INCOME TAX ACT, 1961

Section 69A

Income from undisclosed sources - Addition under section 69 - Deposit of cash during demonetization period -

Assessee filed its return of income declaring total income at Rs. 8,460 along with audit report under section 44AB. Revenue carried out a survey under section 133A at business premises of assessee. During the course of survey, statement of partner of assessee-firm was recorded and as per assessment order, assessee has made cash sales and received demonetized currency in shape of 1000 and 500 Specified Bank Notes to extent of Rs. 31,21,238 and according to AO, assessee partner admitted same as unexplained cash deposit and declared under Pradan Mantri Garib Kalyan Yojana (PMGKY) scheme amounting to Rs. 31,21,000 and agreed for payment of taxes on same. But, in return of income filed, assessee had not declared this income and therefore, notice under section 148 was issued and case was reopened and assessment was framed under section 143(3) read with section 147. AO made addition of unaccounted cash under section 69 and applied provisions of section 115BBE. Held: DR could not answer what was quantum of demonetized currency in this cash deposits and what was quantum of new currency. Further, he could not controvert sale effected by assessee to various vendors and traders because entire cash receipts were attributable to sales only, which was deposited by assessee into its bank account. Admittedly, cash deposit in OD bank account by assessee was not clearly established by Revenue, whether it was in demonetized currency or in new notes, but it was an explained source and out of sale proceeds. At best, some profit element could be added in this cash sales of Rs. 31,21,000 because assessee also could not back (support) sales by evidences that entire cash deposits were on account of sale proceeds or sale receipts. Hence, a reasonable disallowance of 10% was estimated on that and AO was directed to tax the same under normal rates because being 'business income' this was not to be assessed under section 115BBE.

REFERRED :

FAVOUR : Partly in assessee's favour

A.Y. : 2017-18

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