The assessee’s return of income for the assessment year 2017-18 was chosen for scrutiny due to cash deposits of Rs. 2,65,44,000 made during the post-demonetisation period, and the Assessing Officer accepted the returned loss after issuing a questionnaire and taking the assessee’s submission into account. The Principal Commission on the proposal of the AO observed that the AO did not examine the cash deposits properly and passed an erroneous order.

Tribunal held that the AO has issued notices for the high sales for the month of October 2016 and therefore, saying that it missed the cash sales The Department was unable to refute the assessee’s factual assertion. Explanation 2 of Section 263 of the Act therefore could not be used against the assessee. It was held that the order of the Principal Commissioner was devoid of merit, did not hold any truth and was unjustified. As a result, the order was set aside. (AY.2017-18)