Yogesh Kumar Chandrakant Jariwala Vs ITO (ITAT Surat)
Entire cash deposits from business income during demonetization could not be considered as unexplained however 20% of additions was upheld
Conclusion: Entire cash deposits made during demonetization could not be treated as unexplained credit and a reasonable addition of 20% of total cash deposit would be sufficient to avoid the possibility of revenue leakage. Despite this, Tribunal upheld that 20% of the additions was valid as the assessee could not substantiate the source.
Held: Assessee-individual was engaged in the manufacturing of textiles and grey cloth, filed his Income tax return for the assessment year 2017-2018 declaring a total income of Rs. 3,63,060. AO found that assessee made a cash deposit of Rs. 26,09,000 in Prime Co-Op Bank Ltd. AO treated the entire cash deposit as unexplained cash and taxed the same under Section 115BBE. On appeal. CIT (A) dismissed the appeal filed by the assessee. Assessee had filed an appeal before ITAT contending that assessee had earned income from manufacturing textile goods during the relevant financial year and during demonetization, assessee had no choice but to deposit the cash in the bank account. He already had included the cash as profit in his income, therefore making this addition would amount to double taxation. AO argued that assessee failed to explain the source of the cash deposit and merely reported that the cash was received from an unidentified person. It was held that entire cash deposit during demonetization period could not be treated as unexplained credit, for a businessman having turnover of more than Rs. 1.00 crore. Further considering the fact that assessee was not able to substantiate the source of entire cash deposit, similarly entire cash deposit could not be treated as unexplained. Therefore, a reasonable addition out of total cash deposit would be sufficient to avoid the possibility of revenue leakage. Thus, considering the facts of the present case, 20% of total cash deposit of Rs. 26.09 lacs were upheld and remaining addition was deleted. So far as taxing the addition was concerned, the cash deposit was out of business receipt, therefore, it could not be taxed under Section 115BBE. AO was directed to tax the sustained addition at normal rate of tax.
