Sugriv Aggarwal v. ITO (ITA No. 1996/Del/2023)
Delhi Bench of the Income Tax Appellate Tribunal (ITAT) ruled in favor of the assessee, quashing the addition of ₹8.87 lakhs made under Section 68 of the Income Tax Act. The addition pertained to cash deposits made during the demonetisation period (November–December 2016), which the Assessing Officer (AO) treated as unexplained income.
Facts of the Case
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The assessee was engaged in the business of cloth trading under the name Shivam Textiles.
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A sum of ₹8,87,000 was deposited in cash during the demonetisation window.
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The AO invoked Section 68 r.w. Section 115BBE, alleging that the cash was unexplained.
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The assessee submitted:
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Properly maintained audited books of accounts
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Sales data and stock registers
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PAN and VAT details of customers
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Evidence of corresponding sales
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Despite these, the AO treated the deposits as unexplained cash credits.
ITAT’s Analysis & Findings
The Tribunal took a firm stand in favor of the assessee, holding as follows:
1. Books of Accounts Not Rejected
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The AO did not reject the assessee’s books of accounts under Section 145.
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Once books are audited and accepted, and no discrepancy is pointed out, cash deposits backed by such records can’t be doubted.
2. No Stock or Sales Discrepancy Found
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Stock position and trading results were verified and accepted.
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No anomaly was found between the cash balance and the deposits.
3. Supporting Documents Were Provided
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The assessee had submitted:
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Sale bills
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VAT registration and PAN of buyers
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Stock summary showing corresponding movement
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4. Merely Depositing High-Value Notes Not Suspicious
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The Tribunal cited previous rulings (e.g., Kailash Jewelry House v. ITO, Om Enterprises) where similar cash deposits during demonetisation were held to be explained if backed by regular business activity.
Key Ratio Decidendi
“In the absence of any defect in books, stock, or sales, cash deposits from explained sales during demonetisation cannot be added under Section 68.”
Result: Addition Deleted
The ITAT concluded that the entire addition of ₹8,87,000 made under Section 68 r.w. Section 115BBE was legally unsustainable and ordered its deletion.
Takeaway for Taxpayers
This ruling reinforces that:
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Maintaining proper books and documentation is your best defense.
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Demonetisation cash deposits, when backed by genuine sales and verifiable records, cannot be taxed arbitrarily.
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The onus shifts back to the department once books are accepted.