ITO Vs Vishal Ornaments Private Limited (ITAT Ahmedabad)
Ahmedabad ITAT: Demonetisation Cash Deposits Cannot Be Treated as Unexplained Income Merely Because Sales Increased Before 8 November 2016
The Ahmedabad ITAT dismissed the Revenue’s appeal and upheld the deletion of the addition made on account of cash deposits during the demonetisation period, holding that cash deposits cannot be treated as unexplained income merely because the assessee recorded substantial cash sales immediately before demonetisation, when such sales formed part of its regular business pattern.
The Assessing Officer had treated cash sales of ₹1.82 crore made immediately prior to 8 November 2016 as non-genuine and concluded that the assessee had introduced its unaccounted money in the guise of cash sales before depositing the amounts in the bank during the demonetisation period.
The CIT(A), however, found that the assessee had been regularly carrying out cash sales in earlier years as well as throughout the relevant financial year. The evidence showed that substantial cash sales were recorded every month, including months preceding and succeeding demonetisation, and that cash sales in some earlier months were even higher than those immediately preceding demonetisation.
Affirming the CIT(A)’s findings, the Tribunal held that the cash deposits represented normal business receipts arising from regular cash sales, which had been consistently accepted in earlier and subsequent years. In the absence of any material to show that the deposits represented unaccounted money, mere timing of the sales before demonetisation could not justify an addition as unexplained income. Accordingly, the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
