Aurangabad Steel Corporation Vs ITO (ITAT Pune)
The Pune Bench of the Income Tax Appellate Tribunal (ITAT) partly allowed an appeal concerning an addition made on account of unexplained cash deposits during the demonetization period for Assessment Year 2017–18. The appeal arose from an assessment completed under section 143(3) of the Income Tax Act, where an addition of ₹38,57,530 was made towards alleged unexplained cash deposits. The assessee, a partnership firm engaged in the business of scrap, had declared an income of ₹3,25,560 and maintained regular books of account, which were not rejected by the Assessing Officer. The case was selected for scrutiny due to low income reported against TCS receipts from scrap transactions.
The Tribunal noted that the Assessing Officer had accepted the books of account and the regular business activity of the assessee, questioning only the cash sales effected during the demonetization period. It was observed that demonetization was an unprecedented event that created panic and could not be equated with normal business conditions. The assessee’s sales were made from existing stock, quarterly sales were reported under VAT laws, and no material was brought on record to disprove that the cash deposits originated from business cash sales.
However, the Tribunal also recorded that despite multiple opportunities, the assessee failed to appear or furnish complete supporting details before the Tribunal. In the absence of comprehensive evidence, but considering that the source of cash deposits was linked to business activity, the Tribunal held that the deposits could not be treated entirely as unexplained income. Instead, it found it reasonable to estimate income by applying a profit rate of 8% on the alleged cash sales of ₹38,57,530.
