Making Deposit At One Go After Declaration Of Demonetization Is No Reason For Doubting Cash Sales: Indore ITAT
Pankaj Bajpai
2 April 2024 8:30 PM IST
While deleting the addition made by the AO u/s 68 of the Income Tax Act, the Indore ITAT held that once the cash sales and availability of the cash with the assessee is duly supported by the books of account of the assessee, then making deposit at one go in the circumstances after declaration of demonetization cannot be a reason for doubting the availability of cash with the...
While deleting the addition made by the AO u/s 68 of the Income Tax Act, the Indore ITAT held that once the cash sales and availability of the cash with the assessee is duly supported by the books of account of the assessee, then making deposit at one go in the circumstances after declaration of demonetization cannot be a reason for doubting the availability of cash with the assessee.
The Bench of the ITAT comprising of Vijay Pal Rao (Judicial Member) observed that “once the demonetization is declared then the currency notes which are declared demonetized w.e.f 08.11.2016 were required to be deposited in the bank account within the specified period as notified by the Government of India or RBI. Therefore, the reason for making deposits of Rs.5,00,000/- in the specified bank notes declared as demonetized is not an abnormal act on the part of the assessee as there was a limited window for depositing of those currency notes in the bank account of the person holding such notes.” (Para 6)
As per the brief facts of the case, the Assessee's return was selected for scrutiny, wherein AO noted that the assessee has deposited cash of Rs.13,15,000/- during the demonetization period and out of sum of Rs.5,60,000/- in the form of SBN (Specified Bank Note) old demonetized currency notes of denomination of Rs.1000/- & Rs.500/- in two parts. The AO has held that the deposit of cash of Rs.5,60,000/- during the demonetization period is abnormal in comparison to the deposit of cash by the assesse during the non-demonetization period for the year under consideration. Accordingly, the AO has made addition of Rs.5,00,000/- as unexplained cash credit u/s 68.
The CIT(A) has also confirmed the addition made by the AO while passing impugned order ex-parte, as there was no one appeared on behalf of the assessee despite various notices.
The Bench noted that out of the total deposit of Rs.13,15,000/- during the month of November 2016 only Rs.5,60,000/- was deposited in the old demonetization currency notes of denomination of Rs.1000/- and Rs.500/-.
The Bench observed that the assessee has produced relevant record showing cash balance as per the books of account and particularly as per the cash book but the AO has not accepted the said explanation of the assessee on the ground that during the demonetization period deposited in the bank account is abnormally higher than the deposit in the bank account during the non-demonetization period.
The Bench further noted that except the deposit in lumpsum amount of Rs.5,00,000/- which is the higher amount in comparison to the deposit made by the assessee frequently in small-small amounts there was no other abnormality found by the AO.
Therefore, on finding the addition made by the AO on account of deposit in the bank account during the demonetization period is not justified, ITAT allowed the assessee's appeal.
Counsel for Appellant/Taxpayer: S.N. Agrawal
Counsel for Respondent/Department: Ashish Porwal
Case Title: Mohammad Ibraheem Khatri verses ITO
Case Number: ITA No.388/Ind/2023
