ITAT Sends Back Demonetisation Cash Deposit Case After Admitting Additional Evidence Ignored Earlier
Rani Devi, a wholesale trader of edible oils operating through her proprietorship M/s Gwalior Industries, filed her return for AY 2017-18, declaring an income of ₹6.48 lakh. The case was selected for scrutiny to verify demonetisation-period cash deposits. The Assessing Officer noted that out of total cash deposits of Rs. 68.80 lakh, only Rs, 15.50 lakh was in old currency. As the assessee did not produce books of account or other primary records during assessment proceedings, the AO treated the Rs. 15.50 lakh as unexplained under Section 69A. Further, without rejecting the audited books, the AO applied an 8% net-profit rate under Section 44AD on turnover of Rs. 4.48 crore and added the differential amount of Rs. 28.91 lakh as income. Deduction under Section 80C was disallowed for want of evidence.
On appeal, the CIT(A) upheld the entire assessment, holding that the assessee did not furnish books before the AO and failed to justify the source of the demonetization deposit.
Main Issue: Whether the CIT(A) erred in sustaining additions by refusing to consider crucial additional evidence relating to sales, cash flow, and deductions, and whether the matter required remand for fresh adjudication under Rule 46A.
Tribunal’s Decision: The Tribunal noted that the assessee had submitted medical evidence demonstrating health issues that prevented timely filing of the appeal, and accordingly condoned the 212-day delay. On merits, the Bench observed that multiple documents, VAT returns, sale ledger, daily cash summary and insurance payment proof, were filed only before the Tribunal and had not been examined by either the AO or the CIT(A). Since these materials directly impacted the source of cash deposits, the profit estimation controversy and the claim under Section 80C, the Tribunal held that they formed essential evidence going to the root of the matter.
Invoking the principles of natural justice and Rule 46A, the Tribunal admitted the additional evidence and set aside the CIT(A)’s order. The appeal was remanded to the CIT(A) for a fresh decision after granting the assessee one final opportunity to substantiate her claims. The Tribunal also cautioned the assessee to cooperate fully, failing which the CIT(A) would be free to pass an order on the available material. The appeal was thus partly allowed for statistical purposes.
To Read Full Judgment, Download PDF Given Below