Assessee engaged in the business of trading in diamond filed its return of income for the year under consideration declaring a loss of Rs. 2.59 crores. The Assessing Officer noticed that the assessee has deposited a sum of Rs. 45 lakhs into its bank account during demonetization period. It was explained that the above said amount represented cash balance available in its books of account, which included advance received from the customers towards sale over the counter. In consequent to which AO held that the assessee has failed to prove cash deposits made by it during demonetization period and accordingly, treated the cash deposits of Rs. 45 lakhs as unexplained cash deposit and assessed the same as income of the assessee under section 68 of the Act. Further in appeal the Hon’ble CIT(A) also upheld the findings of the Ld. AO and confirmed the additions u/s 68 of the Act. Aggrieved the Assessee filed appeal before the Hon’ble Tribunal.

The Hon’ble Tribunal relying on Lakshmi Rice Mills v. CIT(1974)  97 ITR 258 (Pat)(HC)  and ACIT v. Hirapana Jewelers (2021)   189 ITD 608 (Visakha Patnam)(Trib)  held that it is seen that the advance amount collected from customers, the sales bill raised against them etc., have been duly recorded in the books of account. The impugned deposits have been made from cash balance available with books of account. Also the Assessing Officer has not rejected the books of account.  Thus, when cash deposits have been made from the cash balance available in the books of account, there is no question of treating the said deposits as unexplained cash deposit (AY. 2017-18)