Tribunal Rules Cash Deposits During Demonetization Were Legitimate; Deletes Rs. 69,38,000 Addition for Lack of Evidence.

The Tribunal allowed the appeal in favor of the assessee, concluding that the cash deposits made during the demonetization period were adequately explained and not from undisclosed sources. The addition of Rs. 69,38,000/- made by the Assessing Officer was deleted, as the Tribunal found no evidence of undisclosed income. The assessee's explanations, including cash flow statements and reasons for the deposits, were accepted, resulting in the grounds raised by the assessee being allowed.

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Issues:
The judgment involves the only issue of confirming the addition of Rs. 69,38,000/- made on account of cash deposit during the demonetization period by the assessee.

Details of the Judgment:
The appeal pertained to the assessment year 2017-18 and arose from the National Faceless Appeal Centre in Delhi against the order of assessment passed by the Assessing Officer. The assessee, engaged in the manufacturing business, had filed the return of income declaring total income. The Assessing Officer observed cash deposits made by the assessee during demonetization and in July 2016. While the cash deposit in July 2016 was accepted, the one during demonetization was treated as income under the Income-tax Act. The assessee explained the cash withdrawals made prior to demonetization for payment to factory workers due to labor unrest. The demonetization announcement forced the assessee to deposit the available cash in the bank account. The assessee provided detailed cash flow statements and explanations for the cash deposits, showing no negative cash balance and sufficient sources for the deposits. The Tribunal found no undisclosed income and deleted the addition made by the revenue, allowing the appeal of the assessee.

Conclusion:
The Tribunal concluded that the cash deposits were adequately explained by the assessee and were not from undisclosed sources, warranting no addition under the Income-tax Act. The grounds raised by the assessee were allowed, and the appeal was granted in favor of the assessee.

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