Patel Wines Vs DCIT (ITAT Ahmedabad)
The appeal before the Income Tax Appellate Tribunal (ITAT), Ahmedabad, arose from the order of the Commissioner of Income Tax (Appeals) dated 27.08.2025 for Assessment Year 2017–18, wherein the addition of ₹1,61,37,212/- made by the Assessing Officer on account of cash deposits during the demonetization period was upheld.
The assessee, a partnership firm engaged in the business of sale of liquor, had filed its return declaring income of ₹18,57,653/-. A survey under Section 133A was conducted on 17.03.2017. During assessment, it was observed that the assessee had deposited ₹1,65,81,880/- in its bank account during the demonetization period, including ₹1,31,34,000/- in demonetized currency. The assessee explained that these deposits were sourced from accumulated cash-in-hand of ₹1,61,37,212/- as on 01.04.2016, which had been retained due to family disputes and apprehension of interference in bank operations.
The Assessing Officer examined prior years’ balance sheets and noted that the assessee had consistently reported high cash-in-hand balances along with substantial unsecured loans and long-standing creditors. These liabilities had remained unchanged for years without repayment or interest and were later written off. The Assessing Officer also observed that the assessee regularly deposited cash sales and incurred expenses through bank accounts, contradicting the claim of long-term cash hoarding. The assessee failed to produce documentary evidence supporting the alleged family disputes or the retention of such large cash balances. Accordingly, the Assessing Officer treated the deposits as unexplained income under Section 68 read with Section 115BBE.
