In a recent case, the Lucknow Bench of the Income Tax Appellate Tribunal (ITAT) deleted the additions made by the assessing officer (AO) on certain cash deposits made during demonetisation. The assessee forwarded the appeal against an order made by the Commissioner of Income Tax(Appeals) [CIT(A)], National Faceless Appeal Centre (NFAC).
The assessee, Jagdish Prasad, who primarily sells electrical and electronic goods through his firm, M/s Bharat Electricals, reported an income of ₹42 Lakhs under the presumptive taxation scheme of Section 44AD for the Assessment Year 2017-18.
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During the demonetisation period, Prasad deposited a total of ₹5,39,500 into his bank account. The Income Tax Department flagged these deposits, claiming the entire amount was unaccounted cash. The AO invoked Section 69A, treating the cash as unexplained money and added it to Prasad’s taxable income under Section 115BBE, which imposes a higher tax rate on such additions.
Aggrieved by the AO’s decision, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who upheld the addition made by the AO, leading the assessee to further appeal before the ITAT. The authorised representative (AR) for the assessee submitted that only and amount of ₹39,500 was deposited by the assessee in demonetised currency during the demonetisation period.
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The AR asserted that the Ao had mistakenly treated the entire amount of ₹5 Lakhs being deposited as demonetised currency. The departmental representative relied on the order of the CIT(A) and the AO.
The ITAT noted that the assessee had declared his income under the presumptive taxation scheme, which does not mandate maintaining regular books of accounts. It was observed that out of the total cash deposit, only ₹39,500 was in demonetised currency, with the remaining amount deposited in valid currency notes. The tribunal observed that the cash deposits were made from the sales proceeds from the assessee’s business.
The Tribunal, consisting of Anadee Nath Misshra concluded that the AO’s addition was based on mere suspicion without substantial evidence. Consequently, the addition of ₹5,39,500 was deleted.
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