Cash Deposits of ₹1.31 Lakh During Demonetisation Treated as Unexplained Income: ITAT Deletes Addition, Accepts as Rent Received in Cash [Read Order]

The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) deleted an addition of ₹1.31 lakh treated as unexplained income under section 69A of Income TaxAct,1961 during the demonetisation period and accepted it as rent received in cash.

Bibhu Prasad Sahoo, appellant-assessee, was an individual earning rental income. For AY 2017-18, he reported ₹7,15,295 from house property and ₹37,638 as interest income. His case was selected for scrutiny under CASS, and notices were issued seeking details of cash deposits in his bank account.

He submitted his income computation but did not explain cash deposits of ₹1,55,565 made during the demonetization period. The Assessing Officer (AO) treated ₹1,31,465 as unexplained cash and added it to his total income, assessing it at ₹6,98,035.

The assessee appealed to the Commissioner of Income Tax (Appeals)[CIT(A)], who dismissed the appeal, noting that he failed to provide confirmations from tenants and could not prove the source of the cash. The addition was confirmed as unexplained investment under section 69 of the Act.

The assessee then filed an appeal before the tribunal.

The assessee counsel submitted that the appellant filed the return for AY 2017-18 declaring total income of ₹5,66,570, including ₹7,15,295 from house property and ₹37,638 as interest. The appellant claimed deductions of ₹1,86,365 under Chapter VI-A.

In response to notices, he submitted income computation and lease agreements. The AO observed cash deposits of ₹1,31,465 during the demonetization period and treated it as unexplained money under section 69A, which the CIT(A) confirmed.

The counsel argued that the deposits were cash rent, supported by rental details and agreements already submitted, and requested that the addition be deleted.

The two member bench comprising Sonjoy Sarma (Judicial Member) and Rakesh Mishra ( Accountant Member) reviewed the submissions, facts, and CIT(A)’s order. The AO had noted that the assessee submitted income computation and deeds but did not explain cash deposits in three Axis Bank accounts. Deposits in two accounts totaling ₹48,78,233 were accepted, but ₹1,31,465 in the third account was added to income.

The appellate tribunal observed that the total rent from the four apartments was ₹10,32,000, and the disputed deposit represented about one and a half months’ rent. It was not unusual to deposit cash rent, especially during demonetization. The bench directed the AO to delete the addition of ₹1,31,465.

Accordingly the appeal was allowed.

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