Manik Asri Vs ITO (ITAT Delhi)
The Delhi Income Tax Appellate Tribunal (ITAT) allowed the assessee’s appeal and deleted the addition of ₹55 lakh made under Section 68 of the Income Tax Act in respect of cash deposited during the demonetisation period, holding that the cash deposits could not be treated as unexplained where they were sourced from recorded cash sales already reflected in the books of account.
The assessee, a proprietor engaged in the business of PU coated fabric, had filed a return declaring total income of ₹6,90,980. During scrutiny, the Assessing Officer (AO) noted that ₹55 lakh in specified bank notes (SBNs) had been deposited in the assessee’s bank account during the demonetisation period. After assessment, the AO added the amount under Section 68, resulting in an assessed income of ₹74,72,980. The Commissioner of Income Tax (Appeals) [CIT(A)] partly allowed the appeal but confirmed the addition, primarily on the ground that the assessee had recorded unusually high cash sales during October 2016.
Before the Tribunal, the assessee submitted that the cash deposited represented cash sales made out of available stock. It contended that complete documentary evidence had been furnished before the AO, including the cash book, month-wise quantitative stock register, monthly cash-in-hand summary, sales and purchase details, names and addresses of purchasers, cash sale invoices, audited financial statements, bank statements, VAT returns, and reconciliation statements of purchases, sales, and stock movement. The assessee argued that out of total sales exceeding ₹8 crore, cash sales amounted to ₹71.68 lakh, of which ₹55 lakh available as on 8 November 2016 was deposited in the bank. It further submitted that the AO had neither questioned the availability of stock nor rejected the books of account, accepted the trading results, and accepted the sales themselves. Therefore, treating the same cash deposits as unexplained credits under Section 68 resulted in double taxation because the profits arising from those sales had already been offered to tax.
