G.Ramesh Vs ITO (ITAT Chennai)
Chennai ITAT Deletes Demonetisation Addition; Cash Deposits Matching Audited Sales and VAT Returns Cannot Be Treated as Unexplained
The Chennai ITAT held that cash deposits made during the demonetisation period cannot be treated as unexplained under section 69A where they are duly supported by audited books of account, regular business sales and VAT returns. The Tribunal noted that although the CIT(A) had restricted the addition to ₹33.66 lakh, representing deposits in Specified Bank Notes (SBNs), he failed to consider the assessee’s specific evidence showing that the cash deposits were out of regular business sales. The assessee had produced audited books of account, details of purchases and sales for the period from 01.04.2016 to 31.12.2016, and demonstrated that the figures matched the VAT returns filed with the Sales Tax authorities. The Tribunal observed that the CIT(A) himself had accepted that the entire cash sales proceeds could not be brought to tax, yet overlooked the crucial evidence correlating the impugned cash deposits with recorded sales. Holding that the matching VAT returns and business records had not been properly examined, the Tribunal found the appellate order unsustainable, set aside the addition of ₹33.66 lakh, and allowed the assessee’s appeal.
