Cash Advance received by the assessee and not doubted by AO can’t be rejected as source of cash available for deposits in bank – ITAT
In a recent judgment, ITAT Agra held that when Assessing Officer (AO) accepted the advance received from customers in cash as genuine and made no addition under section 68 cannot reject the claim of the assessee to treat the said advance amount as a cash source available to explain the cash deposits made in the bank account.
ABCAUS Case Law Citation:
4494 (2025) (04) abcaus.in ITAT
The assessee was an individual carrying on the business of IOCL Diesel filling Pump. The assessee during the year under consideration derived income from business and agricultural income. The case of the assessee was selected for limited scrutiny to examine the cash deposits made by the assessee during the year.
In the assessment proceedings, the AO noted that assessee had made certain cash deposits in bank during the demonetization period and asked for explanation of the source of such cash deposits. The AO observed that assessee had made cash sales of much lessser amount than the cash deposited in the bank account and hence there was a big difference in high old currency notes which were deposited by the assessee in his bank account.
The assessee submitted that the remaining sum represented recoveries made in Specified Bank Notes from old debtors during the demonetization period. It was submitted that since Petrol Pumps were permitted to receive monies in Specified Bank Notes, the same cannot be considered as illegal when it was subsequently deposited into the bank account.
Further, the assessee also submitted that he had received cash other than sale proceeds of petroleum products as cash from various persons as advance from 37 parties and in support of his claim submitted affidavits from 37 parties who had paid cash to the assessee which were ultimately deposited in specified bank notes in the bank account of the assessee.
However, the AO did not accept the said cash advances received from customers as source of cash and added the deficit figure and also the amount claimed as recovery of cash from its existing debtors as unexplained money under section 68 read with section 115BBE of the Act and added the same to the total income of the assessee. This action of the AO was upheld by the CIT(A), NFAC.
The Tribunal observed that the AO admittedly had not made any addition on account of advance received from customers in cash which were stated to be received by the assessee as advance in cash from the customers for which diesel were supplied to them in the subsequent year. No addition for the same was made as unexplained cash credit under section 68 of the Act during the year under consideration, even though the said sums were found credited in the books of accounts of the assessee.
The Tribunal opined that AO having accepted the said credits to be genuine cannot reject the claim of the assessee to treat the said sum as a cash source available to explain the cash deposits made in the bank account during the demonetization period.
With regard to the other addition made by the AO, the Tribunal opined that it was nothing but the recovery made in cash from the existing debtors of the assessee, on which the sales had already been reported by the assessee. Hence the said recovery from old debtors would also be available as a cash source with the assessee to explain the cash deposits made in the bank account.
The Tribunal held the entire cash deposits made in the bank account stood properly explained. Accordingly, the ground raised by the assessee were allowed.
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