Satya Pal Shiv Kumar Vs ACIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, heard the assessee’s appeal against the order of the Commissioner of Income-tax (Appeals) for Assessment Year 2017-18 arising from an assessment completed under Section 143(3) of the Income-tax Act. The case was selected for complete scrutiny on account of large cash deposits made during the demonetisation period. The assessee, a partnership firm engaged in manufacturing chewing tobacco and trading in chewing tobacco and perfumery products, explained that the cash deposits originated from cash sales. During scrutiny, the Assessing Officer examined the assessee’s turnover, cash sales, gross profit, net profit and the composition of its manufacturing and trading business over several financial years.
The assessee explained that while turnover had increased significantly, its tobacco business had declined due to restrictions on chewing tobacco and changing consumer preferences, leading it to expand its perfumery trading business. The Assessing Officer, however, observed a substantial increase in cash sales during the first eight days of November 2016. Comparing those sales with October 2016, the corresponding period in earlier and subsequent years, and the average cash sales during the financial year, the Assessing Officer considered the increase to be disproportionate and issued a show-cause notice proposing rejection of the books of account. According to the Assessing Officer, the sharp increase in sales did not accord with normal market behaviour or human probability.
