ITAT Deletes Income Tax Addition on Cash Deposited from Sales During Demonetization
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, deleted the addition of Rs. 25.07 lakh made by the Assessing Officer (AO) on account of alleged unexplained cash deposits. The tribunal said that additions cannot be made merely on the basis of assumptions.
The assessee, Madhuram Bhuraji Purohit, had made cash deposits of Rs 25,07,480 in his bank prior to the demonetisation period, which the AO treated as unexplained cash deposits. The assessee appealed before the CIT(A) but did not succeed. Therefore, he challenged the order before the ITAT.
The assessee argued that the cash deposits were from cash sales. Records showed that total sales nearly doubled from Rs. 2.02 crores in AY 2016-17 to Rs. 4.77 crores in AY 2017-18. The cash sales increased from Rs. 84.62 lakh to Rs. 1.41 crore. The assessee said that due to the announcement of the demonetisation scheme, he had deposited the cash available in his books of account.
ITAT noted that the percentage of cash against the total sales had actually decreased.
The tribunal observed that the AO’s addition was based on assumptions and found it unjustified. Therefore, the addition was deleted.
Case Citation: Madhuram Bhuraji Purohit Vs ITO (ITAT Ahmedabad); ITA No.2580/Ahd/2025; 01/04/2026; 2017-18
