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Facts
The assessee, Otto Bock Healthcare India Private Limited, faced an addition of ₹2,65,03,626/- under Section 68 for unexplained cash deposits during demonetisation by the AO, citing lack of evidence. The assessee appealed to the CIT(A), claiming actual deposits were ₹1,14,88,160/- from business receipts, supported by bank certificates and audited books. The CIT(A) granted relief, but the Revenue challenged this due to an unreconciled difference of ₹41,64,214/- between SFT data and bank certificates.
Held
The tribunal found a crucial unreconciled discrepancy between the SFT data, bank certificates, and the assessee's books of account regarding the quantum of cash deposits. As the CIT(A) did not provide a categorical finding on this reconciliation, the tribunal set aside the CIT(A)'s order and remanded the matter for fresh examination by the Assessing Officer.
Key Issues
The primary legal issue is the proper reconciliation and substantiation of cash deposits made during the demonetisation period, specifically resolving discrepancies between SFT data, bank certificates, and the assessee's books of account for an addition under Section 68.
Sections Cited
68, 143(3), 250
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI SANDEEP GOSAIN & SHRI JAGADISH
This appeal filed by the Revenue is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 20.06.2025 for the assessment year 2017-18 passed under section 250 of the Income Tax Act, 1961.
The Revenue has raised the grounds challenging the relief granted by the Ld. CIT(A). The grievance of the Revenue is that the Ld. CIT(A) erred in deleting the addition made by the Assessing Officer under section 68 of the Act in respect of cash deposits during the demonetisation period without properly appreciating the facts brought on record by the Assessing Officer. The Revenue has contended that the assessee failed to produce the cash book and other supporting evidence during the assessment proceedings and therefore the addition made by the Assessing Officer ought to have been sustained.
Briefly stated, the facts of the case are that the assessee is a company engaged in the business of trading and distribution of orthopaedic equipments, prostheses, artificial limbs and other orthopaedic aids. The assessee filed its return of income for the year under consideration declaring a loss. The case was selected for scrutiny and assessment was completed under section 143(3) of the Act.
During the course of assessment proceedings, the Assessing Officer observed that the assessee had reported cash deposits during the demonetisation period. As per the return of income filed by the assessee, the amount of cash deposited during the demonetisation period was stated to be ₹1,09,50,723/-. However, as per the information available with the department through ITS/SFT data, the total cash deposits during the said period were reported at ₹2,65,03,926/-.The Assessing Officer called upon the assessee to furnish complete details of the cash deposits along with supporting evidences including the cash book, details of cash in hand and other relevant documents to substantiate the source of the deposits. According to the Assessing Officer, the assessee failed to produce the cash book and other supporting evidence required to verify the availability of cash in hand and to reconcile the figures appearing in the departmental information. In the absence of satisfactory explanation and supporting documents, the Assessing Officer held that the assessee failed to discharge the onus cast upon it to explain the source of the cash deposits. Accordingly, the Assessing Officer treated the cash deposits of ₹2,65,03,626/- as unexplained cash credit under section 68 of the Act and added the same to the income of the assessee.
Aggrieved by the assessment order, the assessee carried the matter in appeal before the Ld. CIT(A). Before the Ld. CIT(A), the assessee submitted that the addition made by the Assessing Officer was based on the ITS data which, according to the assessee, contained duplicate entries and therefore reflected an inflated figure of cash deposits. The assessee submitted that the actual cash deposited during the demonetisation period was only ₹1,14,88,160/- and not ₹2,65,03,626/- as considered by the Assessing Officer. It was further submitted that out of the total deposits of ₹1,14,88,160/-, a substantial portion represented deposits in legal tender such as new currency notes and other valid denominations and therefore the amount representing deposits in specified bank notes was much lower. The assessee further explained that the deposits were out of opening cash balance, withdrawals from bank and collections from customers against sales made in the normal course of business. It was contended that the assessee had sufficient opening cash balance as reflected in the audited financial statements and had also collected cash from customers immediately preceding the demonetisation announcement. The assessee further submitted that the sales recorded in the books of account were duly reflected in the statutory returns and that the books of account were maintained in the regular course of business and were duly audited. It was therefore submitted that the deposits made in the bank accounts represented business receipts duly recorded in the books and could not be treated as unexplained income.
The assessee also filed additional evidences before the Ld. CIT(A), including bank certificates indicating the denomination-wise details of the cash deposits made during the demonetisation period. It was submitted that such certificates could not be obtained during the assessment proceedings due to the limited time available.
The Ld. CIT(A) forwarded the additional evidences filed by the assessee to the Assessing Officer for examination and called for a remand report. In the remand proceedings, the Assessing Officer examined the bank certificates furnished by the assessee. As per the bank certificates, the total cash deposits during the demonetisation period were stated to be ₹1,14,68,175/-. However, the Assessing Officer observed that as per the Statement of Financial Transactions (SFT), the cash deposits during the same period were reported at ₹1,56,32,389/-. Thus, there existed a difference of ₹41,64,214/- between the amount reflected in the SFT data and the amount appearing in the bank certificates furnished by the assessee. The Assessing Officer further observed in the remand report that the assessee had not furnished a complete reconciliation explaining the difference between the figures appearing in the SFT data and the figures reflected in the bank certificates. It was also noted that the explanation offered by the assessee was largely based on estimations rather than verifiable documentary evidence. After considering the submissions of the assessee and the remand report of the Assessing Officer, the Ld. CIT(A) granted relief to the assessee. Aggrieved by the relief granted by the Ld. CIT(A), the Revenue is in appeal before us.
We have heard the rival submissions and perused the material available on record. It is observed that the addition in the present case has been made by the Assessing Officer on account of cash deposits
during the demonetisation period by treating the same as unexplained cash credit under section 68 of the Act. During the appellate proceedings before the Ld. CIT(A), the assessee furnished bank certificates indicating the denomination-wise details of the deposits made during the demonetisation period. As per the said certificates, the total cash deposits during the relevant period were ₹1,14,68,175/- .However, the remand report of the Assessing Officer clearly records that as per the SFT data the cash deposits during the same period were reported at ₹1,56,32,389/-. Thus, there exists a difference of ₹41,64,214/- between the amount reflected in the SFT data and the amount appearing in the bank certificates furnished by the assessee. On perusal of the order of the Ld. CIT(A), we find that though the remand report and the additional evidences filed by the assessee have been referred to, there is no clear finding explaining how the difference of ₹41,64,214/- between the SFT data and the bank certificates stands reconciled.
In our considered opinion, reconciliation of the figures appearing in the SFT data with the bank certificates and the books of account is a crucial aspect for determining the correct quantum of cash deposits made during the demonetisation period. Since the Ld. CIT(A) has not recorded any categorical finding on this aspect and the reconciliation of the said difference requires factual verification, we are of the view that the matter requires fresh examination at the level of the Assessing Officer. In the interest of justice, we therefore deem it appropriate to set aside the order of the Ld. CIT(A) on this issue and restore the matter to the file of the Assessing Officer for the limited purpose of verifying the reconciliation of the cash deposits reflected in the SFT data, the bank certificates and the books of account of the assessee.
The Assessing Officer shall examine the reconciliation and supporting documents and decide the issue afresh in accordance with law after providing adequate opportunity of being heard to the assessee.
In the result, the appeal of the Revenue is allowed for statistical purposes.
Order pronounced in the open court on 11/03/2026.