ITO Vs Khanna Sales (India) Pvt. Ltd. (ITAT Lucknow)
Section 68 Addition Deleted as Cash Deposits Explained by Sales Records: ITAT Lucknow
The Revenue appealed against the order of the Commissioner of Income Tax (Appeals), NFAC, which had allowed the assessee’s appeal against the assessment order passed under Section 143(3) for Assessment Year 2017-18 and deleted an addition of ₹2,64,19,000 made under Section 68 of the Income Tax Act.
During the demonetisation period, the assessee deposited ₹2,83,19,000 in its bank accounts. The Assessing Officer (AO) sought details regarding the source of the deposits. The assessee stated that the deposits represented cash sales made in the regular course of its business of trading in Supari and Kattha. The AO compared month-wise cash sales, cash deposits and cash-in-hand positions for financial years 2015-16 and 2016-17 and observed significant increases in cash sales and deposits immediately before demonetisation. The AO also noted that cash sales became abnormally high in October 2016 and up to 8 November 2016, while cash sales before and after that period were negligible. The AO examined the purchase pattern, observed that purchases after September 2016 were mainly from related concerns, and concluded that bogus sales had been recorded to accommodate unaccounted cash. After treating only ₹19,00,000 as explained, the AO added the balance amount of ₹2,64,19,000 under Section 68.
