Amar Sparklers Factory Vs ITO (ITAT Chennai)
The appeal before the Income Tax Appellate Tribunal (ITAT), Chennai, arose from the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, dated 26.05.2023 for Assessment Year 2017–18. The dispute related to additions made by the Assessing Officer under Section 69A of the Income Tax Act concerning cash deposits during the demonetization period.
The assessee, engaged in the fireworks business, filed its return declaring an income of ₹6,59,610. The case was selected for scrutiny due to substantial cash deposits of ₹93,53,786 made across multiple bank accounts during demonetization. The assessee explained that the deposits were sourced from closing cash balance as on 08.11.2016, cash received from debtors for earlier sales, and advances received from group concerns. A cash flow statement was submitted in support of this explanation.
The Assessing Officer found that the assessee could not explain the source of ₹6,62,783 as per the cash flow statement. Further, the claim of ₹20,40,000 received as advances from group concerns was rejected on the ground that such receipts were in specified bank notes after 08.11.2016, allegedly in violation of RBI notifications. Accordingly, the Assessing Officer made total additions of ₹27,02,783.
The Commissioner (Appeals) upheld these additions, observing that the assessee failed to provide additional evidence to justify the sources of deposits. The assessee then appealed before the Tribunal, arguing that most of the deposits were explained and that details of advances, including PAN and confirmations from group concerns, had been submitted. It was also contended that the Assessing Officer had not disputed these details.
