Bhai Bhai Co. Vs ITO (ITAT Kolkata)
The Income Tax Appellate Tribunal (ITAT), Kolkata bench, has directed the deletion of a ₹62 lakh tax addition imposed on Bhai Bhai Co. The addition, made under Section 68 of the Income-tax Act, 1961, was for cash withdrawals from the company’s own bank account during the demonetization period. The ITAT ruled that the Assessing Officer (AO) had wrongly applied Section 68, concluding that the cash withdrawals were part of the company’s normal business operations.
The case originated when Bhai Bhai Co., a commission agent in the fruit business, came under scrutiny for substantial cash deposits made during demonetization. The AO doubted the business need for such large cash transactions and, based on these doubts, made an addition of ₹62,00,000 to the company’s taxable income, treating the cash withdrawals as unexplained income.
Bhai Bhai Co. appealed the decision, arguing that the cash withdrawals were essential for its business as a commission agent, which routinely involves cash purchases and sales. The company’s representative explained that the disputed amount of ₹62 lakh was a result of a continuous cycle of cash withdrawals and deposits and was duly reflected in the business’s turnover and books of accounts.
