Durga Fire Work Vs ITO (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT) Delhi recently adjudicated on an appeal filed by Durga Fire Work against an addition of Rs. 69,25,000 under Section 69A of the Income Tax Act for AY 2017-18. The dispute arose over cash deposits made during the demonetization period, with the Assessing Officer (AO) contending that these deposits were unexplained income.
Durga Fire Work, engaged in trading fireworks, filed its return declaring Rs. 1,84,010 income. During scrutiny, the AO flagged Rs. 69,25,000 deposited in a Bank of India account during demonetization. The AO argued that these deposits were undisclosed income, as the assessee failed to provide sufficient documentation for stock summaries and purchase bills.
However, Durga Fire Work defended its position, presenting a cash book and asserting that deposits were from legitimate cash sales, primarily during the Diwali season. The firm’s audited books and tax audit report supported this claim. The ITAT examined precedents and established that Section 69A applies only when unrecorded income is involved, which was not the case here.
The ITAT Delhi ruled in favor of Durga Fire Work, stating that cash deposits recorded in audited books cannot be treated as undisclosed income under Section 69A.
