PR & Co. Vs ITO (ITAT Chennai)
ITAT Chennai Deletes Section 68 Addition on Demonetisation Cash Deposits: Source Explained Through Debtors’ Collections
The Chennai Bench of the Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal for AY 2017-18 and deleted the addition of ₹19.56 lakh made under section 68 in respect of cash deposits in specified bank notes (SBNs) during the demonetisation period.
The assessee, a partnership firm engaged in wholesale and retail trading of rice, explained that the SBN deposits represented collections from sundry debtors, received through cash-collection agents. The Tribunal noted that the assessee had produced affidavits from agents, cash ledgers, month-wise details of cash sales, receipts, and bank deposits, and that the books of account were not rejected by the Assessing Officer. The pattern of cash transactions was also found to be consistent with earlier years and the net profit ratio remained stable.
The ITAT held that once the source of cash is substantiated, mere acceptance of SBNs after 08-11-2016—though it may violate RBI notifications—cannot by itself justify an addition under section 68. Since the assessee had discharged the onus of explaining the source of cash deposits, the addition was unsustainable and was directed to be deleted.
Consequently, the stay application filed by the assessee was dismissed as infructuous, and the appeal was allowed in full
FULL TEXT OF THE ORDER OF ITAT CHENNAI
