A Balasore cement trader faced tax scrutiny after placing Rs 14.74 lakh into bank accounts between November 30 and December 6, 2016, leading tax authorities to treat Rs 5.72 lakh as unexplained cash. Despite a 736-day filing delay caused by the trader's severe injury and hospitalisation, the tribunal condoned the lapse to evaluate the evidence. Account ledgers established that the enterprise possessed Rs 14.78 lakh in verified cash on November 8, 2016. Because tax officers never formally rejected the business accounts or questioned the net profit, the tribunal deleted the disputed additions.
Key points
The ITAT eliminated tax additions because the cash on hand on demonetisation day exceeded…: The ITAT eliminated tax additions because the cash on hand on demonetisation day exceeded the total subsequent bank deposits.
Tax authorities cannot classify deposits as unexplained cash while simultaneously accepti…: Tax authorities cannot classify deposits as unexplained cash while simultaneously accepting the taxpayer's reported profits and books of account.
The ruling successfully removed the tax department's classification of Rs 5.72 lakh as un…: The ruling successfully removed the tax department's classification of Rs 5.72 lakh as unexplained cash and set aside the penalty order.
Sources checked by our analysis pipeline: 1
A cement trader based in Balasore, Odisha, came under the
Income Tax Department's scrutiny after depositing Rs 14.74 lakh in cash into his bank account during the
demonetisation period in November 2016.
The Income Tax Assessing Officer (AO) in Balasore questioned the deposit and estimated the trader’s cement sales by comparing his business activity before and after demonetisation. Following this exercise, the AO classified Rs 5.72 lakh as unexplained cash and initiated proceedings against him.
The trader, however, was unable to contest the department's action or file an appeal within the prescribed period because he had sustained a serious injury and was admitted to hospital. His doctor had advised him to remain on complete bed rest.
After recovering, the trader approached the Income Tax Appellate Tribunal (ITAT), Cuttack, to challenge the assessment, resulting in a delay of 736 days in filing the appeal.
The tribunal condoned the delay and agreed to examine the case on its merits.
Why did the cement trader win relief?
The trader’s advocates submitted his cash books and other supporting evidence before ITAT Cuttack.
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