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ITAT deletes Rs 2.33 crore addition in cash deposit case
The Income Tax Appellate Tribunal (ITAT), Amritsar Bench, has deleted a Rs 2.33 crore addition made against Bhupendra Flour Mills Pvt Ltd for cash deposited during the 2016 demonetisation period. The company had withdrawn Rs 2.325 crore from its Bathinda bank account between July and October 2016, and deposited Rs 2.33 crore into a newly opened UCO Bank account in Delhi in November 2016.
The tax department treated the deposit as unexplained income under Section 69A of the Income-tax Act, questioning why the cash was held for months and transported physically rather than transferred through banking channels. The ITAT, however, found that the company had accounted for the earlier withdrawals in its books, and the Revenue failed to prove the cash was used elsewhere.
The tribunal relied on the Punjab and Haryana High Court ruling in Shiv Charan Dass vs CIT, which held that tax authorities cannot reject a taxpayer's explanation based on assumptions alone. The case underscores the importance of maintaining clear records of cash withdrawals and deposits to withstand scrutiny.
Indian Opinion Analysis
The ITAT's ruling reinforces a long-standing principle: the tax department must prove that withdrawn cash was diverted before it can treat a later deposit as unexplained. This case arose from demonetisation, when millions of rupees in old notes were deposited, and the department often presumed such deposits were unaccounted income. The burden of proof under Section 69A is on the Revenue, but taxpayers still need bank statements, cash registers and board resolutions to show the trail. The next practical step for businesses: ensure that any large cash movement, especially across cities, is documented with contemporaneous records and board approvals.
Source: livemint.com
This story was synthesised by AI from the source linked above. Methodology and corrections.
