Recent Important Judgment of Hon’ble Delhi ITAT on Demonetization and Its Implications
In a recent Hon’ble ITAT, Delhi H Bench has delivered a most important and historic judgment in Harisons Diamonds Pvt Ltd Vs. The A.C.I.T regarding the addition of entire cash sales from 1.10.2016 to 8.11.2016 by the A.O and partly by the CIT(A). In this case, the assessee was asked to prove the genuinity of the huge cash sales made comparatively much higher than the previous two financial years and in response, the assessee furnished the comparative chart of cash sales, cash deposits, and cash withdrawals of three FYs along with the cash book, sales register, and VAT returns copy apart from a comparative chart. But A.O rejected the genuinity of the huge sales figure prior to the demonetization month as inflated sales to cover up the undisclosed income by the assessee. A.O rested his view on the basis of much lower sales figure in the other two previous years as well as non-furnishing of PAN and names of the purchaser. However, CIT(A) granted part relief to the said substantial addition. Before the Hon’ble ITAT, the Appellant’s main contention was that since both lower authorities have not cast an iota of doubt about the books of accounts meticulously maintained by the appellant along with the VAT return sales figure being accepted by the other revenue authority without any murmur. Moreover, in the line of appellant trade name of purchasers and PAN no is not possible to maintain. After patient hearing, Hon’ble Bench accepted the appellant’s contention with following important observations as:
A. Where both the lower authorities have not rejected the books of accounts of the appellant and has not disputed the purchases and sales turnover then there is no basis for disbelieving the sales prior to the demonetized month as inflated sales.
B. Where the sales receipts have not been disputed by the lower authorities and where appellant has paid the full tax against the said sales then any further addition will be amounted to the double additions.
C. That logically not a single soul including the appellant was aware about the demonetization declared by the Hon’ble PM. Then how come appellant could have circumvented the books of accounts which are fully audited both under the COMPANY ACT as well as by the 44AB. It is absurd to presume that the appellant has inflated its sales to cover up the undisclosed income to combat the demonetization effect.
D. Moreover where the VAT return sales figures were accepted by the other revenue authority then there is no room left to doubt about the sales figure.
So from the said important judgment of Hon’ble ITAT it can be said that it is a scathing rebuke from the judiciary to the assessing authorities for effecting huge additions on SBN cash deposits by treating the entire deposits as undisclosed income of the assesses without any rhyme and reason particularly where books of accounts are not rejected or A.O cannot find any defect on the said accounts. Moreover adding back the same sales receipts is a clear act of double addition not permissible in law. Hope that this historical judgment of ITAT will send a clear message to the income tax department on making blanket addition in most cases of demonetization subverting the basic principles of accounting and laws of land.
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