Cash Deposits During Demonetization Alone Is No Basis To Make Addition In Absence Of Glaring Error In Books: Mumbai ITAT
Pankaj Bajpai
14 July 2024 5:45 PM IST
Finding that cash sales as part of the trading result offered for taxation by the assessee is not disputed, the Mumbai ITAT held that addition is permitted on account of cash deposit during demonetization on mere allegation that books of account are manipulated without its rejection. The Bench presided by Prashant Maharishi (Accountant Member) observed that “Mere cash deposit or...
Finding that cash sales as part of the trading result offered for taxation by the assessee is not disputed, the Mumbai ITAT held that addition is permitted on account of cash deposit during demonetization on mere allegation that books of account are manipulated without its rejection.
The Bench presided by Prashant Maharishi (Accountant Member) observed that “Mere cash deposit or cash sales, without pointing out any latent, patent and glaring defect in books of accounts, books of accounts cannot be rejected”.
Facts of the case:
The assessee is an individual proprietor engaged in trading of cloths. Consequent to filing of its return, the case was selected for scrutiny for verification of cash deposit during demonetization period. Finding that assessee had hardly any cash sales and the cash deposited by assessee were transferred to its sister concern, the AO passed an order making an addition of Rs.33 lacs u/s 69A r/w section 115BBE. This addition was confirmed by the CIT(A).
Observations of the Tribunal:
The Bench noted that the assessee has cash sales of Rs.33,57,000/- out of which Rs.33 lacs were deposited in his bank account with Kotak Mahindra Bank.
To support source of cash deposited on four different occasions out of the sale proceeds which are disclosed as sales in the trading account, the assessee has produced the details of cash sales & cash book before the AO, added the Bench.
The Bench observed that in absence of cash sales post demonetization of even a single rupee might be a case of suspicion but that cannot be the basis to disregard the sale of Rs.33.57 lacs in cash prior to that without making any enquiry.
When the sales invoices on cash sales and the books of account are available with the AO, then he should have made an enquiry to disprove the cash sales prior to demonetization, pointed the Bench.
The Bench also emphasized upon the obligation of AO to show that cash sales is not coupled with delivery of goods, or on that assessee did not have stock to sale.
Therefore, the ITAT deleted the addition and allowed Assessee's appeal.
Counsel for Appellant/ Assessee: Jeetender C. Lal
Counsel for Respondent/ Revenue: R.R. Makwana
Case Title: Anil Champalal Jain verses ITO
Case Number: ITA No. 213/Mum/2024
