Ankit Garg Vs ITO (ITAT Delhi)
Cash Sales Recorded in Books—No Rejection of Accounts: ITAT Delhi Deletes Entire ₹1.23 Cr Demonetisation Addition
The ITAT Delhi held that cash deposits made during demonetization cannot be taxed as unexplained income under Section 68 when they are duly recorded in audited books, supported by sales records, stock reconciliation, and VAT filings. Emphasizing that authorities cannot reject declared turnover without first rejecting the books of account, the Tribunal deleted the ₹1.24 crore addition, preventing double taxation and reinforcing that properly documented business cash deposits cannot be treated as undisclosed income.
Ankit Garg, engaged in trading/manufacturing of socks & hosiery, deposited ₹1,23,97,000 in cash during the demonetisation period. AO framed assessment u/s 143(3) treating the entire amount as unexplained cash credit u/s 68, based mainly on an Inspector’s adverse field report & the view that cash sales had increased abnormally (8172%) compared to the preceding year. CIT(A)-NFAC upheld the addition, observing that Assessee produced no sale bills or transport documents & that purchases from one supplier (Unique Enterprises) were unverifiable.
Before the Tribunal, Assessee submitted that all cash sales were duly recorded in audited books, stock registers, VAT records & cash book, none of which were rejected by the AO. All purchases were supported by bills & VAT records. It was argued that the AO relied solely on an Inspector’s informal report obtained on the last day of assessment without giving the assessee any opportunity to rebut it, violating natural justice. It was further argued that double taxation results when recorded sales already forming part of turnover are again taxed u/s 68.
