Demonetisation Cash Sales Explained by Books and VAT Returns: ITAT Jaipur Deletes Section 69A Addition

Damodar Prasad Agarwal Vs ITO (ITAT Jaipur)

Summary: ITAT Jaipur allowed the assessee’s appeal and deleted the addition made under Section 69A in respect of cash deposited during the demonetisation period from 09.11.2016 to 30.12.2016. The AO had treated cash deposits of Rs.94,49,786/- as unexplained money, primarily noticing an abnormal increase in cash sales, absence of customer particulars on bills below Rs.2 lakh, increase in cash balances during September-November 2016, deviation from the earlier pattern of depositing cash in the bank, and deposit of old Rs.500 and Rs.1,000 notes.

The CIT(A) substantially confirmed the addition, though directing exclusion of the gross profit associated with sales already accounted for, and also upheld taxation under Section 115BBE. The assessee explained that his jewellery business had shifted from a 100 sq. ft. shop to a 1,500 sq. ft. premises, resulting in increased sales; that the higher October-November cash sales arose during the Deepawali season; and that cash sales of Rs.46,01,586/- took place on 08.11.2016.

The assessee produced day-to-day books, stock records, cash book and sales ledger and demonstrated that the sales had been disclosed in VAT returns which were accepted. The Tribunal noted that the Revenue found no infirmity in the assessee’s explanation or books and did not reject them.