Cement Trader’s Rs 14.74 Lakh Deposit During Demonetisation Challenged by Tax Officer

A cement trader from Balasore, Odisha, has successfully challenged an Income Tax Department assessment that classified Rs 5.72 lakh of his cash deposits as unexplained. The scrutiny stemmed from a cash deposit of Rs 14.74 lakh made during the demonetisation period in November 2016. The Income Tax Assessing Officer (AO) questioned the legitimacy of the deposit by comparing the trader’s business activity before and after demonetisation.

The trader was unable to contest the assessment in a timely manner due to a serious injury that required hospitalization. After recovering, he approached the Income Tax Appellate Tribunal (ITAT) in Cuttack, resulting in a delay of 736 days in filing his appeal. The tribunal accepted the delay and agreed to review the case based on its merits.

Why did the cement trader win relief?

The trader’s advocates presented his cash books and supporting evidence to ITAT Cuttack. They argued that the trader had deposited Rs 14.74 lakh in cash into his bank account between November 30 and December 6, 2016. The AO had classified Rs 5.72 lakh of this amount as unexplained. However, the cash book indicated that the trader had Rs 14.78 lakh available in cash as of November 8, 2016.

The advocates contended that this cash balance was sufficient to justify the subsequent bank deposits. After reviewing the facts, ITAT Cuttack determined that the trader had adequate cash on hand at the time of demonetisation to account for the deposits. The tribunal noted that the AO had not rejected the trader’s books of account or disputed the reported net profit. ITAT Cuttack concluded that no additional tax was warranted, leading to the deletion of the AO’s assessment.