Unexplained cash deposits during demonetisation treated as business cash sales, tribunal allows source but estimates income at 8%

Unexplained cash deposits during the demonetisation period were treated as alleged cash sales where the assessee's regular business and books of account were not disputed. Because the demonetisation declaration created abnormal panic affecting normal business patterns, the tribunal accepted that cash deposits likely arose from business cash sales in absence of contrary material. However, due to insufficient documentary details despite opportunities to produce them, the tribunal estimated taxable income at 8% of the alleged cash sales. The outcome was partly in favour of the assessee by recognising business source but permitting an estimated addition on limited particulars.

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Issues: Whether the addition of Rs. 38,57,530 as unexplained cash deposit can be sustained where books of account are accepted but detailed evidence of cash sales during the demonetisation period is not furnished to the Tribunal.

Analysis: The Tribunal examined (i) the acceptance of the assessee's books of account by the Assessing Officer, (ii) the nature of the business (regular scrap trading with declared quarterly sales), and (iii) the specific factual context of the demonetisation period which affected cash transactions. The Tribunal noted that the return was selected for scrutiny and that cash sales records had been filed but that the assessee failed to provide adequate details despite opportunities and was absent at hearings resulting in ex parte adjudication. Applying the principle that accepted books support the source of receipts but recognising the lack of specific corroborative details, the Tribunal exercised the power to estimate income from the alleged cash sales. The estimation method applied was 8% of the disputed cash deposits to determine taxable income.

Conclusion: The addition sustained in part; the Tribunal reduced the addition by allowing part relief and confirmed an assessed addition of Rs. 3,08,600 (being 8% of Rs. 38,57,530).

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