Sqny Fireworks Industries Vs ITO (ITAT Chennai)
Summary: The appeal before the Income Tax Appellate Tribunal (ITAT), Chennai, arose from an order dated 15.03.2024 passed by the Commissioner of Income Tax (Appeals), NFAC, for Assessment Year 2017–18. The dispute related to an addition of ₹49,65,799 made under Section 69A of the Income Tax Act concerning specified bank notes (SBN) deposited during the demonetization period.
The assessee, engaged in the business of purchase and sale of fireworks, had deposited ₹68,15,600 in SBNs. Out of this, the Assessing Officer accepted ₹18,49,901 as closing cash balance as on 08.11.2016 but treated the remaining ₹49,65,799 as unexplained. The assessee explained that the balance amount represented collections from debtors who had purchased goods on credit during the Diwali festival on 30.10.2016. The assessee submitted audited financial statements, books of account, and details of 207 customers, including PAN details for most of them.
The Assessing Officer rejected the explanation on the grounds that confirmations from debtors and their return details were not furnished and that acceptance of SBNs after demonetization was not permissible. The Commissioner (Appeals) upheld the addition on similar reasoning.
The Tribunal examined the records and found that the assessee had duly recorded total sales of ₹3.06 crore, which included the impugned deposits. The profit from these sales had already been offered to tax, and the Assessing Officer had not rejected the books of account, sales, purchases, or stock records. It was also noted that the assessee had sufficient stock for sales during the Diwali period and that there was no abnormal deviation in sales or cash deposit patterns compared to earlier and subsequent years.
