DCIT Vs Sanjay Sales Agency (ITAT Delhi)
Demonetisation Cash Deposits Explained from Books: Delhi ITAT Upholds Deletion of ₹12.20 Cr Addition- Suspicion ≠ Evidence: No Rejection of Books, No Stock Discrepancy—Cash Sales Cannot Be Taxed Again u/s 68
Assessee, a trader in pan masala & allied tobacco products, filed ROI declaring income of ₹1.01 crore. Search/survey was conducted on 29.03.2017. AO completed assessment u/s 143(3) by treating ₹12,20,50,000 out of SBN deposits during 09.11.2016–31.12.2016 as unexplained cash credit u/s 68 r.w.s 115BBE, based purely on an “average daily cash deposit” theory. AO alleged inflated sales for 01.11.2016–08.11.2016 and held that only ₹2.32 crore could be considered explained; the balance ₹12.20 crore was added u/s 68.
CIT(A) deleted the addition after a detailed factual & legal examination. CIT(A) recorded that:
- Books were duly audited; AO did not reject books; no error in purchases, sales, stock or cash was found.
- Survey/search on 29.03.2017 found no discrepancy in stock or cash; no incriminating material was discovered.
- Complete books—cash book, bank book, purchase & sales registers, stock register, VAT returns, excise registers—were produced and accepted.
- VAT @12.5%–20% and excise duty @38%–68% were paid; indirect tax structure showed high cash-intensive sales.
- Total sales from 01.11.2016–08.11.2016 were ₹28.11 crore with closing cash in hand ₹14.61 crore, figures never disputed by AO.
- Only ₹14.53 crore of total deposits were SBNs; 83% deposits during demonetisation were in legal tender, proving consistency in cash business.
- IDBI Bank certificate (page 7) recorded operational inability to accept full cash immediately, explaining temporary cash accumulation.
- AO’s theory of “average daily cash deposit” was a pure presumption, unsupported by any stock, purchase or sales discrepancy.
- Since the entire cash sales were already credited to P&L, the addition u/s 68 would result in double taxation, prohibited by law (Delhi HC Kailash Jewellery House, Gujarat HC Vishal Exports).
Before Tribunal, Department relied on AO’s suspicion of inflated sales. Assessee reiterated the factual findings of CIT(A) and submitted that every sale was supported by stock movement & VAT payment.
