Ramchandra Keshav and Company Vs CIT (ITAT Mumbai)
In the case of Ramchandra Keshav and Company vs. CIT (ITAT Mumbai), the Income Tax Appellate Tribunal (ITAT) deliberated on the addition of Rs. 3.05 crores made under Section 69A of the Income Tax Act for the Assessment Year 2017-18. The assessee, a partnership firm engaged in jewelry trading, had filed its return of income declaring a total income of Rs. 40.52 lakhs. During the scrutiny of the return, the Assessing Officer (AO) noted that the firm had made large cash deposits of Rs. 3.00 crores and Rs. 50.06 lakhs in two co-operative banks during the demonetization period. The AO raised questions about discrepancies in reporting these deposits and suspected that the firm had manipulated its books of accounts to show higher cash availability, leading to the deposit of unaccounted cash.
The AO based the addition on Section 69A, assuming that the cash deposits were unexplained and taxable as income. Despite the assessee presenting its ledger accounts and details of cash sales, the AO argued that the surge in cash sales was inconsistent with the previous year and raised doubts about the availability of physical stock to support these sales. The CIT(A) upheld the AO’s decision, leading to the appeal before the ITAT. The appellant contended that the discrepancies in reporting were due to clerical errors, and that the deposits were made from legitimate cash generated through sales during a period of increased demand due to festivals like Diwali and Dussehra.
