The case of Rathoure Trading Co. versus ITO Ward-2(2), Faridabad, revolves around an appeal against the addition of INR 10,03,000 to the appellant’s income during the demonetization period for the Assessment Year 2017-18. The case was filed on June 22, 2020, and concluded with a tribunal order on the same date in 2022.
Rathoure Trading Co., a business involved in chemical sales, faced an addition by the Income Tax Officer under Section 69A of the Income Tax Act. This addition was based on cash deposits made during India’s demonetization period. The ITAT reviewed the appeal following the CIT(A)’s confirmation of the addition, challenging the authenticity of cash sales reported by the company.
The tribunal, led by Judicial Member Shri Sanjay Garg, heard the case. The appellant’s representative, Sh. Achal Kanwar, argued that the cash deposits were from legitimate cash sales which had not been properly credited during other parts of the year due to the nature of the business operations. The respondent, represented by Sh. Sanjay Kumar, maintained that the appellant failed to provide sufficient proof of the cash transactions’ authenticity.
The tribunal found that the appellant had adequately reconciled the cash deposits with their VAT returns and other financial statements, thus proving the legitimacy of the cash sales. Despite the absence of detailed sales records like stock registers or transport documents, the small amount relative to total sales and the consistency with tax returns led the tribunal to delete the addition made by the AO.
The decision sets a significant precedent for how cash deposits during unusual financial periods like demonetization are to be treated, especially when they are consistent with disclosed financial operations. It highlights the importance of maintaining comprehensive sales documentation to support claims against tax additions.
ITA 1256/DEL/2020: Appeal of Rathoure Trading Co. Allowed Over Cash Deposits During Demonetization
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