ITAT Deletes Unexplained Cash Credit Addition After Finding No Merits
The Income Tax Appellate Tribunal (ITAT), Bangalore, ruled in favour of the assessee by deleting an addition made for unexplained cash credit, as the tribunal found no merit in the assessing officer’s decision.
The assessee, Shri Shantilal Jain, an HUF, filed its tax return for AY 2017-18, declaring an income of Rs 23,80,150, which was selected for scrutiny. During the assessment proceedings, the AO observed that the assessee had made a huge cash deposit of Rs 2,21,20,670 in their bank account; out of this, Rs 99,21,500, was deposited during the demonetisation period.
The assessee submitted that it collects the amount through cash and bank and as per the nature of business, the assessee collects cash for the sales and withholds it for day-to-day expenses. The rest of the amount is deposited into the bank. The assessee submitted that for FY 2016-17, their turnover increased from Rs 5,44,57,456 to Rs 5,44,57,456, mostly due to the festive season in June, October and December 2016. Therefore, the cash deposits were also increased.
The assessee also submitted copies of VAT returns along with sample purchase and sale bills. Despite this, the AO did not accept the explanation given by the assessee and said that the turnover increased by 41%, which is abnormal. Holding the same, the AO allowed only 30% and the balance of 11% was treated as unsubstantiated turnover, making additions of Rs 84,57,143 as unexplained cash credit. The matter was sent to the Income Tax Appellate Tribunal (ITAT), Bangalore.
The ITAT observed that the assessing officer had not disputed the supporting documents submitted by the assessee like VAT returns and sample purchase and sales bills. The ITAT also observed that the assessee’s gross profit margin and the net profit margin were normal, even with the increase in turnover by 41%. The Tribunal did not find any reason to uphold the addition made under section 68, based on these facts. Therefore, the assessee’s appeal was allowed, and the additions were deleted.
Case Citation: Shri Shantilal Jain (HUF) Vs The Assistant Commissioner of Income Tax (ITAT Bangalore); ITA No. 1489/Bang/2025; 12/11/2025; 2017-18
