Jitudan Ravatdan Gadhvi Vs ITO (ITAT Ahmedabad)
Cash Deposits Explained by Withdrawals – ITAT Ahmedabad Deletes Addition of ₹12.44 Lakh; Deposits Not Unexplained, But Business Redeployment – ITAT Deletes Sec.68 Addition
Assessee, a small contractor from Gujarat, was subjected to reassessment after AO noticed cash deposits of ₹11.94 lakh in his Bank account. As Assessee did not respond to statutory notices, AO completed a best-judgment assessment u/s 144, treating deposits as unexplained cash credits u/s 68 & adding ₹12,44,754 (including bank interest). CIT(A) dismissed the appeal in limine citing a delay of 477 days in filing, without entering into merits or admitting additional evidence.
Before the Tribunal, Assessee explained that he was unfamiliar with tax proceedings, had shifted from his registered address due to personal reasons & was unaware of emails used in correspondence. He came to know of the assessment only when recovery action was initiated in 2020. Further, Covid-related disruptions contributed to the delay. Tribunal condoned the delay in filing & considered the case on merits.
On the substantive issue, Assessee demonstrated that deposits were not unexplained but represented redeposits of business receipts & withdrawals. Construction contract receipts credited into the bank were withdrawn for site expenses, especially for labour payments & the unutilised cash was redeposited. A reconciliation showed that while total cash deposits were ₹14.01 lakh, cash withdrawals from the same account were ₹38.75 lakh, leaving a net withdrawal of over ₹24 lakh, which matched labour expenses of ₹45.40 lakh, of which ₹24 lakh was paid in cash. Supporting evidence including bank statements, Form 26AS, & cash book were produced.
