Sahil Sareen Vs ITO (ITAT Delhi)
The ITAT Delhi adjudicated on the sustainability of additions made under Section 68 of the Income-tax Act, 1961, regarding cash deposits made during the 2016 demonetization period. The Tribunal provided partial relief to the assessee by accepting historical cash sales and prior bank withdrawals as legitimate sources of the deposited funds.
Background and Facts
The assessee, an individual wholesale trader of medicines, filed a return for Assessment Year 2017-18. Following the demonetization announcement on November 8, 2016, the assessee deposited a total of ₹30,92,500 in various current and savings bank accounts.
- AO’s Action: The Assessing Officer (AO) noted that the assessee had
no history of significant cash sales or deposits in previous years. - Addition Made: After allowing a credit of ₹2,50,000 for past savings, the AO made an addition of ₹28,42,500 as unexplained credit.
- Assessee’s Defense: The assessee argued the funds originated from cash sales (duly reported in VAT returns) and recorded cash withdrawals made prior to the demonetization period.
Arguments and Evidence
The Tribunal examined the comparative data submitted by the assessee to substantiate the source of funds:
- Cash Sales: The assessee demonstrated cash sales of ₹16,77,160 (July–Sept 2016) and ₹3,24,188 (Oct–Nov 8, 2016).
- VAT Consistency: It was noted that these sales were disclosed in VAT returns. Although the returns were revised, the changes were found to be minor and did not impact the reported cash turnover significantly.
- Withdrawals: The assessee provided a schedule of six specific bank withdrawals totaling ₹6,00,000 made between May and October 2016.
Findings of the Tribunal
