Unexplained Cash Deposits: ITAT Reduces ₹72 Lakh Addition to ₹2 Lakh on Verifying Home Loan Credits and ITRs [Read Order]

The Surat Bench of the Income Tax Appellate Tribunal (ITAT) reduced the addition made under Section 69A of the Income Tax Act, 1961, from Rs. 72,81,674 to Rs. 2,00,000 by considering the assessee's home loan credit and available cash balance.

Jayeshbhai Becharbhai Chovatiya (assessee), who had deposited a sum of Rs. 72,81,674 across three bank accounts, including Corporation Bank, Varachha Co-Op Bank, and HDFC Bank during demonetisation period.

The Assessing Officer (AO) issued notices to prepare the correct income tax return. The assessee failed to furnish a reply to the notices issued by the AO. The AO treated the entire sum as unexplained income and made an addition under Section 69A of the Income Tax Act.

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Aggrieved by the order of the AO, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee provided detailed submissions, including supporting documents such as the home loan sanction letter, ITR of the previous year, and cash book.

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The CIT(A) confirmed the AO’s addition without addressing the evidence furnished by the assessee. The CIT(A) took a view that the assessee did not furnish any reply to the notices. Therefore, the CIT(A) observed that there was no reason to interfere with additions made by the AO.

Aggrieved by the order of  CIT(A), the assessee filed an appeal before ITAT. The counsel for assessee contended that home loan of Rs. 44,01,180 was disbursed which was wrongly considered as unexplained credit.

The counsel also contended that the assessee had a cash balance of Rs. 9,92,080 as of 31.03.2016, which was duly disclosed in the ITR for the assessment year 2016-17. The counsel contended that the addition made by the AO ignored these facts and resulted in excessive taxation.

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The two-member bench comprising Pawan Singh ( Judicial Member ) and Bijayananda Pruseth (Accountant Member) observed that the AO ignored the home loan of Rs. 44,01,180 disbursed during the year, which was clearly reflected in the bank statement.

The tribunal also observed the cash-in-hand of Rs.9,92,080 was substantiated through the ITR filed for AY 2016-17. The tribunal highlighted that the permissible deduction of Rs. 2,042 under Section 80TTA of the Income Tax Act was not allowed.

The tribunal observed that the assessee engaged in business income which is estimated @10% which would amount to Rs. 1,86,650 and rounded off to Rs. 2 lakhs. The tribunal restricted the addition to Rs.2,00,000 and deleted the balance amount. The appeal of the assessee was partly allowed.

To Read the full text of the Order CLICK HERE

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