Sonny Fireworks Pvt. Ltd. Vs DCIT (ITAT Chennai)
The appeal before the Income Tax Appellate Tribunal (ITAT), Chennai, arose from an order dated 13.02.2024 passed by the Commissioner of Income Tax (Appeals), NFAC, for Assessment Year 2017–18. The dispute concerned an addition of ₹3,09,37,567 made under Section 68 of the Income Tax Act in respect of specified bank notes (SBN) deposited during the demonetization period.
The assessee, a company engaged in the manufacture and sale of fireworks, had deposited SBNs received from customers who had purchased goods on credit during the Diwali festival preceding demonetization. The assessee furnished audited financial statements, profit and loss account, balance sheet, and details of 773 customers who deposited cash into its bank accounts. It also provided PAN details of 394 customers, VAT/Sales Tax details of 223 customers, and addresses of 156 unregistered dealers.
The Assessing Officer accepted that customer details were provided but treated the deposits as unexplained on the grounds that complete PAN and address details were not furnished for all customers and that SBNs ceased to be legal tender after 08.11.2016. The addition was confirmed by the Commissioner (Appeals).
The Tribunal examined the material and found that the assessee had recorded total sales of ₹6.55 crore, which included the impugned deposits. The profit from these sales had already been offered to tax, and the Assessing Officer had not rejected the books of account, sales, purchases, or stock records. It was also noted that the assessee had sufficient stock for sales during the Diwali period and that there was no abnormal deviation in sales or cash deposit patterns compared to earlier and subsequent years.
