Unexplained Cash Deposits of ₹14.53 Lakh: ITAT Deletes Addition u/s 68 of Income Tax Act [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal(ITAT) deleted the addition of ₹14.53 Lakh under Section 68 of the Income Tax Act,1961 ruling that the unexplained cash deposit was legitimate.

Dawoodi Bohra Jamat Godhra,appellant-assessee,filed its income tax return on 06/07/2017, declaring ₹1,12,09,340 after claiming an exemption under Section 11. The return was processed under Section 143(1), but the case was reopened on 30/03/2021 through a notice under Section 148. This was based on information regarding cash deposits of ₹16,50,000 made in a bank account operated by MSB Educational Institute during the demonetization period.

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During reassessment, the Assessing Officer(AO) found that only one bank account was disclosed in the return, while several others, including the one with ₹16,50,000 in cash deposits, were not. On 08/11/2016, the cash book showed receipts of ₹15,60,800, attributed to various fees, with a closing balance of ₹14,84,376. This was considered unusually high and inconsistent with the average cash balance of ₹10,000 to ₹3,00,000 during the year.

The assessee was asked to provide detailed records of fee collections but failed to furnish complete information, making verification impossible. The AO concluded that the cash book was manipulated to accommodate unaccounted cash and treated ₹14,53,000 as unexplained cash credit under Section 68 of the Act.

The Commissioner of Income Tax(Appeals)[CIT(A)] upheld the reopening and confirmed the addition under Section 68, citing insufficient evidence to justify the deposits. Taxation under Section 115BBE and penalty proceedings under Section 271AAC were also upheld.

The tribunal reviewed the submissions from both sides and the material on record, including the lower authorities’ orders. It noted that the assessee, a registered charitable trust under Section 12A, managed institutions like MSB Educational Institute and earned income primarily from student fees and donations. The cash deposit of ₹14,53,000 in the Prime Co-operative Bank was attributed to legitimate fee collections from the institute's students.

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The assessee had disclosed the bank account in its audited financial statements and provided evidence such as a circular to parents for fee payments after the school reopened post-Diwali. A detailed list of fees, cash book records, and comparative data from previous years were submitted to substantiate the deposits. These details were also shared with the AO during assessment, giving sufficient opportunity for verification.

While the CIT(A) relied on precedents to justify the addition under Section 68, the tribunal found the facts different. The assessee had provided adequate evidence, including student-wise fee records, to prove the cash deposits were genuine and linked to its charitable activities. The tribunal also rejected the Department’s request for a remand, as the AO already had the necessary details during the assessment and pointed out no specific discrepancies.

The two member bench comprising T.R. Senthil Kumar (Judicial Member) and Makarand V.Mahadeokar(Accountant Member) concluded that the cash deposit of ₹14,53,000 was legitimate and supported by proper documentation. It held the addition under Section 68 unsustainable and directed its deletion, allowing the appeal in favor of the assessee.

To Read the full text of the Order CLICK HERE

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