The Income Tax Appellate Tribunal in Cuttack has erased a ₹5.72 lakh unexplained cash assessment slapped on an Odisha cement merchant who banked demonetised currency eight years ago.
The Balasore-based trader had deposited ₹14.74 lakh in cash across multiple tranches between November 30 and December 6, 2016. Assessing officers flagged the transaction, matched his sales before and after the note ban, and slapped a penalty order alleging that ₹5.72 lakh lacked legitimate accounting backing. But the tribunal ruled that the revenue department committed a critical legal misstep: it accepted the trader’s primary accounting ledgers while arbitrarily disallowing the cash that flowed through them.
The assessment collapsed.
The trader was initially blocked from defending his case because of severe physical trauma. Sustaining critical injuries shortly after the tax department opened proceedings, the merchant was admitted to hospital and placed on strict, doctor-mandated bed rest.
By the time he recovered and retained counsel to contest the assessment before ITAT Cuttack, 736 days had lapsed beyond the statutory filing deadline. The tribunal reviewed his medical documentation, waived the delay, and agreed to adjudicate the dispute directly on its merits.
Legal representatives representing the merchant placed the physical cash ledgers before the appellate bench, demonstrating that the cement enterprise possessed ₹14.78 lakh in documented liquid cash on November 8, 2016 — the very night the Union government invalidated ₹500 and ₹1,000 currency notes.
Balasore tax authorities had arrived at the ₹5.72 lakh addition by comparing the merchant’s pre-demonetisation and post-demonetisation turnover to project speculative sales volumes. Yet the assessing officer failed to perform the mandatory legal groundwork required to invalidate an assessee’s returns. The tax officer neither rejected the firm's formal books of account nor contested the net profit figure declared in its annual profit and loss statement.
Because the revenue department accepted the ledger entries as genuine, it had no statutory foundation to treat the deposited cash as illicit income, the appellate bench held.
Once the books of accounts have been accepted, the cash available as of the date of demonitisation and SBN deposits are less than the cash availability as of the date of demonitisation, we are of the view that no addition is called for in the hands of the assessee. Consequently, the addition made by the AO and confirmed by ld CIT(A) stands deleted.
ITAT Cuttack Bench
The tribunal pointed out that total bank deposits of ₹14.74 lakh sat comfortably below the verified ₹14.78 lakh cash balance recorded on the books when the currency ban took effect.
| Case Parameter | Official Detail |
|---|---|
| Assessee Location | Balasore, Odisha |
| Total Demonetisation Deposit | ₹14.74 lakh (Nov 30 – Dec 6, 2016) |
| Assessing Officer Addition | ₹5.72 lakh classified as unexplained cash |
| Recorded Cash in Hand (Nov 8, 2016) | ₹14.78 lakh |
| Appeal Delay Condoned | 736 days (medical bed rest) |
| Final Tribunal Verdict | Addition deleted; penalty order quashed |
The verdict fully discharges the Balasore merchant from the disputed tax liabilities and ends the revenue department's recovery proceedings.