Cash deposits arising from cash sales during demonetization period cannot be treated as unexplained money

Income Tax Appellate Tribunal Rules in Favor of Petrol Pump Owner in Demonetization Cash Deposit Case. Tribunal invalidates addition under Section 69A, citing proper documentation of cash sales during demonetization period.

In a notable judgment, the Income Tax Appellate Tribunal (ITAT), Mumbai Bench "G," has ruled in favor of Girish Karamshi Dedhia, a petrol pump owner, against the Deputy Commissioner of Income Tax (DCIT), Circle-15(1). The Tribunal deleted the addition of Rs. 1,24,41,000 made by the Assessing Officer (AO) under Section 69A of the Income Tax Act, 1961, pertaining to cash deposits made during the demonetization period. The judgment was delivered by Justice (Retd.) C V Bhadang and Padmavathy S, Accountant Member, on October 10, 2025.

The case revolved around the deposits of specified bank notes (SBN) during the demonetization period, which the AO had treated as unexplained money under Section 69A, alleging violation of a government notification that restricted acceptance of SBNs to certain petrol pumps. Girish Karamshi Dedhia, operating a proprietorship under the name M/s. Autopushp, contended that the cash deposits were from legitimate cash sales of petroleum products and were duly recorded in his books of accounts.

The Tribunal noted that the AO had accepted the sales figures and did not reject the books of accounts maintained by the assessee, yet treated the cash deposits as unexplained. It was highlighted that the assessee had provided comprehensive documentation, including income tax returns, audited financial statements, sales registers, VAT returns, stock details, and a cash book summary, to substantiate the cash sales.

In its decision, the Tribunal emphasized that once the source of cash deposits is established through documented cash sales, treating such deposits as unexplained is self-contradictory. The Tribunal relied on judicial precedents, including cases like ITO v. Ashapura Petrochem Marketing Pvt. Ltd., where similar additions were deleted.

The Tribunal observed that the violation of the government notification concerning SBN acceptance does not automatically attract the provisions of Section 68 or 69A if the cash sales are duly recorded and substantiated. It concluded that the revenue's action to treat the cash deposits as unexplained was unsustainable, given the acceptance of the cash sales and the proper maintenance of books of accounts.

The judgment is seen as a significant precedent for businesses dealing with cash transactions during the demonetization period, emphasizing the importance of maintaining proper documentation and the consistency of cash sales trends.

Bottom Line:

Cash deposits arising from cash sales during demonetization period cannot be treated as unexplained money under Section 69A of the Income Tax Act, 1961, if proper documentation and evidence supporting the cash sales are provided and accepted.

Statutory provision(s): Income Tax Act, 1961 Sections 68, 69A

Girish Karamshi Dedhia v. DCIT, Circle-15(1), (ITAT)(Mumbai Bench "G") : Law Finder Doc Id # 2792657