No Evidence, No Relief: ITAT Upholds Rs 80 Lakh Addition in Unexplained Cash Credits Case

The ITAT Surat held that mere claims without evidence cannot justify large cash deposits. Unusual cash handling and lack of documentation led to treating deposits as unexplained income, upholding the Rs 80 lakh addition and dismissing the assessee’s appeal.

The ITAT Surat has delivered its judgement on an appeal filed by Sumeru Textiles Private Limited against the Income Tax Authorities, challenging an order dated March 11, 2025, passed by the CIT(A), NFAC Delhi, under Section 250 of the Income-Tax Act, 1961. The case belongs to the Assessment Year 2017-18.

The assessee had made some cash deposits amounting to Rs 80 lakh in its bank account during the period of demonetisation. During the assessment of the return, the Assessing Officer (AO) treated the entire deposit as unexplained cash credits under Section 68 of the Act and made an addition of the same to the assessee’s income, declaring the total income of the assessee at Rs 9,265,562.

The assessee claimed that the deposits made were not unexplained because they were the same amount withdrawn from the same account earlier for the purpose of purchasing an immovable property. However, when the deal could not succeed, the amount was re-deposited to the same bank account during the period of demonetisation.

The assessee further argued that the books of accounts were properly audited and were not rejected under section 145, so section 68 (which deals with unexplained cash) should not be applied. Lastly, they said that the changes made to section 115BBE should not be applied retrospectively, i.e., to transactions that took place in the past.

When the tribunal analysed the facts of the case, it noted that the assessee failed to furnish relevant documents to prove the source of the deposit. Hence, the tribunal emphasised that a claim cannot be assumed genuine without relevant evidence or documents. It further observed that keeping large amounts of borrowed cash idle for months and then redepositing cannot be considered normal business behaviour.

The tribunal further highlighted that large cash transactions are not permitted under the law, especially in property dealings, which are expected to be done through banking channels. In conclusion, the tribunal held that since the assessee could not properly explain the source of the cash deposit, the Rs 80 lakh addition cannot be deleted. The assessee’s appeal was dismissed.