ITAT: Cash Deposits from Sales Already Offered to Tax Cannot Be Added Again as Unexplained Income u/s 68/69
Brief Facts of the Case
The assessee, Sanjay Malhotra, filed an income tax return for the Assessment Year 2017-18, declaring an income of ₹15,06,8401. During the demonetization period, the assessee deposited ₹1,29,47,000 in cash into HDFC Bank.
The Assessing Officer (AO) noted that the daily sales from November 3, 2016, to November 8, 2016, were abnormally high (average of ₹21,48,881 per day) compared to the average daily sales for the financial year (₹60,817). The AO concluded that these were not genuine sales and treated the entire cash deposit as unexplained income, making an addition of ₹1,29,47,000 under Section 68 of the Income-tax Act. The Commissioner of Income-tax (Appeals) [NFAC] upheld the addition but changed the provision to Section 69 of the Act.
Decision of the Tribunal
The ITAT allowed the appeal, ruling in favor of the assessee and deleting the addition. The Tribunal provided the following key reasons for its decision:
- Addition Based on Assumptions: The AO’s conclusion was based merely on assumptions that the sales pattern should remain consistent throughout the year. No concrete material was brought on record to dispute the sales.
- No Discrepancy in Stock: The AO did not find any issues with the movement of stock, which supported the sales figures recorded by the assessee. The assessee had demonstrated that the stock movement and sales were matching the book results.
- Double Taxation Not Permissible: The assessee had already declared the sales in his books of accounts and offered the resulting income to tax. Adding the same cash sales receipts again under Section 68 or 69 would lead to the same income being taxed twice, which is not permissible.
- Context of Sales: The Tribunal acknowledged the fact that the sales declared were during the festive period and that huge sales of gold and jewelry were widely recorded during the demonetization period, a fact that cannot be denied.
- Inapplicability of Sections 68 & 69: The Tribunal held that cash sales that have already been accounted for and offered to tax cannot be subjected to a separate addition under Section 68 or 69 of the Act.
Case Citation
Sanjay Malhotra vs. ITO, Ward 29 (3), Delhi
- Appeal Number: ITA No.2255/DEL/2024
- Date of Judgment: 13th October 2025
- Tribunal: Income Tax Appellate Tribunal, Delhi Bench ‘G’