No addition for unexplained cash deposit if Sale amount exceeds cash deposit in bank

Ld. CIT(A) sustained the addition of Rs.3,67,000/- on the ground that the assessee could not substantiate with evidence of sales and cash deposits made at Jam Nagar, Delhi and Jaipur and, therefore, cash deposits of Rs.3,16,000/- at Jaipur and Rs. 15,000/- at Jam Nagar and Rs.36,000/- at Delhi were sustained by the CIT(A). A perusal of the order of the CIT(A) shows that the assessee, before the AO, while explaining cash deposit at Jam Nagar, had submitted that an amount of Rs.10,000/- dated 03.09.2010 and Rs.5,000/- dated 20.01.2011 were deposited by a customer directly in the account of the assessee which relates to sale. It was explained that the father of the person to whom sales were made was doing his business at Jam Nagar and he had deposited the cash against the sale of goods. Similarly, while explaining the cash deposit of Rs.3,16,000/- at Jaipur is concerned, it was submitted that the parents of the assessee were staying at Jaipur and the assessee was regularly visiting his parents at Jaipur and every time he used to carry some cash collected from sales to hand over to his father to deposit the same according to the requirement of the retail business and MCX dealing of the assessee. So far as the deposit of Rs. 36,000/- at Delhi the same was explained to be out of sales. I further find that the total gross receipt of the assessee was shown at Rs. 19,25,140/- whereas the total addition by the AO was Rs. 8,57,200/- which has been partially deleted.

In my considered opinion, once the total turnover of the assessee is much more than the total cash deposit in the bank account (in this case sales is 227% of the cash deposit), no addition is called for on account of unexplained cash deposit in the bank account. The explanation of the assessee appears to be reasonable. Under these circumstances, I hold that the ld.CIT(A) is not justified in sustaining the addition of Rs. 3,67,000/-. I, therefore, set aside the order of the CIT(A) and direct the AO to delete the addition.
(Related Assessment Year : 2011-12) – [Virender Kumar v. ITO - Date of Judgement : 24.03.2021
(ITAT Delhi)]