Gold Spice Impex Vs ITO (ITAT Delhi)
Cash Deposits During Demonetisation Explained as Recorded Cash Sales—Books Accepted; Only 10% Sustained u/s 68 for Non-Compliance; 115BBE Not Applicable for AY 2017-18
The Assessee, a wholesale spice trader, filed return declaring ₹68,540. The case was selected for scrutiny owing to large cash deposits of ₹1.15 crore on 11.11.2016, abnormal increase in sales, and mismatch in customs duty data. Though the AO repeatedly sought year-wise cash-sales/cash-deposit details and issued summons u/s 131 to the partners, the Assessee failed to respond in the prescribed format. The AO concluded that the Assessee had booked concocted cash sales to justify demonetisation-period deposits, and therefore made a full addition of ₹1,15,00,000 u/s 68, taxing it u/s 115BBE. CIT(A)/NFAC upheld the addition, holding that source of cash deposit remained unexplained.
Before ITAT, the Assessee produced complete audited books, VAT & FSSAI reconciliations, quantitative details, inventory records and a detailed fact-sheet showing cash sales of ₹1,14,03,500, representing only 6.1% of total turnover, consistent with wholesale business practice. ITAT noted that the bank statement clearly showed immediate utilisation of deposited cash only for business—payments to suppliers and import remittances, indicating genuine business activity. ITAT also recorded that neither the AO nor the CIT(A) found any defects in the books, and CIT(A) had accepted that AO brought no evidence of concocted sales.
The Tribunal held that once books, stock movement, VAT reconciliation and sales are accepted, corresponding cash realisation cannot be treated as unexplained. Relying on multiple ITAT decisions cited by the Assessee (e.g., JK Wood India, Kalaneedhi Jewellers LLP, Hirapanna Jewellers, Charu Aggarwal), the Bench held that taxing recorded sales again as unexplained would result in double addition, which is impermissible.
However, ITAT acknowledged the Assessee’s procedural non-compliance in not responding properly to notices u/s 142(1)/131. For “overall justice”, instead of deleting the entire amount, the Bench sustained 10% of cash deposits u/s 68 as a reasonable disallowance.
On the applicability of 115BBE, the Tribunal followed Madras High Court in SMILE Microfinance (19.11.2024) holding that s.115BBE applies only from 01.04.2017 onwards, and since the cash deposit was made on 11.11.2016, the AO must assess the sustained addition under normal provisions.
Result
Appeal partly allowed:
