ACIT Vs Mahendra Kumar Agarwal (ITAT Jaipur)
The ITAT Jaipur dismissed the Revenue’s appeal against the order of the CIT(A), which had deleted an addition of ₹1,41,32,000 made under Section 68 in respect of cash deposited in demonetised currency during the period from 9 November 2016 to 31 December 2016. The assessee, an individual engaged in the business of trading in bullion, precious stones, diamonds and manufacturing jewellery through a proprietorship concern, maintained audited books of account and had filed a return declaring income of ₹1,27,020. During scrutiny assessment under Section 143(3), the Assessing Officer treated the cash deposits as unexplained income and completed the assessment by adding ₹1,41,32,000.
The Revenue challenged the CIT(A)’s deletion of the addition, contending that the assessee had deposited ₹1.41 crore in old currency after demonetisation despite maintaining bank accounts, had failed to furnish the names, addresses and PANs of buyers to establish the genuineness of the cash sales, and that the CIT(A) had ignored the test of human probability and surrounding circumstances. The Revenue also challenged the finding that Section 115BBE was inapplicable.
The assessee submitted that the cash deposited represented accumulated cash received against sales effected before demonetisation, particularly during September 2016 to 7 November 2016. A summary of the cash book reflected a closing cash balance of ₹1,41,70,921.45 as on 8 November 2016, of which ₹1,41,32,000 comprised demonetised currency. During assessment proceedings, the assessee produced the cash book, sales register, stock register, VAT assessment order, audited books of account, and financial statements. It also pointed out that the stock register established the availability of sufficient stock for the sales, that the VAT authorities had accepted the sales declared in the VAT returns, and that the cash sales and cash balances were consistent with the trend in earlier years. The assessee further submitted that no incriminating material was found during a survey under Section 133A to indicate any undisclosed source of income or bogus sales. It also explained that the showroom remained closed after the false ceiling collapsed around 7–8 November 2016, resulting in no cash sales on 8 November 2016 and limited business immediately thereafter.
