The Income Tax Appellate Tribunal (ITAT), Amritsar Bench, deleted a ₹2.33 crore tax addition made in the case of Bhupendra Flour Mills Pvt. Ltd. According to the ITAT order in ITA No. 54/ASR/2025, the tribunal found that the company had accounted for the earlier cash withdrawals and that the Revenue had not established that the withdrawn money had been used elsewhere. The case relates to Assessment Year 2017-18 and involves cash deposited during the 2016 demonetisation period.
According to the ITAT order, Bhupendra Flour Mills had withdrawn approximately ₹2.325 crore in cash from its SBOP bank account in Bathinda between July and October 2016. The company withdrew around ₹1.66 crore up to 31 August 2016, another ₹41 lakh between 15 and 19 September, while ₹22.50 lakh was withdrawn on 17 October. A few weeks later, during the demonetisation period in November 2016, the company deposited ₹2.33 crore in cash into a newly opened UCO Bank account at Parliament Street, New Delhi.
The Assessing Officer questioned the company's explanation that the cash had been physically transported from Bathinda to Delhi, noting that the company had bank accounts at both locations and could have transferred the money through banking channels. The department treated the ₹2.33 crore cash deposit as unexplained money under Section 69A of the Income-tax Act, and the Commissioner (Appeals) subsequently upheld the addition. The Revenue's case was substantially based on the circumstances surrounding the cash, with withdrawals taking place between July and October while the deposit happened during demonetisation in November.
The tribunal examined the company's bank statements and financial records, noting that both the bank account from which the cash had been withdrawn and the account into which the cash was deposited were reflected in the company's financial statements. The SBOP bank statement showed cash withdrawals of approximately ₹2.325 crore before demonetisation, while the subsequent deposit of ₹2.33 crore was also recorded in the company's accounts. The ITAT referred to the Punjab and Haryana High Court's decision in Shiv Charan Dass vs CIT, which supported the principle that where the Revenue cannot establish that cash withdrawn earlier was utilised elsewhere, it cannot reject the explanation for a subsequent deposit merely on assumptions.
The case demonstrates why taxpayers making substantial cash withdrawals should maintain proper records. As reported by Mint, bank statements, books of account and cash records can become important when the source of a later cash deposit is questioned. The tribunal's reasoning focused on the actual evidence available on record, with the earlier withdrawals reflected in bank statements while the Revenue had not produced concrete evidence showing that the withdrawn money had been spent or diverted elsewhere. The absence of evidence of alternative utilisation became crucial to the tribunal's decision.
