Cash Deposit during Demonetization: ITAT partly deletes Rs. 3.5 lakh Addition based on CBDT Guidelines [Read Order]

The Raipur Bench of the Income Tax Appellate Tribunal (ITAT) has partly deleted an addition of Rs. 11,00,000 made on account of cash deposits during the demonetization period, holding that Rs. 3.5 lakh can be reasonably attributed to household savings, in line with CBDT Instruction No. 03/2017.

Sunita Sherwani (assessee) e-filed her income tax return declaring that her income was Rs. 2,14,350/-. The case was selected for scrutiny. The Assessing Officer (AO) observed that the assessee had deposited Rs. 11,00,000 in her bank account during the demonetization period.

The assessee claimed the cash deposits were sourced from accumulated capital, income from hobby classes, and prior bank withdrawals.

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However, the AO rejected the explanation due to the lack of documentary evidence, and keeping such an amount would risk life and safety. Therefore, the AO observed that the assessee failed to explain the source or nature of the amount.

Therefore, the AO treated the entire amount as unexplained money under Section 69A of the Income-tax Act, 1961.

Aggrieved by the order, the assessee filed an appeal before the Commissioner of Income Tax (appeals)[CIT(A)]. The CIT(A) observed that the assessee had failed to furnish evidence during both assessment and appellate proceedings to substantiate the claim of cash from past savings or business activities.

Aggrieved by the order, the assessee filed an appeal before the ITAT. The counsel for the assessee submitted that the cash deposits were from explainable sources and that the rejection by lower authorities has no justification.

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On the other hand, the counsel for the revenue relied on the orders of the lower authorities and sought to dismiss the appeal.

The single-member bench comprising Shri Ravish Sood (Judicial Member) observed that the assessee failed to offer a reasonable explanation for the full amount of Rs. 11 lakhs.

The Tribunal relied on CBDT Instruction No.03/2017, which provides relief in cases involving cash deposits of up to Rs.2.5 lakh (and Rs.5 lakh for individuals above 70 years) during demonetization.

The tribunal observed the assessee filing an Income Tax Return. Therefore, the Tribunal held that Rs. 3.5 lakh could be reasonably explained as cash in hand available with the assessee.

Therefore, the tribunal restricted the addition to Rs. 7,50,000 and deleted the remaining Rs. 3,50,000 from the total unexplained amount. Thereby, the appeal of the assessee was partly allowed.

To Read the full text of the Order CLICK HERE

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