DCIT Vs Sushil Kumar Sharma (ITAT Delhi)
Merely because certain cash was deposited in the specified bank notes by the assessee during the demonetization period will not make the assessee tainted party when the very same transaction are being made by the assessee in the part as well as in the future.
In a significant ruling, the Income Tax Appellate Tribunal (ITAT) Delhi has deleted additions for unexplained cash deposits in the case of DCIT vs. Sushil Kumar Sharma. This judgment highlights the importance of substantiating transactions with proper evidence, especially during critical periods like demonetization. The case revolved around cash deposits made by the assessee during the demonetization period, which the Assessing Officer (AO) initially treated as unexplained income. However, the ITAT Delhi’s decision to delete these additions underscores the tribunal’s reliance on thorough evidence and proper documentation.
Case Background
The case involved cross appeals for the Assessment Year (AY) 2017-18 against the order of the National Faceless Appeal Centre (NFAC), which partially upheld the additions made by the Assessing Officer (AO). Sushil Kumar Sharma, the assessee, was engaged in the business of providing security, housekeeping, and manpower supply under the name Vandana Enterprises. During the financial year 2016-17, he operated as a business correspondent for First Rand Bank (FRB), a scheduled commercial bank. His responsibilities included collecting loan installments from numerous microfinance borrowers and depositing the collected amounts in his bank account before transferring them to FRB’s account.
Grounds of Appeal
The assessee challenged the AO’s decision to treat cash deposits made during the demonetization period (09.11.2016 to 30.12.2016) as unexplained money. The AO had added a sum of INR 89,41,86,882 to the assessee’s income, ignoring the explanations and evidence provided by the assessee. The assessee argued that the deposits were legitimate collections from microfinance borrowers on behalf of FRB, supported by cogent evidence and proper documentation.
ITAT Delhi’s Findings
The ITAT Delhi carefully examined the evidence presented by the assessee. The tribunal noted that the assessee had a clear modus operandi of collecting loan installments from various borrowers, depositing these amounts in his bank account, and subsequently transferring the funds to FRB. The tribunal acknowledged the business correspondent agreement between the assessee and FRB, which outlined the responsibilities and the nature of transactions.
