The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) limits the addition of unexplained cash deposits during demonetization to ₹10 lakhs, considering the possibility of cash sales. Gaurangi Merchandise Pvt. Ltd., appellant-assessee, challenged the order dated 06.01 .2024 passed by  CIT(A) for Assessment Year 2017-18 . During the hearing, it was found that both the lower authorities had treated the cash deposits made by the assessee during demonetization, totaling Rs. 30.18 lakhs from 29.11.2016 to 14.12.2016, as unexplained cash credits under section 68, to be taxed under section 115BBE at 60%. Both the learned representatives restated their arguments for and against the impugned addition and it was  observed that the assessing authority did not challenge the important fact that the appellant was in the textile trading business, with gross receipts of Rs. 34,72,380 and a net profit of Rs. 1,32,631. Step by Step Guidance for Tax Audit & E-filing, Click Here

The tribunal, considering the main issue of the impugned addition, noted that the assessee sourced its entire purchase of Rs. 33,09,890 from M/s Aggarwal Enterprises. This suggested that, even if the assessee’s claim was just an accommodation entry, the department couldn’t disprove that the assessee had made textile retail sales, which could explain the cash deposits.

However, the assessee failed to provide enough evidence to prove that the deposits were sales outside the books, and the department couldn’t rule out the possibility that the appellant was engaged in textile trading, where such off-book sales could occur. A Single Member Bench comprising Satbeer Singh Godara ( Judicial Member ) decided to reduce the impugned addition of Rs. 13.18 lakhs to Rs. 10 lakhs, with the condition that this wouldn’t set a precedent. As a result, the assessee got relief of Rs. 20.18 lakhs. In short,the appeal filed by the assessee was allowed. To Read the full text of the Order CLICK HERE