Jaipur ITAT deletes fifty lakh rupee cash addition made during demonetisation for petrol retailer

The Jaipur bench of the Income Tax Appellate Tribunal issued an order deleting a disputed cash addition amounting to fifty lakh rupees against a petrol pump operator. The addition had been contested by the taxpayer following scrutiny proceedings related to high-volume cash deposits made during the demonetisation period. During demonetisation, petrol pumps and essential service providers were temporarily permitted to accept specified bank notes, creating unique reconciliation challenges for tax auditors.

Under standard tax assessment provisions, unexplained cash deposits are treated as income from undisclosed sources under the Income Tax Act. The taxpayer must substantiate the business source and daily collection logs, shifting the evidentiary burden during assessment proceedings. Tax practitioners representing businesses with high demonetisation cash deposits should examine this ruling when defending against arbitrary additions.

Accountants must ensure complete daily sales registers, stock tallies, and bank reconciliation statements are maintained for client audits. The bottom line is that substantiated operational cash flows during demonetisation cannot be arbitrarily taxed as undisclosed income by revenue authorities.