Unexplained Cash Deposits: ITAT Ahmedabad Grants Relief to Small Homemade Food Business

The Income Tax Appellate Tribunal, Ahmedabad bench, gave the decision in favour of the assessee (Hiralben Jineshbhai Bavis). The Tribunal held that the cash deposited in the bank account was the sale proceeds from the business and could not be treated as unexplained cash credit. Therefore, the assessee’s appeal was accepted, deleting the addition of Rs 24,81,570 made by the lower authorities.

This appeal was filed by Hiralben Jineshbhai Bavisi against the Income Tax Department. The appeal was filed in the Income Tax Appellate Tribunal based in Ahmedabad. The case pertains to Assessment Year 2012-13 and was filed to challenge the order passed under the Income Tax Act, 1961. The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi. This order was passed on 26/09/2025, wherein the CIT(A) had upheld the addition made by the Assessing Officer.

In this case, the assessee was running a small business of homemade food products. She sold her products to customers and retailers and received small amounts in cash. This amount was deposited into his bank account from time to time. The amount deposited was used to purchase raw materials and other business-related expenses. The AO reopened the case under section 148, observing several cash deposits in the bank account. The deposits were treated as unexplained cash deposits, and an addition of a total of Rs 24,81,570 was made to the assessee’s income.

The assessing officer observed several cash deposits in the bank account and treated them as unexplained cash deposits and added a total of Rs 24,81,570. Also,

The assessee stated in the appeal that the deposits in the bank account were related to the sale of the business, and these deposits were accompanied by matching withdrawals. Withdrawals were used to buy raw materials and run the business. The assessee also submitted that the AO added the entire deposited amount while not taking into account the withdrawals.

The Income Tax Appellate Tribunal examined all the facts and found that the deposits in the bank account were related to regular business activities. The small deposits and withdrawals indicate that these were business transactions and not money received from an unknown source. The Tribunal held that the AO and CIT(A) added the entire deposited amount without considering the withdrawals. Therefore, the addition made by the lower authorities was removed as untenable, and the assessee’s appeal was allowed.