ITAT Deletes Demonetization Cash Deposit Addition as Books & VAT Records Were Accepted

Paaneri Exim Pvt. Ltd. Vs DCIT (ITAT Mumbai)

The Income Tax Appellate Tribunal (ITAT), Mumbai, allowed the assessee’s appeal against the order of the Commissioner of Income Tax (Appeals) [NFAC] for Assessment Year (AY) 2017-18 and directed deletion of the addition of ₹1,90,82,500 made in respect of cash deposits during the demonetization period.

At the outset, the Tribunal condoned a delay of 25 days in filing the appeal after noting that the director handling the income-tax matter had faced a medical emergency. Since the Revenue did not strongly object to the delay, the appeal was admitted for adjudication.

The assessee, engaged in the retail business of sarees and dress materials, had filed its return declaring total income of ₹35,83,710 and book profit under Section 115JB of ₹37,38,748. During scrutiny, the Assessing Officer (AO) examined cash deposits made during the demonetization period and found that the assessee had deposited ₹1,90,82,500 in Specified Bank Notes (SBNs) between 09.11.2016 and 31.12.2016. Although the assessee explained that the deposits represented business receipts and produced supporting records, the AO observed that the cash in hand as on 08.11.2016 was substantially higher than the corresponding figure on 08.11.2015. Holding the explanation to be unsatisfactory, the AO added the entire amount to the assessee’s income. The CIT(A) upheld the addition.