S. 68 : Cash credits-Cash deposits during demonetization-Addition cannot be made merely because cash-in-hand as on 08.11.2016 was substantially higher than the preceding year when books of account were not rejected, sales were duly recorded, supported by stock records and accepted in VAT returns. Cash deposits out of recorded business receipts cannot be treated as unexplained money on suspicion alone. [S. 69A, 145(3)]
The assessee, engaged in the retail business of sarees and dress materials, deposited ₹1.90 crore in Specified Bank Notes (SBNs) during the demonetisation period. The AO treated the deposits as unexplained and made an addition under sections 68/69A primarily on the ground that the cash-in-hand as on 08.11.2016 was significantly higher than on the corresponding date in the preceding year. The assessee contended that the deposits represented regular business receipts duly recorded in the books, supported by day-wise cash book, sales register, purchase register, stock register, stock statements and VAT returns. The Tribunal held that the assessee had maintained regular books of account which were duly audited and that the AO had neither rejected the books under section 145(3) nor pointed out any defects therein. The sales recorded during the demonetisation period were duly reflected in the books and VAT returns, which had been accepted by the State VAT authorities. The purchases and stock movement were also not disputed. The Tribunal observed that the addition was based merely on suspicion arising from higher cash-in-hand and that no material was brought on record to establish that the cash deposits represented unaccounted money. Once the assessee discharged the primary onus by producing books of account, stock records, quantitative details and VAT returns, and in the absence of any finding of inflated sales, bogus purchases or abnormal profits, the cash deposits could not be treated as unexplained money merely because they were deposited during the demonetisation period.
Followed , Ziva Jewellary Pvt. Ltd. v. ACIT,ITA No. 2625/Mum/2024 ACIT v. Ramlal Jewellers (P.) Ltd. (2023) 154 taxmann.com 584 (Mum)(Trib), and Pukhraj Nathmal Jain v. ITO, TA No-2815/Mum/2023 dt.26 -2-2024, the Tribunal directed deletion of the addition of ₹1.90 crore. (AY 2017-18,)(ITA No. 1994/Mum/2026, dt. 25-5-2026)
Paaneri Exim Pvt. Ltd. v. DCIT (www.itatonline.org)
[Coram : Hon’ble Shri Anikesh Banerjee, JM and Hon’ble Shri Makarand Vasant Mahadeokar, AM]