Gaurangi Merchandise Pvt. Ltd. Vs ITO (ITAT Delhi)
In the case of Gaurangi Merchandise Pvt. Ltd. Vs ITO for Assessment Year 2017-18, the Income Tax Appellate Tribunal (ITAT), Delhi, addressed the issue of unexplained cash deposits made by the assessee during the demonetization period. The assessee had made cash deposits amounting to ₹30.18 lakhs between November 29, 2016, and December 14, 2016. These deposits were treated as unexplained cash credits by the assessing authorities, and the addition was made under Section 68 of the Income Tax Act, 1961, subject to tax at 60% under Section 115BBE.
Both parties presented their arguments, with the assessee contending that the cash deposits were sourced from its textile trading business, specifically from sales outside the books of accounts. The assessee’s gross receipts from the business were ₹34.72 lakhs, with a net profit of ₹1.32 lakhs. However, the department argued that the cash deposits were unexplained, thus subject to taxation under Section 68. While the assessing authority did not dispute the business activity of the assessee, they found that the cash deposits could not be fully explained or substantiated by the assessee.
After reviewing the facts, the ITAT concluded that while the assessee failed to provide adequate evidence to support its claim that the deposits were from unaccounted sales, it was plausible that some part of the cash deposits might be from the business’s retail sales. Considering the circumstances, the ITAT decided to limit the addition to ₹10 lakhs, granting a relief of ₹20.18 lakhs to the assessee. The tribunal clarified that this decision should not be treated as a precedent, and necessary adjustments would be made as per the law.
