The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) reduced the addition of unexplained cash deposits from Rs. 32 lakhs to Rs. 18.50 lakhs for Assessment Year (AY) 2017-18 due to an incorrect bank deposit amount, which was rectified by the Assessing Officer ( AO ).
Dineshkumar Somabhai Patel,appellant-assessee,challenged the order dated 20/06/2024 by the Commissioner of Income Tax(Appeals)[CIT(A)], for AY 2017-18. The issue was the addition of Rs. 32,00,000 to his income due to unexplained cash deposits during the demonetization period.
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The assessee’s counsel explained that a rectification application was filed with the AO regarding the cash deposit of Rs. 15 lakhs in the Kukarwada Nagrik Sahakari Bank Ltd. account, which was later corrected to Rs. 1.50 lakhs. The AO agreed with this and reduced the addition by Rs. 13.50 lakhs, bringing it down to Rs. 18.50 lakhs.
The counsel argued that this was shared with the CIT(A), but the CIT(A) ignored this correction and upheld the original addition of Rs. 32 lakhs. The counsel claimed this was unjust, as the income was increased without notice or explanation. They also argued that the CIT(A) wrongly rejected the cash book that explained the source of the deposits.
The revenue counsel stated that the CIT(A) had rejected the assessee’s arguments due to discrepancies. The AO had rejected the cash book because there were no cash balances reported in previous returns. The CIT(A) found no supporting documents for the entries in the cash book, making the evidence unreliable.
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The assessee’s claim of withdrawing cash as far back as 2014 was also not justified, as there was no explanation for holding such a large sum of cash idle. The CIT(A) upheld the addition of Rs. 32,00,000 under section 69A, and the appeal was dismissed.
The two member bench comprising T.R Senthil Kumar(Judicial Member) and Annapurna Gupta(Accountant Member)reviewed the case and found that the addition of Rs. 32 lakhs to the assessee’s income was incorrect, except for the Rs. 13.50 lakh reduction. The AO had corrected the error in the deposit amount through a rectification order, but the CIT(A) did not address this in his order. The tribunal ruled that the addition should have been Rs. 18.50 lakhs not to Rs. 32 lakhs.
While the appellate tribunal agreed with the CIT(A) that the assessee’s explanation for the cash deposit was insufficient, noting that the only explanation provided was an unsubstantiated cash flow statement, it confirmed the addition of Rs. 18.50 lakhs. It also found it improbable that the assessee would have held such a large sum of cash for so long.
In conclusion, the appeal filed by the assessee was partly allowed, with the addition reduced to Rs. 18.50 lakhs.
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