ITO Vs Hari Krishan Gupta (ITAT Chandigarh)
Cash Deposits During Demonetisation Accepted as Business Receipts – ITAT Upholds Deletion of ₹1.11 Crore Addition-Festival Sales, Not Black Money – ITAT Rejects “Human Probability” Theory, Cash Deposits Fully Accepted!
Assessee, a retail trader in crockery & electronics, deposited ₹1,11,67,000 in cash during demonetisation. AO treated the entire amount as unexplained u/s 68, applying the “human probability” theory, stating no prudent person would hold invalid notes & deposit in parts.
CIT(A) deleted the addition, holding that:
- Assessee maintained audited books of account.
- Turnover increased from ₹4.34 crore to ₹5.56 crore.
- Gross profit improved from 12.31% to 14%.
- Peak sales occurred in October 2016, consistent with festival season.
- Cash book showed huge cash-in-hand up to 08.11.2016.
- AO never rejected the books or found defects.
- VAT returns matched sales.
Before the ITAT, Revenue relied on human probability. However, the ITAT held:
- Section 68 cannot apply to recorded sales already in books.
- Without rejecting books u/s 145(3), AO cannot disregard cash balance.
- Deposits during the permitted window (09.11.2016–30.12.2016) are not illegal per se.
- Suspicion cannot override audited records & VAT data.
- The CIT(A)’s findings are fact-based & remain uncontroverted.
ITAT also relied on Delhi HC in Agson Global & multiple Chandigarh ITAT rulings holding that cash sales during demonetisation, when backed by books & VAT records, cannot be treated as unexplained.
Held: Cash deposits were genuine business receipts, no unexplained income. Section 68 not applicable. Entire addition of ₹1,11,67,000 deleted.
FULL TEXT OF THE ORDER OF ITAT CHANDIGARH
