Shree Balaji Associates Vs ITO (ITAT Surat)
Income Tax Appellate Tribunal (ITAT) Surat bench has ruled that cash on hand in a real estate business should not be automatically deemed “unexplained” solely due to deposits made during the demonetization period. The Tribunal, in the case of Shree Balaji Associates Vs ITO, partly allowed the assessee’s appeal, reducing the addition made by tax authorities and clarifying the applicability of higher tax rates.
The case pertains to the assessment year 2017-18, a period directly impacted by the demonetization drive initiated in November 2016. Shree Balaji Associates, a firm engaged in the real estate business, had filed its return of income declaring ₹5,44,520/-. During the assessment proceedings, the Assessing Officer (AO) identified cash deposits totaling ₹29,00,000/- into the firm’s bank account with Gandevi Peoples’ Co-Operative Bank Ltd.
The AO, taking the view that these deposits represented unexplained money during the demonetization period, made an addition of ₹7,54,000/- under Section 68 of the Income Tax Act, 1961, categorizing it as “unexplained cash credit.” This action by the AO led to the disputed tax liability.
Upon appeal, the National Faceless Appeal Centre (NFAC)/Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition of ₹7,54,000/- but changed its categorization from “unexplained cash credit” under Section 68 to “unexplained money” under Section 69A of the Act. This shift in legal classification became a point of contention for the assessee.
