CBDT SOP on Demonetisation Cash Deposits Saves NRI from Higher Addition: ITAT Restricts ₹5 Lakh Addition to ₹2.5 Lakh [Read Order]

The assessee-appellant, Anil Manilal Patel, who had deposited ₹10 lakh in cash into two bank accounts during the demonetisation window of November-December 2016. The Assessing Officer treated the entire amount, along with other credits, as unexplained under Section 69 of the Income-tax Act, invoking best judgment assessment under Section 144 due to non-compliance.

 Know Tax Planning Real Estate Transactions Click here

Though the Commissioner of Income Tax (Appeals) later deleted most of the addition after verifying remittance and interest credits, it sustained an unexplained cash deposit of ₹5 lakh, citing lack of corroborative evidence regarding the source of household cash claimed to be jointly held with the assessee’s wife.

The assessee, who felt offended by the partial confirmation, went to the tribunal to claim that the cash deposits were genuine home savings that had been financed by monthly remittances from the USA during previous years and that he was an NRI with no business income in India.

The assessee’s counsel relied strongly on the CBDT’s SOP on demonetisation cash deposit verification, which specifically prescribes that no further verification is required for cash deposits up to ₹2.5 lakh for individuals without business income.

Know Practical Aspects of Tax Planning, Click Here

The bench noted that there was no evidence of any undisclosed business activity or any cash-intensive operation that would suggest the deposit was unaccounted income. It held that applying the CBDT’s SOP, a deposit up to ₹2.5 lakh should not attract addition or further scrutiny for a non-business individual.

The bench of T.R. Senthil Kumar ( Judicial Member) and Makarand V. Mahadeokar ( Accountant Member) observed that “applying the CBDT's SOP, a cash deposit of Rs.2,50,000 /- by an individual without business income should be treated as prima face explained, and does not warrant further verification, unless there are exceptional facts indicating concealment, which are absent in the present case.”

As a result, the ITAT limited the addition to ₹2.5 lakh, giving the taxpayer some relief, even though it rejected the full claim because there was no supporting cash book or records for the full ₹5 lakh.

Support our journalism by subscribing to Taxscanpremium. Follow us on Telegram for quick updates