establishes that amounts credited in business books are presumed to be business receipts unless proven otherwise by the tax department.

For the business account deposit, the ITAT restored the matter to the file of the Assessing Officer. It directed the AO to verify the genuineness of the parties using the Aadhaar details provided and to conduct independent inquiries, including issuing notices under Section 133(6), instead of dismissing the evidence outright.

Regarding the personal cash deposit of Rs. 2,50,000, which was claimed as household savings, the tribunal noted that the CBDT's own instructions provide relief for senior citizens. It directed the AO to re-examine the issue by looking into past financial records, cash withdrawals, and savings patterns to determine if the amount could reasonably be attributed to accumulated savings, ensuring CBDT guidelines are followed.

In conclusion, the appeal was allowed for statistical purposes by the bench comprising Judicial Member Shri T.R. Senthil Kumar and Accountant Member Shri Makarand V. Mahadeokar.

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