The Chennai Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition of Rs.53.23 Lakhs on cash deposits during the demonetization period and directed the Assessing Officer ( AO ) to re-compute the income of the assessee. Shri Balu Vignesh,appellant-assessee, engaged in the textile business under the proprietary concern ShriKrishna Silks has a turnover of Rs.25.77 Cores,with books audited under section 44AB of the Act.During the demonetization period the assessee deposited Rs.133.73 Lakhs in three bank accounts.

According to the cash book, a cash balance of Rs.169.57 lakhs was available as of November 8, 2016, cited as the source for these deposits. Get a Complete Kit of Essential Books for Daily Practice, Click Here The AO accepted the source for Rs.80.50 lakhs deposited up to November 15, 2016, but disallowed Rs.53.23 lakhs deposited afterward, arguing that the entire amount should have been deposited within a “reasonable period.” This Rs.53.23 lakh amount was added as unexplained money under Section 69A, read with Section 115BBE. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition, leading the assessee to file an appeal before the tribunal.

The two member bench comprising Manu Kumar Giri ( Judicial Member ) and Manoj Kumar Aggarwal ( Accountant Member ) upon review, observed that the assessee’s cash balance of Rs.133.73 lakhs as of November 8, 2016, was well-supported by the cash book and that the books were audited with no defects. It noted that the AO had arbitrarily accepted part of the deposits and rejected the rest, even though all deposits had the same source. The tribunal also highlighted that there was no legal requirement for the timing of deposits, thus finding the AO’s reasoning unsupported. As a result, the tribunal deleted the addition of Rs.53.23 lakhs and directed the AO to recompute the income, allowing the appeal. In short, the appeal filed by the assessee was allowed.