Jamaluddin Vs ITO (ITAT Delhi)
Cash Deposits Can’t Be Treated as Unexplained Without Rejecting Books: Delhi ITAT Deletes ₹64 Lakh Addition & Penalty
Delhi ITAT allowed both the quantum as well as consequential penalty appeals, holding that addition of entire cash deposits of ₹64 lakh was unsustainable in law as the AO failed to reject the books of account u/s 145(3).
In the assessment framed u/s 143(3)/144, the AO treated cash deposits of ₹64 lakh as unexplained, without pointing out any defect in the books of account and without invoking section 145(3). The CIT(A)/NFAC upheld the addition, leading to the present appeal before the Tribunal.
The ITAT noted that the Assessee had duly produced books of account, bills and vouchers during assessment proceedings. Relying extensively on binding precedents including Forum Sales (P.) Ltd. vs. PCIT (Del HC), Sargam Cinema (SC), and decisions of the Bombay, Karnataka, Madras, Punjab & Haryana High Courts, the Tribunal reiterated the settled principle that rejection of books of account is a sine qua non before making best-judgment assessment or estimating income.
The Tribunal held that the AO had adopted an impermissible “pick and choose” approach by accepting the books on one hand and rejecting cash entries on the other, which is arbitrary and contrary to law. Since the foundational requirement of rejecting books was absent, the addition of ₹64 lakh could not survive.
Consequently, once the quantum addition was deleted, the penalty imposed u/s 271(1)(c) was also held to be unsustainable and deleted.
FULL TEXT OF THE ORDER OF ITAT DELHI
