Cash deposits during demonetization alone cannot justify income addition

Anil Champalal Jain Vs ITO (ITAT Mumbai)
The case of Anil Champalal Jain vs ITO (ITAT Mumbai) revolves around the contentious issue of cash deposits during the demonetization period and their tax implications. Mr. Anil Champalal Jain, a proprietor of M/s Satawat Textile, faced scrutiny over a significant cash deposit of ₹33 lakhs during this period. The Income Tax Department (ITD) added this amount to his income under Section 69A of the Income-tax Act, 1961.
The ITAT Mumbai reviewed the case, noting that while the ITD alleged manipulation of accounts due to lack of post-demonetization cash sales, the appellant contended that the deposited cash was from legitimate pre-demonetization sales. Crucially, the appellant’s books, audited and certified under Section 44AB, affirmed proper maintenance and accuracy.
The ITAT criticized the CIT (A)’s decision to uphold the addition, emphasizing that mere cash deposits cannot serve as grounds for disregarding earlier documented cash sales. They highlighted that the ITD failed to substantiate any irregularities or discrepancies in the appellant’s accounting practices. Moreover, the appellant presented detailed evidence including sales invoices, cash book entries, and bank statements to support the source of the deposits.
Furthermore, the ITAT observed that the appellant’s business operations showed consistent cash flow and profitability, with the cash deposits aligning with documented sales figures. They underscored that the burden lies with the ITD to prove deliberate falsification or significant errors in the appellant’s books, which was not convincingly demonstrated.Please become a Premium member. If you are already a Premium member, login here to access the full content.