Cash deposits after demonetization duly made out of cash withdrawals, addition deleted by ITAT

The Assessee is a domestic company engaged in trading of tyres, tubes, electronic parts and accessories and other auto related goods. The AO noted that after demonetization in 2016, the assessee had deposited old currency notes of Rs. 50,05,000/- in bank after 08.11.2016. The AO thereafter passed the assessment order assessing after making addition u/s. 68 of the Act of Rs. 31,96,917/- (i.e. Rs. 50,505,000/- minus the average cash deposit in bank for last 6 months of Rs. 18,08,083). In appeal, Ld. CIT(A) noted that the nature and source of cash deposits remains not fully satisfactorily explained, hence, he enhanced the addition to Rs. 47,55,000/- (i.e. Rs. 50,05,000/- minus cash receipt from sundry debtors of Rs. 2,50,000/-)

Submissions by A/R of the Assessee

• Ld. Counsel for the assessee submitted that an amount of Rs. 50,65,000/- was withdrawn by the assessee from his bank account in the month of October, 2016 and from out of this amount sum of Rs. 50,05,000/- was deposited by the assessee in bank during 08.11.2016 to 30.12.2016.
• However, these submissions were not accepted by the authorities below and addition was made. Ld. Counsel for the assessee further submitted that it is clearly shows that withdrawal of money was made from the own account of the assessee, which was deposited during the aforesaid period. Hence, he submitted that explanation is reasonable and no addition is warranted in this case.

Verdict of the Tribunal

The assessee has duly given the source of cash deposits which was withdrawal from assessee’s own bank account. No case has been made out by the Revenue that the said amount was withdrawn for any other purpose. In this view of the matter, we find that assessee’s explanation is cogent and therefore, direct the AO to delete the addition in this regard.

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