Micky Fireworks Industries Vs ACIT (ITAT Chennai)
The appeal before the Income Tax Appellate Tribunal (ITAT), Chennai, arose from an order dated 28.12.2022 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, for Assessment Year 2017–18. The dispute pertained to an addition of ₹1,18,23,000 made by the Assessing Officer under Section 68 read with Section 115BBE of the Income Tax Act, treating cash deposits made during the demonetization period as unexplained cash credit.
The assessee, a partnership firm engaged in the manufacturing and wholesale of fireworks, deposited the said amount in specified bank notes (SBN) during November and December 2016. The assessee explained that these deposits represented cash received from debtors against recorded sales made during the festival season, particularly Deepavali, when business activity was substantial.
The Assessing Officer rejected this explanation on the basis that, following the Government notification dated 08.11.2016, specified bank notes ceased to be legal tender except for limited purposes such as exchange. According to the Assessing Officer, transactions in SBN after this date lacked legal validity, and therefore, the cash deposits could not be accepted as a satisfactory explanation. Consequently, the entire amount was treated as unexplained cash credit under Section 68.
