Atish Singla Vs ITO (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi Bench, allowed the appeal against the addition of Rs.39.60 lakh made under Section 68 of the Income Tax Act on account of cash deposits during the demonetisation period.
The assessee, engaged in the business of trading and manufacturing footwear under the name M/s A.N. International, had filed the return of income for Assessment Year 2017-18 declaring income of Rs.6.36 lakh under the presumptive taxation scheme of Section 44AD. The case was selected for scrutiny due to abnormal cash deposits during the demonetisation period compared to earlier periods.
During assessment proceedings, the Assessing Officer examined cash deposits made in the ICICI Bank account and asked the assessee to explain the source. The assessee stated that the cash deposits represented cash received from debtors between 01.04.2016 and 08.11.2016. However, the Assessing Officer rejected the explanation, observing that the assessee had not deposited such cash before demonetisation and, therefore, the claim of holding large cash balances for a long period was not acceptable. Consequently, an addition of Rs.39.60 lakh was made under Section 68.
The Commissioner of Income Tax (Appeals), NFAC, upheld the addition. The appellate authority observed that the assessee failed to provide a day-to-day cash book, confirmations from debtors, proper supporting documents, audited financial statements, and sufficient evidence regarding the availability of cash in hand. It was also noted that the pattern of cash deposits during the demonetisation quarter was substantially higher compared to earlier and subsequent periods. Further, the authority observed that the assessee had not satisfactorily established the genuineness of the source of cash deposits and had not adequately explained the utilisation of funds transferred to another entity.
