ITAT allows 10% of Cash Deposits as Taxable Income in Absence of Evidence of Source u/s 69A of IT Act [Read Order]

The Rajkot bench of the Income Tax Appellate Tribunal (ITAT) has allowed only 10% of the cash deposits made by an assessee as taxable income, citing a lack of evidence of the source of the deposits and held that the assessee had not been able to establish the source of the cash deposits, and therefore, only 10% of the total deposits could be taxed. 

The assessee, Rama Mepa Odedara, had made cash deposits amounting to Rs. 32,70,525/- in his bank account during the financial year 2009-10. The Assessing Officer (AO) added the full sum to the assessee's income and defined it as unexplained income. The assessee appealed against the order of the AO, contending that the entire amount could not be treated as unexplained income and that only the peak credit could be added to his income.

The assessee argued that cash deposits should not be considered unexplained income, and only the peak credit should be added. They claimed they earned agricultural income for years and the deposits were made from agricultural produce.

The AO argued that the assessee failed to provide an explanation for the cash deposits' source and that the entire amount should be treated as unexplained income. They also argued the deposits were not made from agricultural income.

The Tribunal observed that the assessee had not been able to establish that the entire cash deposits had been made out of the agricultural produce of the assessee. Therefore, the Tribunal only allowed 10% of the total deposits as taxable income in the hands of the assessee.

In the case of Dineshbhai Mathai Vala, the Tribunal had held that in the case of cash deposits, only the peak credit should be added to the assessee's income and held that the assessee had not been able to establish that the entire cash deposits were made out of business income. Therefore, the Tribunal only allowed 10% of the total deposits as taxable income in the hands of the assessee.

The Two Member Bench comprising Waseem Ahmed (Accountant Member) and Siddhartha Nautiyalpartly (Judicial Member) allowed the appeal of the assessee. The Tribunal agreed with the assessee's contention that the entire amount of cash deposits could not be treated as unexplained income.

To Read the full text of the Order CLICK HERE

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