High Court of Judicature at Allahabad · Judgments and reasoned final orders
Principal Commissioner of Income Tax-I, Lucknow v. Medharaj Techno Concept Pvt. Ltd.
Income Tax Appeal No. 4 of 2026 ·
Deletion of section 68 addition on demonetisation-period bank cash deposits upheld where the assessee's audited books established availability of cash in hand, no defect was pointed out in the books, and the AO produced no evidence that the cash in hand was utilized elsewhere.
1. FACTS OF THE CASE
The Revenue filed Income Tax Appeal No. 4 of 2026 under section 260A challenging the order dated 22.08.2025 passed by the ITAT Lucknow Bench for AY 2017-18 confirming the CIT(A)'s deletion of an addition made under section 68 in respect of cash deposited by Medharaj Techno Concept Pvt. Ltd. during the demonetisation period. The Revenue contended that abnormal cash deposits during demonetisation warranted addition on human probabilities even without rejecting the books of account.
2. DISCUSSION BY THE COURT
Reviewing the ITAT's findings (which applied Dhakeshwari Cotton Mills Ltd. v. CIT, (1954) 26 ITR 775 (SC) on suspicion versus proof) and the legal standard of 'perversity' in Arulvelu v. State, (2009) 10 SCC 206, S.R. Tewari v. Union of India, (2013) 6 SCC 602, CIT v. Ajay Kapoor, 2013 SCC OnLine Del 2779, and the coordinate Bench ruling in Pr. CIT, Bareilly v. Dharam Singh, (2025) 342 CTR 653 (All), the Division Bench held that the assessee's books of account were duly audited and the Assessing Officer had not pointed out a single defect in them. Once the availability of cash in hand in the audited books was established and the AO brought nothing on record to show that such cash in hand had been spent elsewhere, the explanation that the available cash in hand was deposited into the bank during demonetisation could not be rejected on bare suspicion or conjecture.
3. JUDICIAL DECISION
Holding that the concurrent findings of fact recorded by the CIT(A) and the ITAT suffered from no perversity and raised no substantial question of law under section 260A, the Allahabad High Court (Lucknow Bench) dismissed Income Tax Appeal No. 4 of 2026.
4. OUTCOME
In favour of the assessee (Medharaj Techno Concept Pvt. Ltd.); Revenue appeal ITA No. 4 of 2026 dismissed.
5. AKHB REVIEW POINT
AKHB analysis: Marked 'A.F.R.' (Approved for Reporting), this Allahabad High Court judgment reinforces Pr. CIT v. Dharam Singh ((2025) 342 CTR 653 (All)) and Dhakeshwari Cotton Mills (26 ITR 775 (SC)): demonetisation cash deposits supported by audited cash-book balances cannot be added under section 68 on generalized 'preponderance of probability' where no defect in the books is found and no alternative utilization of the cash balance is proved.
Source and verification
Reviewed from the complete 9-page official High Court judgment PDF (20260408_UPHC020145702026.pdf, SHA-256: 90ab93cf6cadf394d02d1f21e14a90657f8baae6d1b5a9dc6b48623d2dc94d3c).
Original PDF: 9 pages · SHA-256: 90ab93cf6cadf394d02d1f21e14a90657f8baae6d1b5a9dc6b48623d2dc94d3c
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Refers to the Income-tax Act, 1961 and allied statutory rules/circulars as applicable to the relevant assessment years.
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