Demonetization Cash Deposits: ITAT Mumbai deleted addition as the books of account was not rejected.
Mumbai Tribunal: Aries Agro Ltd (ITA No 244/Mum/2025) has deleted addition on account of cash deposit during demonetization as the book of account was not rejected.
The Tribunal, upheld the CIT(A)’s decision to delete the additions made under Section 68 of the Act, concerning unexplained cash credits during the demonetization period. The Tribunal found that Aries Agro Ltd successfully rebutted the AO’s concerns by providing sufficient documentary evidence, and the Revenue failed to provide any new evidence to counter the CIT(A)’s findings.
Let us have a Short Overview of the case:
(2) Key issue:
The CIT(A) erred in deleting the additions made under Section 68 of the Act, concerning substantial cash deposits made by Aries Agro Ltd. during the demonetization period.
(3) Key Arguments:
Revenue’s Arguments:
The assessee made substantial cash deposits during the demonetization period, which were classified as unexplained cash credits under Section 68. The assessee could not establish the genuineness and creditworthiness of the cash deposits.
The cash receipts were entered in the books just before the demonetization period, raising doubts about their legitimacy.
Cited Supreme Court cases (Durga Prasad More and Sumati Dayal) to argue that the transactions defied logical and practical reasoning.
Assessee’s Arguments:
The cash deposits were payments received for credit sales from identified parties Provided month-wise details of sales and expenses, cash sales, and cash deposits, along with confirmations from the parties who made the payments. The accounts were audited, and no discrepancies were found between the book stock and actual stock.
The sales were accepted by the VAT department, and the cash sales were offered for taxation, arguing that adding cash deposits under Section 68 would lead to double taxation.
(4) Tribunal’s decision:
The Tribunal upheld the CIT(A)’s decision to delete the additions made under Section 68, dismissing the Revenue’s appeal.
The Tribunal found that the assessee successfully rebutted the concerns raised by the Assessing Officer with sufficient documentary evidence.
The Revenue failed to provide any new evidence to counter the CIT(A)’s findings.
Genuineness of Transactions: The Tribunal emphasized that the assessee provided detailed documentary evidence, including confirmations from the parties who made the cash payments, to establish the genuineness of the transactions.
Audited Accounts: The assessee’s accounts were audited, and no discrepancies were found between the book stock and actual stock, reinforcing the legitimacy of the transactions.
Double Taxation: The Tribunal noted that the cash sales were already offered for taxation, and adding the cash deposits under Section 68 would lead to double taxation.
Theory of Human Probability: The Tribunal found that the theory of human probability, as cited by the Revenue, was not applicable in this case, as the assessee maintained proper books of accounts, and the entries were genuine.
The copy of the order is as under:
