The Chennai bench of the Income Tax Appellate Tribunal (ITAT) deleted the addition of Rs. 21.5 crores as the bench reached the conclusion that when cash is sourced out of recorded debtors, Section 69A cannot be invoked.
The assessee has appealed against the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] for the assessment year (AY) 2017-18.
The assessee was engaged in the manufacture of IMFL, and when an enquiry under Section 131(1A) of the Income Tax Act was conducted at the business premises of the assessment, it was revealed that the assessee deposited cash of Rs.29.50 crores in Specified Bank Notes (SBNs) in State Bank of Hyderabad during the demonetization period.
In the statement recorded on the same day, the director stated that the cash deposits were sourced out of receipts from three entities viz. M/s Oceanic Impex, M/s Topaz International, and M/s Eshikimpex.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
At the end of the proceedings, the assessing officer was of the opinion that the assessee failed to explain the source of cash remittance into the bank accounts. The AO added Rs. 21.50 as unexplained income under Section 69A of the Income Tax Act.
The CIT(A) upheld the AO’s addition as it reached the conclusion that the assessee failed to establish that the source of the cash deposit was the debtors’ realisation.
The assessee’s counsel criticized the applicability of the provisions of Section 69A of the act on the ground that debtors’ realization was duly recorded in the books of accounts
The ITAT observed that the sum so realised by the assessee has duly been credited to the cash book, and a corresponding reduction has happened in the number of sundry debtors.
It further observed that the assessee has realised debtors during the year, which have duly been credited in the cash book, and thus there is no unexplained money within the meaning of Section 69A of the Income Tax Act.
ITAT held that “when the cash is sourced out of recorded debtors, the provisions of Sec.69A could not be invoked.”
The ITAT, comprising Mahavir Singh (Vice President) and Manoj Kumar Aggarwal (Accountant Member) deleted the addition made by AO.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
