Cash Deposits Linked to Pension and Property Sale Properly explained': ITAT Quashes Unexplained Income Addition under Section 69A [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) quashed the Unexplained Income Addition under Section 69A of the Income Tax Act, 1961, by noting that the assessee had sufficiently explained the cash deposits made during the demonetisation period and that the cash deposits were linked to the assessee’s pension and property sale proceeds. 

In this case, the assessee has appealed against the order of the Commissioner of Income Tax (Appeals) [CIT(A)] for the Assessment Year (AY) 2017-18. 

Coming to the facts of the present case, a notice was issued to the assessee, who was an NRI on 09-03-2018, asking her to file a return for Assessment Year 2017-18 by 31-03-2018. Although repeated statutory notices were issued, the assessee did not comply.

During the "Operation Clean Money" verification, it was found that the assessee had deposited Rs. 10 lakhs in cash during the demonetisation period without filing a corresponding return. Upon inquiry, she stated that the cash was withdrawn earlier for household and medical needs and that the deposits matched the withdrawals.

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The Assessing Officer (AO) was not satisfied with the explanation given by the assessee and treated the cash deposit as unexplained income under Section 69A of the Income Tax Act, 1961, taxing it under Section 115BBE at 60%, resulting in an addition of Rs. 12.12 lakhs.

It was also observed by the  AO that the assessee received Rs. 35 lakhs as sale proceeds from a property purchased in 1978. As no capital gains were reported, an undisclosed long-term capital gain of Rs 8.59 lakhs was added to the income.

The assessee’s appeal was only partly allowed by the CIT(A), due to which she appealed before the ITAT for relief.

The assessee’s counsel submitted that the cash deposits were from earlier withdrawals made before demonetisation. The assessee, a retired government employee since 1989, receives a monthly pension of Rs.18,500. She sold her property in Narayannagar in September 2016 and bought another property for Rs.19,95,000 the same year.

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It was further submitted by the assessee’s counsel that Cash was also kept on hand for medical needs, as both she and her husband are unwell. She has undergone heart surgery with two stents and suffers from colostomy, and due to her age and medical condition, she preferred holding cash, but demonetisation forced her to deposit it.

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The ITAT noted that the assessee had given proper explanations regarding the unexplained income in question. It was observed by the bench that the money was kept in hand as she had medical problems, and the source of the income was rightly explained through her pension details as well as the consideration of the property/flat sold during that period.

The bench further noted that “ the assessee has in detail explained the cash deposits, which were totally ignored by the AO as well as by the CIT(A).”

The ITAT, comprising Suchithra Kamble (Judicial Member) and Annapurna Gupta (Technical Member), allowed the assessee’s appeal.

To Read the full text of the Order CLICK HERE

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