The ITAT has restricted a Rs. 1.80 crore cash addition claimed by a hospital during demonetisation to a maximum of Rs. 5 lakh. This decision highlights the need for robust evidence in defence of cash deposits during cash restrictions of that period.
ITAT Limits Cash Addition Under Section 68
The Income Tax Appellate Tribunal (ITAT) has ruled that a hospital's claim of Rs. 1.80 crore in cash deposits during the demonetisation period will only attract a Section 68 addition of Rs. 5 lakh. This decision stems from the hospital’s assertion of higher patient receipts during the cash crunch.
During the proceedings, the tribunal scrutinized the bank statements and established that the cash deposits did not correlate with the patient receipts claimed during the same period. In its analysis, the ITAT emphasized the importance of substantiating large cash deposits with reliable evidence, especially when the assumptions relate to significant sums arising during a time of financial unrest.
Section 68 of the Income Tax Act provides the legal framework under which the Assessing Officer can treat unexplained credits as income if the depositor does not satisfactorily explain the source of such cash. By allowing only a nominal addition, the ITAT has set a precedent that could benefit similar cases involving cash transactions made during demonetisation.
The implications of this ruling are substantial for practitioners in tax law, particularly in how they advise clients facing scrutiny over such cash deposits. Emphasis on meticulous documentation and evidence will be crucial for taxpayers disputing claims of unexplained income.
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