The Surat Bench of Income Tax Appellate Tribunal ( ITAT ) remanded the matter alleged cash deposit during the demonetization period back to the assessing officer ( AO ) to verify the agriculturalist claim, deposited before the demonetization period.
Vijay Odhabhai Lalu ( the assessee ) deposited Rs. 57,22,000 into bank accounts, which was brought under scrutiny by the Income Tax Department. The Assessing Officer ( AO ) raised concerns regarding cash deposits during the demonetization period (09/11/2016 to 30/12/2016), claiming these were unexplained under Section 69A of the Income Tax Act, 1961.
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In response, the assessee claimed the amount was agricultural income and part of it was deposited before the demonetization period, only Rs.60,000 deposited during demonetization. However, the assessing officer added Rs. 57,22,000 to the assessee’s income as per Section 69A of the Income Tax Act.
The AO applied the enhanced tax rate under Section 115BBE, taxing the unexplained income at 77.25%, which the assessee contested claiming the old rate of 35.54% should apply. On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] passed an ex parte order due to non-compliance by the assessee.
The assessee challenged the ex-parte decision before the Surat Bench of ITAT arguing that the cash deposits primarily occurred before the demonetization period, except for Rs. 60,000, which was deposited during the period. The assessee’s counsel argued the source of the deposits was agricultural income, not taxable under Section 69A of the Income Tax Act, 1961.
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Further, the assessee’s counsel argued the enhanced tax rate under Section 115BBE was applied retrospectively, which the assessee opposed arguing for the old tax rate and requesting for re-examination.
On the contrary, the revenue counsel argued the assessee had been given ample opportunities to explain the source of cash but failed to do so and opposed the request for a remand.
The two-member bench comprising Pawan Singh ( Judicial Member ) and Bijayananda Pruseth ( Accountant Member ) noted that the AO made the assessment based on incomplete information, particularly regarding the timing of the cash deposits.
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The tribunal observed that the majority of the cash deposits were made before the demonetization period, which was a key point that the lower authorities had not considered.
The tribunal criticized the assessee for failing to comply with notices but acknowledged the need for one more opportunity to present evidence supporting the source of the cash deposits. Therefore, the tribunal set aside the orders of both the AO and the CIT(A) and restored the matter to the AO.
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