Addition of ₹24.48 Lakh for Unexplained Cash Deposits: ITAT allows ₹15.48 Lakh, confirms ₹9 Lakh as Unexplained [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) partially allows ₹15.48 Lakh of the ₹24.48 Lakh addition for unexplained cash deposits, confirming ₹9 Lakh as unexplained due to insufficient explanation for excess deposits.

Prashant Chandulal Parikh, appellant-assessee, filed his income tax return for A.Y. 2017-18 declaring ₹20,89,430. The case was scrutinized for capital gains from agricultural land sales and cash deposits during demonetization. The Assessing Officer(AO) rejected the declared land valuation of ₹70 per square meter, recalculating it at ₹6.20, and partially disallowed a ₹2.51 crore deduction under Section 54F.

Additionally, cash deposits of ₹24,48,000, explained as agricultural income, were treated as unexplained.The assessment concluded with a total income of ₹4,86,05,340. The assessee's appeal to the Commissioner of Income Tax(Appeals)[CIT(A)] was dismissed, and he subsequently appealed to the tribunal.

Get a Complete Kit of Essential Books for Daily Practice, Click Here

The issue was the addition of Rs. 24,48,000/- for cash deposited in the bank. The assessee’s counsel explained that the assessee had agricultural land and reported agricultural income every year. He showed a chart with the income for different years.

The counsel pointed out that the AO had not questioned the agricultural income from previous years. However, the AO said Rs. 7,32,200/- from firewood sales was not agricultural income, which the representative disagreed with. The representative also explained that the assessee had cash from agriculture, including old high denomination notes, which was deposited after demonetization. Therefore, the AO was wrong to treat the cash deposits as unexplained.

The revenue counsel, pointed out unexplained withdrawals from the bank despite a large cash balance and questioned why the assessee kept cash at home. He argued that the source of cash, especially the post-demonetization deposits, was unexplained, supporting the AO’s addition.

Get a Complete Kit of Essential Books for Daily Practice, Click Here

The two member bench comprising T.R Senthil Kumar(Judicial Member) and Narendra Prasad Sinha(Accountant Member)considered the submissions carefully. The AO had treated the entire cash deposit of Rs. 24,48,000/- in the bank as unexplained, which was incorrect.

It was clear that the assessee earned agricultural income in cash. The agricultural income disclosed by the assessee, Rs. 12,53,920/-, was similar to the previous year’s income of Rs. 12,26,002/%, showing no inflation of income.

Although the AO questioned the income from firewood sales, the transaction itself was not challenged. However, the appellant did not explain why all the cash was kept at home or why it was mostly deposited after demonetization.

Get a Complete Kit of Essential Books for Daily Practice, Click Here

The total deposit during demonetization was Rs. 23,54,000/-. While the assessee claimed the cash came from agricultural income, no explanation was given for the excess deposits.

Considering the opening cash balance of Rs. 3,04,049/- and the agricultural income earned, the tribunal allowed Rs. 15.48 Lakhs of the deposit as explained. The remaining Rs. 9,00,000/- was confirmed as unexplained.

In short,the assessee's ground was partly allowed.

To Read the full text of the Order CLICK HERE

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates