Shyam Sunder Baheti Vs ITO (ITAT Hyderabad)
ITAT Hyderabad held that addition towards unexplained cash credit u/s. 68 unsustainable since AO cannot assume that sales were fictitious sales just because the sales are high in the period of demonetization. Thus, addition deleted since assessee as explained reason for increase in sales.
Facts- The case of the assessee was selected for complete scrutiny under CASS for the reasons i.e., abnormal increase in cash deposits during demonetization period as compared to pre-demonetization period. AO after considering the relevant evidences filed by the assessee and also taking note of cash deposit during the month of November, 2016 observed that there is abnormal increase in cash sales and cash deposit during November, 2016 when compared to the period prior to 08.11.2016. AO observed that the assessee could not establish source for cash deposit with known source of income and thus, rejected the explanation of assessee and made addition of Rs.60 lakhs as unexplained cash credits u/sec.68 of the Income Tax Act, 1961.
CIT(A) upheld the addition. Being aggrieved, the present appeal is filed.
Conclusion- Held that in our considered view, when the assessee has explained the reasons for increase in sales for the month of November, 2016 and further, it is not even the case of the Assessing Officer that the product dealt by the assessee is having sales throughout the year, the reasons given by the Assessing Officer to disbelieve the claim of the assessee for source for cash deposit cannot be appreciated. Further, the Assessing Officer has arrived at a conclusion on the basis of his own assumption of cash sales prior to demonetization period and during demonetization period without appreciating the fact that the sales are never predictable and just because the sales are high in the period of demonetization, the Assessing Officer cannot assume that such sales were fictitious sales and more particularly, when the assessee has submitted relevant sale bills in respect of sales. Since the assessee is having sufficient cash in hand as on 08.11.2016, as per the cash book maintained for the period, in our considered view, the explanation of assessee with regard to source for cash deposit into bank account during demonetization period ought to have been accepted by the Assessing Officer. The learned CIT(A), without considering the relevant facts, simply sustained the additions made by the Assessing Officer towards cash deposit as unexplained cash credits u/sec.68 of the Act. Thus, we set aside the order of the learned CIT(A) and direct the Assessing Officer to delete the additions made towards cash deposit u/sec.68 of the Income Tax Act, 1961.
