ITAT Partly Deletes Demonetisation Cash Deposit Addition; Restricts Unexplained Income to 10%

ITAT Partly Deletes Demonetisation Cash Deposit Addition; Restricts Unexplained Income to 10%

The case arose from cash deposits made during the demonetization period for AY 2017-18. The Assessing Officer noticed deposits of Rs. 18.23 lakh and, after allowing Rs. 23,500 as explained savings, treated the balance Rs. 18 lakh as unexplained money under Section 69A. The assessee had not filed a return despite a notice under Section 142(1), leading the AO to complete the assessment under Section 144. During the assessment, the assessee explained the deposits as sourced from agricultural loans received from individuals, maturity proceeds of fixed deposits, past savings and redeposits of earlier withdrawals.

However, these explanations were rejected both by the AO and later by the NFAC/CIT(A).

Issue Raised: Whether the demonetization-period cash deposits of Rs. 18 lakh were satisfactorily explained through loans, fixed-deposit maturity proceeds and past savings, or whether they should be taxed as unexplained money under Section 69A.

ITAT’s Ruling: The Tribunal examined the detailed explanations and supporting records placed by the assessee, including statements showing agricultural loans from two individuals, FD maturity proceeds received in cash, and bank entries demonstrating withdrawals that were subsequently redeposited. The Bench noted that, in substance, the assessee had furnished a comprehensive trail of how the deposited amounts originated. The AO’s own remand report did not contradict these claims. The Tribunal accepted that the assessee had provided “all possible evidence” to substantiate the sources of cash deposit.

The Bench rejected the full unexplained addition of Rs. 18 lakh, but estimated income by applying a 10% presumptive profit rate on the cash deposits. The AO was therefore directed to restrict the addition to Rs. 1,80,000, with a specific clarification that the finding shall not operate as a precedent for any other year.

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