#Demonetization Tax

The ITAT Delhi has ruled that cash deposits made during demonetization, if fully supported by genuine, audited cash sales recorded in the books of account and already taxed as turnover, cannot be reclassified as unexplained income under Section 68. This protects businesses with transparent cash-based operations from double taxation and reinforces that proper bookkeeping is a valid defense against presumptive tax additions.

ITAT Delhi rules that cash deposits during demonetization, sourced from prior bank withdrawals (e.g., salary income), cannot be taxed as unexplained income under Section 69A without evidence of diversion or unaccounted utilization. The ruling shifts the burden of proof to the tax authorities to establish diversion, reinforcing taxpayer rights in banking transactions.

ITAT Delhi sets aside a ₹2.23 crore addition under Section 68, ruling that unexplained income additions cannot stand if an identical addition in the co-party’s case has been deleted. The decision reinforces consistency in tax adjudication and limits arbitrary additions based on demonetization-era cash deposits.