2023 (3) TMI 1575 - AT - Income Tax

Cash deposited in the bank account during demonetization period - HELD THAT - Assessee closed down its business operations on 31-10-2016. As the assessee closed down its business on 31-10-2016 all the outstanding debtors were realised creditors were paid off and the stock in hand was liquidated. That is the reason that the figure of sundry debtors sundry creditors and stock in trade as at the end of the year have been reflected at Nil. Opening cash balance has been shown in such tabulation at Rs.5, 29, 870/-. Figures of cash sales and opening debtors realised along with payment to all the creditors and other expenses are also depicted on page 5 of the impugned order. Since the business was closed down on 31-10-2016 the assessee after realising all the debtors had cash of Rs.30, 60, 000/- that was deposited in the bank account against which the AO made the addition of Rs.29, 10, 000/-. Source of cash deposits in the bank is fully substantiated by the cash sales and realization from debtors. In such circumstances there can be no warrant for making or sustaining any addition. Therefore order to delete the addition.

Summary

The Appellate Tribunal (ITAT Pune), per Vice President R.S. Syal, allowed the assessee's appeal against the CIT(A)'s order confirming an addition of Rs.29,10,000/- on account of cash deposits during the demonetization period in AY 2017-18. The Assessing Officer disbelieved the assessee's explanation that the cash deposits arose from cash sales and realization of debtors, despite detailed submissions and financial particulars. The Tribunal noted that the assessee had closed its business on 31-10-2016, realized all debtors, paid creditors, and liquidated stock, resulting in a cash balance of Rs.30,60,000/- which was deposited in the bank. The Tribunal held that "source of cash deposits in the bank is fully substantiated by the cash sales and realization from debtors," and accordingly found "no warrant for making or sustaining any addition." The addition of Rs.29,10,000/- was deleted and the appeal allowed.