Rajkot ITAT Reduces Cash Deposit Tax Addition and Rules Out Section 115BBE

The Income Tax Appellate Tribunal in Rajkot reviewed a disputed demonetisation cash deposit case where tax authorities had originally added Rs 12.03 lakh to the assessee's income. The tribunal restricted this taxable addition to Rs 10 percent of the deposited amount, arriving at Rs 1.20 lakh as estimated peak profit. Additionally, the bench explicitly directed that normal tax rates apply to this adjusted figure rather than the penal rates prescribed under section 115BBE.

This decision prevents tax authorities from treating entire gross cash deposits as unexplained income without factoring in underlying business turnover or profit margins. Section 115BBE imposes heavy taxation and penalties on unexplained credits, making the exclusion of these punitive provisions a notable relief for assesses with legitimate commercial explanations for cash handling.

Tax professionals and litigants dealing with pending demonetisation assessments should review similar pending disputes in light of this tribunal approach. Affected assessees should verify their profit estimation methods and consult their tax counsel to claim appropriate relief during appellate proceedings.