Cash Deposits During Demonetization Not Unexplained When Supported by Books: ITAT Delhi

ACIT Vs Priti Brijal Bhatia (ITAT Delhi)

The appeal before the Income Tax Appellate Tribunal (ITAT), Delhi was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)/NFAC for Assessment Year 2017–18. At the outset, the appeal was delayed by 68 days. Upon hearing both sides, the Tribunal found reasonable cause for the delay and condoned it, allowing the appeal to be heard on merits.

The assessee had filed a return declaring income of Rs.12,31,610 and was engaged in the business of trading gold, jewellery, and diamond items. During scrutiny proceedings, the Assessing Officer (AO) observed cash deposits of Rs.1.30 crore made during the demonetization period and sought an explanation. The assessee submitted comparative data showing that cash deposits before and during demonetization were lower than the previous year and explained that such deposits were part of regular business activity arising from cash sales.

The AO, however, rejected the explanation, noting a sharp rise in cash balances in September and October 2016 compared to earlier months, lack of detailed supporting documents such as invoice-wise sales and purchase data, and absence of VAT returns. Based on these observations, the AO treated the deposits as unexplained cash credits under Section 68 and made an addition of Rs.1.30 crore.