The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) checked cash deposits made during the demonetisation period, ultimately deleting an addition of ₹18.25 lakh imposed by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961.
The assessee in this case, a civil construction firm, had deposited ₹39 lakh into its bank account on November 10 and 11, 2016, shortly after the government’s announcement of demonetisation.
Get a Complete Kit of Essential Books for Daily Practice, Click Here
During the scrutiny assessment for the assessment year 2017-18, the AO allowed credit for ₹20.75 lakh, which was withdrawn from the bank just before the demonetisation period. However, the remaining ₹18.25 lakh was treated as unexplained cash and added as income under Section 68 of the Income Tax Act.
The AO’s decision was based on the assumption that the cash withdrawals made earlier in the year could have been spent for other purposes and were not necessarily available to be redeposited. Therefore, he only considered the cash withdrawn in the three weeks leading up to demonetisation, leading to the disallowance of the remaining amount.
The assessee, represented by Advocate Mehul Patel, argued that the cash deposited was sourced from legitimate withdrawals made from its bank accounts in the months prior to demonetisation. To support its claim, the firm submitted bank statements, cash books, and other relevant financial records showing that it had sufficient cash on hand from earlier withdrawals. The assessee further argued that no work was being carried out during the demonetisation period, hence the re-deposit of cash on hand into the bank account.
Get a Complete Kit of Essential Books for Daily Practice, Click Here
The Income Tax Appellate Tribunal Bench of Judicial Member T.R. Senthil Kumar and Accountant Member Annapurna Gupta, carefully examined the case. The Tribunal found that the AO’s decision was based on assumptions rather than concrete evidence and that the assessee had sufficiently demonstrated that the cash deposits were part of regular business operations.
The Tribunal ruled in favour of the assessee, noting that the addition was not sustainable in law and deleted the ₹18.25 lakh addition.
The ITAT observed that the AO had failed to consider the full cash withdrawal history and had unjustly limited the scope to a narrow timeframe. It was noted that, “the addition made mainly on the presumption by the Ld. A.O. is not sustainable in law.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
