MRL Trading Company Vs ITO (ITAT Hyderabad)
Recorded Sales During Demonetisation Cannot Be Taxed as Unexplained Money — Section 69A Inapplicable
The Hyderabad Bench of the ITAT held that cash deposits made during the demonetisation period cannot be assessed as unexplained money under Section 69A when such deposits emanate from regular business sales duly recorded in the books of account. The Tribunal placed significant emphasis on the fact that the Assessing Officer neither rejected the audited books nor disputed the sales turnover, which stood independently verified and accepted by the Commercial Tax Department. A detailed examination of month-wise cash deposits revealed that deposits during November–December 2016 were commensurate with deposits in earlier months, thereby ruling out any abnormal or suspicious pattern.
It was categorically held that Section 69A is attracted only where money is found to be owned by the assessee and is not recorded in the books, a jurisdictional condition clearly absent in the present case. The Tribunal further clarified that mere acceptance or deposit of Specified Bank Notes during the demonetisation window, even if alleged to be in breach of RBI or Government notifications, does not automatically render the receipts unexplained under the Income-tax Act. Any regulatory infraction, if at all, may have consequences under other laws, but cannot justify taxation under Sections 69A or 115BBE. Relying on consistent coordinate bench rulings, the Tribunal deleted the addition of ₹3.37 crore in entirety and allowed the appeal.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
