ITAT Raipur Partly Deletes INR 3.5 Lakh Addition on Demonetization Cash Deposit, Citing CBDT Instruction No. 03/2017

The Raipur Bench of the ITAT has partly removed an addition of Rs. 11,00,000 made on account of cash deposits at the time of the demonetization period, carrying that Rs. 3.5 lakh can be reasonably attributed to household savings, in line with CBDT Instruction No. 03/2017.

The taxpayer Sunita Sherwani e-filed the income tax return specifying that her income was Rs 2,14, 350.

The case was chosen for the scrutiny. It was noted by the Assessing Officer (AO) that the taxpayer deposited Rs 11,00,000 in her bank account during the demonetization period.

The taxpayer asserted that the cash deposits were sourced from the collected capital, income from hobby classes, and prior bank withdrawals.

The explanation has been rejected by the Assessing Officer (AO) because of the absence of documentary proof and keeping such an amount shall risk life and safety. Hence the AO noted that the taxpayer failed to elaborate on the source or the sort of amount.

The entire amount treated by AO is as unexplained money u/s 69A of the Income-tax Act, 1961.

The taxpayer dissatisfied with the order submitted a plea before the Commissioner of Income Tax (appeals). It was marked by the CIT(A) that the taxpayer is unable to file the proof in both assessment and appellate proceedings to verify the claim of cash from past savings or business activities.

Before the Raipur ITAT, the dissatisfied taxpayer from the order submitted a plea. The taxpayer’s counsel furnished that the cash deposits were from unknown sources and that the rejection by the lower authorities did not have any justification.

The revenue’s counsel relied on the orders of the lower authorities and asked to dismiss the plea.

The single-member bench comprising Shri Ravish Sood (Judicial Member) noted that the taxpayer failed to offer a reasonable explanation for the full amount of Rs. 11 lakhs.

Read Also: Cash Deposits During Demonetization Not Fully Unexplained: Surat ITAT Upholds 20% Additions

The Tribunal relied on CBDT Instruction No.03/2017, which furnishes relief in cases concerning cash deposits of up to Rs.2.5 lakh (and Rs.5 lakh for individuals above 70 years) during demonetization.

The taxpayer filing an Income Tax Return, the tribunal noted. Hence the Tribunal held that Rs. 3.5 lakh could be reasonably explained as cash in hand available with the taxpayer.

Henceforth, the addition to Rs. 7,50,000 has been restricted by the tribunal and the left Rs 3,50,000 from the total unexplained amount. Thereby the taxpayer’s appeal was permitted partly.