Cash Deposits During Demonetization Can't Be Treated As Unexplained Without Rejecting Books Of A/C: Delhi ITAT

As per Section 69 of Income tax Act, where in the financial year immediately preceding the assessment year, the assessee has made investments which are not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the value of the investments may be deemed to be the income of the assessee of such financial year.

Whereas, Section 115BBE has been introduced in Income tax Act w.e.f. AY 2013-14 with an intention to tackle with people who shows their black income as white by paying less tax. Therefore, any income for which assessee would not be able to explain the source, now will be taxed at 30% instead of 10% or 20%.

The Bench of the ITAT comprising of Vimal Kumar (Judicial Member) and S Rifaur Rahman (Accountant Member) observed that “the ITAT in arriving its conclusion indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of facts which could not reasonably be entertained or finding was perverse which could not be sustained and Supreme Court was entitled to interfere with such findings and therefore the addition was deleted.” (Para 9)

Facts of the case:

The Assessee's return was selected for scrutiny, wherein AO passed an assessment order u/s 143(3) made disallowance of Rs. 65,49,189/- u/s 69A r.w.s 115BBE on allegation that assessee failed to establish that the cash deposited during demonetisation period was as part of the normal business receipts.

Observations of Tribunal:

The Bench noted that the AO relied on figures given by the assessee on basis of cash deposits during the course of demonetization.

The Bench observed that the corresponding previous year the cash deposit out of sales was Rs. 3,19,32,724/- on basis of which cash deposits of Rs. 65,49,189/- was declared as not explained satisfactorily.

The Bench further observed that the figures were taken from the table on the basis of statement of profit and loss by the assessee and the statements were duly verified by independent auditors report.

The Bench observed while referring the decision of the Supreme Court in the case of Lalchand Bhagat Ambica Ram vs. CIT (1959) 37 ITR 288 that when entries in books of account in regard to cash balances were held to be genuine, there was no escape from conclusion that assessee had offered reasonable explanation as to source of all high denomination notes which it encashed and it was not open to ITAT to accept genuineness of those books and accept assessee's explanation in part and reject same in regard to balance sum.

Thus, the ITAT concluded that treating the cash deposit as unexplained cash on basis of books of account without rejecting the same is legally not permissible.

Therefore, ITAT allowed the assessee's appeal.

Counsel for Appellant/Taxpayer: Amit Ganatra

Counsel for Respondent/Department: Vivek Vardhan

Case Title: Pilani Industrial Corporation Limited verses ACIT

Case Number: ITA No. 1606/Del/2023

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