JCIT Vs Pari Agencies Pvt Ltd (ITAT Delhi)
The Delhi Income Tax Appellate Tribunal (ITAT) has dismissed a revenue appeal, upholding a lower court’s decision to delete a significant tax addition made on a company’s cash sales during the demonetization period. The tribunal found that the Assessing Officer (AO) had based the addition on unsubstantiated assumptions rather than on concrete evidence, a finding that supports the assessee’s position. This decision clarifies that tax additions cannot be made based on mere speculation, especially when books of accounts are not rejected.
The case involves Pari Agencies Pvt. Ltd., a company engaged in trading mobile phones, accessories, and other items. The company filed its tax return for the Assessment Year 2017-18, which was selected for scrutiny. The AO, upon examining the company’s bank statements, noticed cash deposits of over ₹3.48 crore during the demonetization period, of which ₹1.94 crore were in specified bank notes. The AO also observed a 68% increase in cash sales for the financial year compared to the previous one. Based on a “mathematical calculation” and what the AO considered a suspicious pattern, he concluded that the cash deposits were from unaccounted income rather than from genuine sales. Consequently, the AO disallowed ₹1.59 crore, treating it as unexplained income under Section 68 of the Income-tax Act.
