Punjab House Vs ITO (ITAT Jabalpur)
Cash deposits during demonetization held fully explained – AO erred in treating recorded cash as unexplained- Once books accepted, cash deposits can’t be doubted – ITAT Jabalpur
In a detailed ruling, the Jabalpur Bench of the ITAT deleted additions made on account of alleged unexplained cash deposits during the demonetisation period, holding that once the books of account were audited & accepted by the AO, there was no legal justification for invoking Section 69A merely on suspicion or for want of confirmations from debtors.
Background
Assessee, Punjab House, a firm engaged in trading of decorative lights having its head office at Jabalpur & a branch at Bhopal, filed its return of income declaring ₹64,850/-. During the course of scrutiny assessment, AO noticed cash deposits of ₹35,66,980/- made in the bank account during November–December 2016, coinciding with the demonetisation phase.
When called upon to explain, Assessee clarified that:
- The deposits represented realisations from sundry debtors & cash sales made before 8 November 2016, particularly from Diwali season business.
- The audited cash balance as per books on 08.11.2016 stood at ₹32,00,442/- (₹29,36,298 at Jabalpur H.O. & ₹2,64,144 at Bhopal branch).
- The said balance also included ₹1,75,000 received from sale of a car, duly reflected in accounts.
AO, however, rejected the explanation, stating that Assessee failed to file confirmations from debtors & that the deposits were made in parts. Holding the source as unexplained, he made an addition of ₹30,77,800/- u/s 69A. Additionally, the AO made a further addition of ₹2,48,000/- towards an advance to Jackson Hotel, holding it to be unsubstantiated. The assessment was thus completed u/s 143(3) with total additions aggregating to ₹33,25,800/-.
