Tekchand Harilal Vs ITO (ITAT Cuttack)
The Income Tax Appellate Tribunal (ITAT), Cuttack Bench, has ruled in favor of Tekchand Harilal, a firm engaged in the distribution of FMCG products and PDS kerosene, by deleting an addition of Rs.5,01,500 made to its income for the Assessment Year (A.Y.) 2017-18. The dispute arose from cash deposits made during the demonetization period, which the Assessing Officer (AO) had deemed unexplained under Section 69A of the Income Tax Act, 1961.
The assessee, a distributor for Nestle, Amul, and PDS kerosene, had filed its return of income disclosing a total income of Rs.83,940 for A.Y. 2017-18. Following an abnormal increase in cash deposits during the demonetization period, scrutiny assessment proceedings were initiated. The assessee provided comprehensive documentation, including bank statements, purchase and sales registers, cash books, and details of month-wise cash deposits. It contended that the deposits were sourced from the available closing cash in hand, which primarily represented regular business receipts collected from retailers. However, the AO did not accept this explanation, disallowing 5,01,500 out of total deposits of Rs.13,68,500 made during the demonetization period. Additionally, the AO made an ad-hoc disallowance of Rs.19,360, representing 10% of carriage outward expenses. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s additions, leading the assessee to appeal before the ITAT.
