VR Dairy Private Limited Vs ITO (ITAT Chennai)
ITAT Chennai Deletes Demonetisation Addition – Cash Deposits from Recorded Business Receipts Cannot Be Taxed u/s 69
The assessee company engaged in procurement and distribution of cow milk filed its return declaring a loss. During scrutiny, the AO treated cash deposits of ₹49.77 lakh made between 10.11.2016 and 16.12.2016 (demonetisation period) as unexplained investment and added the same u/s 69. The CIT(A) confirmed the addition on the ground that the assessee failed to satisfactorily explain the source of the deposits.
Before the ITAT, the assessee submitted that its business is inherently cash-intensive, involving daily cash collections from distributors and customers. The cash deposits represented opening cash balance and routine business collections, duly recorded in the regularly maintained cash book and audited financial statements filed with the ROC. The assessee also demonstrated compliance with demonetisation disclosure requirements regarding Specified Bank Notes (SBNs).
The Tribunal noted several key facts:
- The assessee maintained regular books of account which were duly audited.
- The cash deposits were recorded in the cash book.
- The AO did not reject the books of account u/s 145.
- No incriminating material was brought on record to show that the deposits represented unaccounted income.
The ITAT held that Section 69 can be invoked only when investments are not recorded in the books of account. Once the transactions are recorded in the books and supported by business records, the basic condition for invoking section 69 fails. The mere fact that deposits were made during the demonetisation period cannot justify an adverse inference, since suspicion cannot substitute proof.
Accordingly, the Tribunal held that the addition was made merely on suspicion due to the timing of deposits during demonetisation and directed deletion of the addition of ₹49.77 lakh
FULL TEXT OF THE ORDER OF ITAT CHENNAI
