Cash deposits during Demonetization alleged to be Unexplained Sufficiently Evidenced: ITAT reduces Addition to 10% [Read Order]

The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, reduced addition to income to 10% as the cash deposits during demonetization alleged to be unexplained were sufficiently evidenced.

The facts of the case are that the assessee-appellant, Dineshbhai Nagjibhai Viradiya, earned salary income and agricultural income from his agricultural activity. The case was selected for scrutiny in CASS for e-assessment proceedings.

The assessee, complied with the show cause notice (SCN) and replied to it before the Assessing Officer (AO) on 29.11.2019. The assessee submitted that he is not maintaining books of accounts but claimed that his cash flow statement that the cash deposit during demonetization was made out of opening cash on hand, income generated from agricultural receipts and salary.

The AO rejected the contention and observed that the total availability of funds before the assessee prior to demonetization was of INR 4,70,000/-. Accordingly, the amount deposited during demonetization was treated as unaccounted money within the meaning of Section 69A of the Income Tax Act, 1961.

The counsel for the assessee argued that the assessee submitted all possible evidences in support of his claim such as books of accounts, cash flow statement, details of the cash deposited and proof of opening cash in hand. The tribunal noted that these evidences have not been considered by the Assessing Officer in a right perspective.

ITAT observed that while some of the documents are self-serving documents and therefore, there is a possibility of leakage of revenue. The bench of Dr. Arjun Lal Saini found that the entire relief cannot be permitted and thus directed the AO to make an addition of INR 68,000/- by applying the normal rate of income tax. The appeal was partly allowed.

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