ITAT Ahmedabad Deletes ₹34.40 Lakh Addition On Petrol Pump Owner For Cash Receipts During Demonetisation

On 19 October, the Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) allowed Vikas Ashokkumar Masand's appeal against an order of the Commissioner of Income Tax (Appeals) [CIT(A)] sustaining the addition for Assessment Year 2017–18.

A Bench comprising Vice-President Dr. B.R.R. Kumar and Judicial Member Tapas Ram Misra held that cash receipts from customers during demonetisation cannot be treated as unexplained money merely because customer confirmations have not been furnished, and deleted an addition of Rs. 34.40 lakh made against a petrol pump owner under Section 69A of the Income Tax Act, 1961. It observed:

“The absence of confirmations, by itself, cannot be treated as conclusive where the assessee has furnished identifiable particulars of the parties and supporting books of account.”

Masand operates Shree Krishna Petroleum, an Indian Oil Corporation retail outlet in Ahmedabad that sells petrol, diesel and lubricants.

During scrutiny assessment, the Assessing Officer found that Masand had received Rs. 34,40,123 in cash from debtors during the demonetisation period. Masand explained that the amount represented collections from regular customers against outstanding dues for petroleum products sold to them.

The Assessing Officer rejected the explanation, citing the absence of confirmations from the debtors and restrictions under applicable Reserve Bank of India instructions on accepting Specified Bank Notes. The officer treated the amount as unexplained money under Section 69A and applied Section 115BBE of the Act. The CIT(A) upheld the addition, prompting Masand to appeal to the Tribunal.

Before the Tribunal, Masand argued that the receipts were recorded in his regular books of account and supported by business records. He also submitted that neither the Assessing Officer nor the CIT(A) had issued notices under Section 133(6) or summons under Section 131 to verify the parties whose details he had furnished.

The Bench noted that the CIT(A) had acknowledged that the relevant entries were recorded in Masand's books of account. It also found that he had furnished party-wise particulars and documentary evidence to support his explanation that the receipts represented collections against outstanding business dues.

Further, it clarified that the permissibility of accepting Specified Bank Notes under applicable notifications or RBI instructions and the tax treatment of the receipts under the Income Tax Act were distinct questions. Acceptance of such notes during demonetisation did not, by itself, establish that the receipts were unexplained under the Act.

Moreover, the Bench noted that the authorities had identified no specific defects in Masand's stock records, sales and purchase registers or VAT returns. The declared turnover and book results had been accepted, and the Assessing Officer had neither rejected the books of account nor independently verified the identified parties before making the addition.

It also noted that the CIT(A) had alternatively referred to Section 68 while sustaining the addition originally made under Section 69A. It held that invoking an alternative statutory provision could not replace the requirement to examine the nature and source of the receipts on the available evidence. The taxpayer must also be given a fair opportunity to respond to a proposed alternative basis for the addition.

Last, the Tribunal observed that Masand had maintained regular books of account, furnished identifiable particulars of the debtors and produced supporting business records, while the lower authorities had failed to adequately rebut the evidence or establish that the receipts constituted unexplained money under Section 69A.

Accordingly, the ITAT deleted the addition of Rs. 34,40,123 and allowed Masand's appeal.

For Appellant: Ms Ridhi Masani, Chartered Accountant

For Revenue: Senior Departmental Representative Amit Pratap Singh