PRAVINKUMAR D GANDHI HUF,AHMEDABAD, GUJARAT vs. ITO WARD 5(3)(2), AHMEDABAD, VEJALPUR AHMEDABAD, GUJARAT

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ITA 1391/AHD/2026Status: DisposedITAT Ahmedabad19 August 2026AY 2017-185 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the cash deposits represented sale proceeds, and the genuineness of sales was not disputed. The increase in deposits during demonetization was a natural consequence for a trader needing to deposit cash instead of making cash transactions.

What were the facts?

The assessee deposited Rs. 16 lakhs in cash during the demonetization period. The Assessing Officer treated this as unexplained cash credit under Section 68, as the assessee failed to provide a proper cash book or authenticate sales. The CIT(A) upheld this addition.

What were the issues?

Whether cash deposits during demonetization, representing sale proceeds, can be added as unexplained cash credit under Section 68 when sales are not disputed.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SHRI SANJAY GARG & SHRI R. GOVINDARAJAN

For Appellant: Shri Chetan L Agrawal, AR, Ms. Madhulika Satpute, Sr. D.R
For Respondent: Ms. Madhulika Satpute, Sr. D.R
Hearing: 04/08/2026Pronounced: 19/08/2026

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE: SHRI SANJAY GARG, JUDICIAL MEMBER AND SHRI R. GOVINDARAJAN, ACCOUNTANT MEMBER आयकर अपील सं./I.T.A. No. 1391/Ahd/2026 (िनधा�रण वष� / Assessment Year : 2017-18) बनाम Pravinkumar D Gandhi Income Tax Officer / Ward-5(3)(2) HUF Vs. 2, State Bank Officer Ahmedabad Society, Near Arpan Society, Naranpura, Ahmedabad, Gujarat-380013 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AABHP2565C (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Chetan L Agrawal, AR ��यथ� क� ओर से/Respondent by : Ms. Madhulika Satpute, Sr. D.R. Date of Hearing 04/08/2026 Date of Pronouncement 19/08/2026 (आदेश)/ORDER Per Sanjay Garg, Judicial Member:

The present appeal has been filed by the assessee against the order of the Ld. Addl/Joint Commissioner of Income Tax (Appeals)-1, Ludhiana, (hereinafter referred to as “CIT(A)”), dated 21.01.2026 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18.

2.

The assessee has taken following grounds in this appeal:

ITA No.1391/Ahd/2026 [Pravinkumar D Gandhi HUF vs. ITO] A.Y. 2017-18 - 2 – “1. The Ld. CIT(A) has erred in law as well as on facts in upholding an addition of Rs. 16,00,000 being cash deposited during demonetisation treated as unexplained cash credit u/s 68 of the Act.” 3. The brief facts of the case are that the assessee did not file the return of income for assessment year 2017-18 within due date. Consequent to the survey action in the case of Co-operative Bank Rajkot Limited, it was noticed that assessee had made cash deposit of Rs. 16 lakhs during the period of 09-11-2016 to 31-12-2016. In response to notice u/s. 142(1) of the Act dated 18-06-2019, assessee e-filed its return on 01-08-2019 admitting total income of Rs. 3,83,120/-. As there was no cash deposit in bank prior to and post demonetization period and major portion of the cash deposits were out of specified notes and made by self, the Assessing Officer (in short ‘the AO’) assessed Rs. 17,60,000/- as unexplained income u/s 68 of the Act.

4.

Being aggrieved by the order of the AO, the assessee came in appeal before the Ld. CIT(A). The CIT(A) vide his order dated 21.01.2026 held that the assessee had not submitted any proper cash book to substantiate his claim of cash deposit of Rs. 16 lakhs from the sales. Further, the CIT(A) held that the claim of cash deposit directly by the purchasers in the bank account of assessee against the sales made by it was also not authenticated from the bills submitted by assessee. Hence, he confirmed the addition of Rs. 16 lakhs.

ITA No.1391/Ahd/2026 [Pravinkumar D Gandhi HUF vs. ITO] A.Y. 2017-18 - 3 – 5. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before us.

6.

The Ld. Counsel appearing for the assessee through his paper book submitted that the cash deposits represented sale proceeds realized in cash and the sales had been offered to tax in the return of income filed on 01-08-2019. Genuineness of sales was not disputed by the AO and sales cannot be added u/s. 68 of the Act and that would amount to double taxation.

7.

The Ld. D.R. relied on the order of the ld. CIT(A). She has further submitted that total cash deposited in bank in previous financial year 2015-16 was Rs. 21,000/- only and the corresponding figure of total cash deposited in financial year 2016-17 was Rs. 16,85,000/- and the entire amount has been deposited during the period of demonetization.

8.

We have heard both parties and perused the materials on record. The assessee, admittedly, is a trader in Cloths. The purchases and the stock-in-trade have not been doubted by the AO. Even, the sales have not been doubted, except that most of the cash sales have been shown prior to the demonetization period. When the purchases have not been doubted, looking at the kind and nature of the product in question i.e. the Cloth purchased by the assessee, could not have been dumped elsewhere for future sale, and, therefore, the reasonable presumption is that the assessee has made corresponding sales. At the most the allegation

ITA No.1391/Ahd/2026 [Pravinkumar D Gandhi HUF vs. ITO] A.Y. 2017-18 - 4 – can be that the assessee might have made the cash sales during the demonetization period in violation of Government orders / notifications. May it be so, still, in that circumstances, it will not be a case of income of the assessee from undisclosed sources. The assessee has already offered the profit embedded in the cash sales for taxation. So far as the increase in deposit during demonetization period as compared to earlier months is concerned, on the announcement of demonetization scheme, the citizens were not allowed to make transaction in cash in demonetized currency. Therefore, for a trader, who would make purchases in cash or make expenditure in cash from the cash receipts from cash sales, the only course left was not to make purchase / expenditure in cash but to deposit the cash available in the cash book in the bank account, therefore, obviously, the cash deposit in the bank account would considerably increase at the start of or during the demonetization period. Therefore, no adverse inference can be drawn against the assessee in this respect. Therefore, we do not find justification on the part of lower authorities for making the impugned addition, therefore, the same is ordered to be deleted.

9.

In the result, the appeal filed by the assessee stands allowed.

This Order is pronounced on 19/08/2026 Sd/- Sd/- (R. GOVINDARAJAN) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 19/08/2026 S. K. SINHA True Copy आदेश क� �ितिल�प अ�े�षत/Copy of the Order forwarded to :

ITA No.1391/Ahd/2026 [Pravinkumar D Gandhi HUF vs. ITO] A.Y. 2017-18 - 5 – अपीलाथ� / The Appellant 1. 2. ��यथ� / The Respondent. संबंिधत आयकर आयु� / Concerned CIT 3. 4. आयकर आयु�(अपील) / The CIT(A)- �वभागीय �ितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad

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