ITO Vs Vishal Ornaments Private Limited (ITAT Ahmedabad)
Ahmedabad ITAT: Demonetisation Cash Deposits Cannot Be Treated as Unexplained Income Merely Because Sales Increased Before 8 November 2016
The Ahmedabad ITAT dismissed the Revenue’s appeal and upheld the deletion of the addition made on account of cash deposits during the demonetisation period, holding that cash deposits cannot be treated as unexplained income merely because the assessee recorded substantial cash sales immediately before demonetisation, when such sales formed part of its regular business pattern.
The Assessing Officer had treated cash sales of ₹1.82 crore made immediately prior to 8 November 2016 as non-genuine and concluded that the assessee had introduced its unaccounted money in the guise of cash sales before depositing the amounts in the bank during the demonetisation period.
The CIT(A), however, found that the assessee had been regularly carrying out cash sales in earlier years as well as throughout the relevant financial year. The evidence showed that substantial cash sales were recorded every month, including months preceding and succeeding demonetisation, and that cash sales in some earlier months were even higher than those immediately preceding demonetisation.
Affirming the CIT(A)’s findings, the Tribunal held that the cash deposits represented normal business receipts arising from regular cash sales, which had been consistently accepted in earlier and subsequent years. In the absence of any material to show that the deposits represented unaccounted money, mere timing of the sales before demonetisation could not justify an addition as unexplained income. Accordingly, the Revenue’s appeal was dismissed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi (hereinafter referred to as “CIT(A)”), dated 10.11.2025 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18.
2. The brief facts of the case are that the Assessing Officer (in short ‘the AO’) noticed that the assessee had shown considerable sale of Rs.1,82,32,000/- immediately prior to starting of the demonetization period w.e.f. 08.11.2016. He held that the assessee had deposited his unaccounted income showing the same as cash sales and made the impugned addition holding that the same was the income of the assessee from unexplained sources.
3. However, before the Ld. CIT(A), the assessee demonstrated that the assessee had been making regular cash sales not only in the year under consideration, but also, in the earlier years. It was also demonstrated before the Ld. CIT(A) that even, in the relevant financial year i.e. F.Y. 2016-17, the assessee has made considerable cash sales during the entire year and every month and that were not restricted only to demonetization period. That even the sales made by the assessee during the earlier months was higher than that was disclosed immediately prior to the demonetization period. Even, the assessee had made considerable cash sales after the demonetization period. The Ld. CIT(A), considering and appreciating the facts on the file, held that it is not a case of any unexplained cash deposit by the assessee, rather, the cash deposits in the bank account, out of cash sales, was regular feature of the business of the assessee, which has been followed consistently not only in earlier years, but also, in subsequent years. We do not find any infirmity in the order of the Ld. CIT(A) and the same is upheld.
4. In the result, appeal of the Revenue stands dismissed.
This Order is pronounced on 06/08/2026
