Demonetisation cash deposit additions cannot sustain when assessee’s books remain unchallenged: High Court

The company Medharaj Techno Concept Pvt. Ltd deposited a lot of cash in the bank during the demonetisation period. The Income Tax Department said this cash was suspicious and tried to add it as “unexplained money” under Section 68 of the Income Tax Act.

The company argued that this money was already shown in its books of accounts (audited records) as cash in hand.

Issue of the case

Was the company’s explanation about the cash deposits genuine and acceptable, or could the tax officer treat it as unexplained income?

Decision of the Court

• The court held that the company’s books were properly audited and no defects were found.
• The tax officer ignored the evidence and acted only on suspicion. Since the company had shown cash in hand and there was no proof it was spent elsewhere, the deposits were valid and explained.
• Therefore, the addition made by the tax officer was wrong. The Court ruled in favour of the company, and the Department’s appeal was dismissed.