Pawan International Vs ITO (ITAT Chandigarh)
In the case of Pawan International vs. ITO, the ITAT Chandigarh addressed a ₹32 lakh addition made by the Assessing Officer (AO) as unexplained income from undisclosed sources. The assessee, a trader of artificial goods and flowers, explained that the cash deposits were proceeds from sales of its opening stock. The business had decided to wind up during the assessment year 2017-18, selling the stock at discounted rates, which led to higher sales compared to previous years. The assessee supported this claim with VAT/Sales Tax returns and records indicating the opening stock.
The AO dismissed the explanation, treating the deposits as unexplained income due to the unusually high sales figures. The CIT(A) upheld the addition, agreeing with the AO’s findings. However, the ITAT Chandigarh noted that the revenue authorities failed to rebut the fact that the sales were made from the opening stock. The tribunal observed that the sales data and supporting documents, including tax returns, corroborated the assessee’s claims. It concluded that there was no justification for treating the cash deposits as income from undisclosed sources, ruling that the addition lacked merit. The ₹32 lakh addition was deleted, and the appeal was allowed in favor of the assessee.
