ITAT Overturns CIT(A) Order, Restores Gas Agency’s Appeal Over Rs. 10.42 Lakh Demonetization Cash Deposits [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Pune Bench, has set aside an order by the Commissioner of Income Tax (Appeals) CIT(A) and restored the appeal of a Gas Agency, a partnership firm dealing in retail gas distribution. The case pertains to cash deposits of Rs. 10,42,800 made during the demonetization period in 2016, which the Assessing Officer had treated as unexplained income under Section 69A of the Income Tax Act, 1961.

Shree Gajanan Gas Agency, which operated under the brand "GO GAS," had deposited the cash in its ICICI Bank account in Beed between November 9 and December 31, 2016. The Assessing Officer passed an ex parte order under Section 144 after the firm failed to respond to notices, adding the entire amount as unexplained cash under Section 69A. The firm later appealed before the CIT(A), submitting evidence including sales registers, cash books, and financial statements to explain the deposits. However, the CIT(A) dismissed the appeal solely on the grounds of non-compliance with Section 249(4)(b), which mandates advance tax payment if no return is filed.

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Before the ITAT, the assessee’s counsel argued that the firm maintained regular books of account and had sufficient cash balances to justify the deposits. It was also highlighted that as a distributor of essential commodities, the firm was legally permitted to accept old currency notes during demonetization. The Departmental Representative, however, supported the lower authorities’ orders.

After reviewing the submissions, Manish Borad (Accountant Member) observed that the CIT(A) had dismissed the appeal without properly considering the merits of the case. The tribunal noted that Section 249(4)(b) was irrelevant here, as there was no evidence of the firm having taxable income in preceding years that required advance tax payment. Emphasizing the principles of natural justice, the ITAT set aside the CIT(A)’s order and directed the Assessing Officer to re-examine the matter afresh, ensuring the assessee receives a fair opportunity to present its case.

In Conclusion, the appeal was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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