Cash Deposits During Demonetization Upheld as Business Income When Supported by Books of Account — ITAT Delhi

Case Overview

ACIT Vs Priti Brijal Bhatia (ITAT Delhi)
Assessment Year: 2017–18
Date of Order: 9th April, 2026

The Income Tax Appellate Tribunal, Delhi, recently decided an appeal preferred by the Revenue against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi, pertaining to Assessment Year 2017–18. The central controversy revolved around whether cash deposits of Rs. 1.30 crore made by the assessee during the demonetization period could be treated as unexplained cash credits under Section 68 of the Income-tax Act, 1961.

The Tribunal, after careful examination of the facts, books of account, and comparative deposit data, ruled in favour of the assessee and dismissed the Revenue's appeal.

Preliminary Issue: Condonation of Delay

Before proceeding to the merits, the Tribunal addressed a procedural objection. The Revenue's appeal was filed with a delay of 68 days beyond the prescribed limitation period. The Registry had flagged this defect at the time of filing.

Upon hearing submissions from both sides on this preliminary issue, the Tribunal was satisfied that there existed reasonable cause for the delay. Accordingly, the delay was condoned and the appeal was admitted for adjudication on merits.

Note: Condonation of delay does not prejudice the merits of the appeal — the Tribunal's ultimate dismissal was based entirely on substantive grounds.

Background: Who Is the Assessee?

The assessee, a individual, filed her return of income on 17th October 2017, declaring total income of Rs. 12,31,610/-. She was engaged in the business of trading of gold, gold jewellery, and diamond items under the trade name M/s. Awesome Sparkles.

The case was picked up for scrutiny under the Computer Assisted Scrutiny Selection (CASS) system. Notices under Section 143(2) and Section 142(1) of the Income-tax Act, 1961 were duly issued and served. The assessee responded to these notices by submitting information from time to time through the ITBA Portal.

The Assessing Officer's Findings and Addition

Cash Deposits During Demonetization

During the course of assessment proceedings, the Assessing Officer (AO) noted that the assessee had made substantial cash deposits totalling Rs. 1.30 crore during the demonetization window, i.e., from 9th November to 31st December 2016. The AO called upon the assessee to explain the source of these deposits.

Assessee's Comparative Data Submission

In response, the assessee submitted a detailed comparative chart showing bank deposits across different periods of Financial Year 2015–16 and Financial Year 2016–17:

The assessee's position was straightforward — the deposits made during the demonetization period were substantially lower than deposits made during the same period in the preceding financial year. The cash deposits, she argued, were a routine feature of her jewellery trading business, arising directly from cash sales.

Why the AO Rejected the Explanation

Despite the comparative chart, the AO was not convinced. His key observations included: