Arbuda Builders Vs ACIT (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT) Ahmedabad recently addressed a case involving Arbuda Builders, a civil construction firm, and the Assistant Commissioner of Income Tax (ACIT) concerning cash deposits made during India’s demonetization period in 2016. Arbuda Builders filed an appeal against a National Faceless Appeal Centre (NFAC) order dated October 31, 2023, upholding a portion of the assessment related to unexplained cash deposits.
Background of the Case
Arbuda Builders, a firm engaged in civil construction work for the National Dairy Development Board (NDDB), submitted its income tax return for the assessment year (AY) 2017-18. The return, filed on August 31, 2017, declared a total income of ₹1,20,92,670. The tax authorities selected the return for scrutiny due to significant cash deposits during the demonetization period and discrepancies between the turnover reported in the firm’s service tax returns and its income tax return.
The scrutiny centered on two key issues:
1. Unexplained Cash Deposits: Arbuda Builders deposited ₹39,00,000 into its bank accounts on November 10 and 11, 2016, during the demonetization window. After examining the firm’s bank accounts, the Assessing Officer (AO) credited ₹20,75,000 of these deposits to earlier cash withdrawals but added the remaining ₹18,25,000 as unexplained income under Section 68 of the Income Tax Act.
2. Discrepancy in Turnover: The AO noted a difference between the turnover figures in Arbuda Builders’ service tax return and income tax return. However, the NFAC deleted the ₹91,28,993 addition related to this turnover discrepancy, focusing only on the cash deposits.
Appeal Arguments by Arbuda Builders
