WHETHER HIGH CASH SALES IN DEMONETISATION WITHOUT ANY PATTERN CAN BE SOLE BASIS OF ADDITION U/S 68?

Respected Members

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Short note of today's case law for quick reference:

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2024] 111 ITR (Trib) 138 (ITAT[Chand])

[BEFORE THE INCOME-TAX APPELLATE TRIBUNAL — CHANDIGARH "B" BENCH]

(hearing through physical mode)

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FASHION ZONE

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JOINT COMMISSIONER OF INCOME-TAX

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1. A.O. observed certain abnormal features in cash book.

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2. That prior to October, 2016, there were very nominal instances of cash sales.

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3. It was from October 6, 2016 that cash sales had abruptly gone up.

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4. That as on October 5, 2016 there was cash in hand of Rs 13,52,272/- which had gone upto Rs 48,10,944/- as on November 6, 2016.

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5. That cash sales of assessee had again come down from December 30, 2016 onwards.

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6. That there had been no cash deposit in bank prior to November 13, 2016.

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7. That assessee had himself admitted in its reply that cash deposits in bank and cash were much below the cash deposits during the demonetisation period and sales as compared to the months of Oct & Nov, 2016.

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8. The cash deposit was explained from cash sales duly incorporated in VAT returns, VAT paid on them and final accounts were duly audited.

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9.? No defect was found by A.O. in terms of availability of stock or in any of the documentation submitted by the assessee or in books of accounts.

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10. Therefore merely the fact that certain cash deposits had been made by the assessee during the period of demonetisation and the deposits were on the higher side considering the past year’s figures could not be the basis to hold the explanation made by the assessee unsustainable and treat the cash sales as bogus and bring the cash deposit to tax under section 68 of the Act.

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11. Tribunal held that comparative figures for past years could provide a starting point for further examination and verification but basis such comparative analysis alone and without any further examination, the sales undertaken by the assessee which were duly recorded in the books of account could not be rejected and treated as bogus.