Ashok Nariyani Vs ACIT (ITAT Jaipur)
Statement During Survey Alone Can’t Justify u/s 68 Addition- ITAT Jaipur Deletes Addition on Demonetisation Cash Deposits
Assessee, proprietor of Manisha Agencies, engaged in wholesale & retail trading of tobacco & mouth fresheners, filed return declaring income of ₹24.46 lakh. During demonetisation (09.11.2016–30.12.2016), Assessee deposited ₹5.00 crore in bank accounts. AO noted abnormal spike in November 2016 deposits & conducted survey u/s 133A. In survey statement, Assessee admitted that ₹94.80 lakh (60% of ₹1.58 crore SBN deposited) was unrecorded sales, offered under PMGKY. AO, however, observed that actual SBN deposits were ₹2.88 crore. Balance ₹1.30 crore was treated as unexplained cash credits u/s 68 & taxed u/s 115BBE. CIT(A) confirmed the addition along with alternate addition u/s 69A.
Assessee’s Contentions
- Assessment made by non-jurisdictional AO (Circle-5 instead of Circle-4).
- Principle of natural justice violated: survey statement not furnished despite specific request; no valid SCN issued contrary to CBDT Instruction No.20/2015.
- No incriminating material found in survey; reliance only on statement u/s 133A which has no evidentiary value (as per SC in Khader Khan Sons).
- Cash deposits were out of duly recorded sales, tallied with VAT returns & audited books.
- Treating the same as unexplained income amounts to double taxation since profits already offered in P&L account.
- Addition made on conjectures & ad hoc basis, without identifying any specific cash credit.
Tribunal’s Observations/Decision
- Statements recorded during survey cannot be sole basis for addition unless corroborated with material evidence.
- AO accepted books of accounts, stock & trading results; no defect was pointed out nor books rejected u/s 145(3).
- Once sales are recorded & accepted, treating deposits as unexplained u/s 68 is unsustainable in law.
- Jurisdictional lapse & failure to follow natural justice further vitiated the proceedings.
- Addition of ₹1.30 crore u/s 68 (with alternate u/s 69A) deleted.
- ITAT held that cash deposits were duly explained through recorded business sales.
- Statement during survey, without corroboration, has no evidentiary value.
- Appeal of Assessee allowed.
Additions based purely on survey statements u/s 133A, without corroborative evidence & when sales are duly recorded in books, cannot be sustained. Cash deposits during demonetisation must be viewed in the context of business turnover & proper accounting records.
