Vipul Pravinbhai Lagadhir Vs ITO (ITAT Rajkot)
Demonetisation Cash Deposits Not Unexplained – ITAT Rajkot Applies 6% NP on Cash Deposits—Rejects 8% Estimation
Assessee, engaged in mobile recharge distribution & small-scale mobile phone sales, faced best-judgment assessment u/s 144. AO treated cash deposits during demonetisation of ₹8,62,000 as unexplained u/s 69A r.w.s.115BBE & further applied 8% NP on remaining cash deposits of ₹1,91,01,420, computing business income of ₹15,28,114. Total assessed additions ignored the ₹3,48,915 income already declared u/s 44AD.
CIT(A) held that AO’s treatment of demonetisation-period deposits as unexplained was inconsistent since AO himself accepted continuous business activity throughout the year; hence 8% NP should equally apply to demonetisation deposits. On the larger deposit block, CIT(A) upheld 8% estimation but granted relief by adjusting the returned income.
Before Tribunal, Assessee argued that CIT(A)’s sustained addition of ₹11,79,199 was excessive given complete documentary evidence—bank statements, cash book, ledgers, and recharge agreements. Tribunal observed that Assessee conducted dual activities: mobile recharge (low margin) & mobile handset sales (higher margin). Cash deposits represented business turnover but NP of 8% was rigid. Taking a holistic view and inconsistencies in documentation, Tribunal held a 6% profit rate reasonable on both demonetisation & non-demonetisation cash deposits.
