Top Stories Income Tax Case Digest: Addition on Cash Deposits – Part 1 Following is Part 1 of a compilation of all the stories on ‘Addition on Cash Deposits’ reported at Taxscan.in By Avinash Kurungot – On December 4, 2024 10:44 am – 29 mins read Unexplained cash deposits have been a focal point of scrutiny in the Indian income tax framework. Section 69A of the Income Tax Act, 1961, is a crucial provision empowering tax authorities to tax unaccounted assets, including cash deposits in the event the taxpayer fails to provide a satisfactory explanation regarding the nature and source of such unaccounted assets.

This section acts as a deterrent against tax evasion by ensuring all forms of income, regardless of their origin, are brought under the tax net. Under Section 69A, if cash or other valuable articles are found in possession of a taxpayer and are not reflected in their financial records, the burden to substantiate the source of such assets are shifted on to the taxpayer. If the taxpayer is unable to satisfactorily explain the source of such asset, the same may be  added to the income of the taxpayer for the concerned assessment year and subjected to tax. The provisions under Section 69A gained particular prominence during the demonetization period, when the tax authorities were alerted due to a wave of sudden spikes in cash deposits, creating suspicion. However, the practical application of Section 69A has been rather convoluted. Courts have repeatedly emphasized the need for tax authorities to rely on concrete evidence rather than arbitrary assumptions, in order to ensure that legitimate transactions are not unduly penalized. This case digest compiles key judgments and practical insights on the interpretation of Section 69A, focusing on unexplained cash deposits. It covers numerous stories reported at Taxscan.in which delves extensively into evidentiary standards, procedural aspects, and the approach adopted by the courts while addressing disputes.

By examining legislative intent and landmark rulings, the digest serves as a practical resource for tax professionals and stakeholders, offering guidance on the equitable enforcement of Section 69A while safeguarding taxpayer rights. ITAT Partially reduces addition of Unexplained Cash Deposits to ₹6,50,000, upholding CBDT Guidelines Dhirajlal Bhagwanbhai Talaviya vs The ITO CITATION: 2024 TAXSCAN (ITAT) 1230 The Surat Bench of Income Tax Appellate Tribunal ( ITAT ) partially reduced the addition of unexplained cash deposits to ₹6,50,000 while upholding the Central Board of Direct Taxes ( CBDT ) guidelines noting the lack of evidence for the source of the remaining cash deposits and recognizing the assessee’s consistent income reporting. The tribunal concluded that the assessee did not substantiate the source of the cash deposits made during the demonetization period. It referred to the CBDT Circular No. 3 of 2017, which instructed that cash deposits up to ₹2,50,000 should be accepted.Therefore, ₹2,50,000 out of the total addition were allowed. ITAT Restores Case to CIT(A) for Reconsideration of Rs. 13.35 Lakh Unexplained Cash Deposits due to Non-Consideration of Assessee’s Evidence Kamalbhai Babulal Kahar vs ITO CITATION: 2024 TAXSCAN (ITAT) 1470 The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) restored the case to the Commissioner of Income Tax (Appeals) [CIT(A)] for reconsideration of the ₹13.35 lakh unexplained cash deposit addition due to non-consideration of key evidence, including proof of his fish trading business and related payments.

It was observed that the CIT(A) relied only on part of the information provided by the assessee, overlooking key details such as the previous year’s accepted business income, payments made by cheque for fish-seeds, and the existence of a valid business license. Since the CIT(A) failed to account for these facts, the tribunal decided to remand the case for reconsideration, allowing the assessee an opportunity to present their case. ITAT deletes Income Tax Addition made on Cash Deposits during Demonetization Period DURGA FIRE WORK vs ITO CITATION: 2024 TAXSCAN (ITAT) 792 The Delhi Bench of Income Tax Appellate Tribunal ( ITAT ) deleted the addition under section 68 of the Income Tax Act, 1961 made on cash deposits during the demonetization period. The bench observed that the AO except stating that the assessee has not furnished bills and vouchers for purchases has not found fault with the books of account maintained by the assessee, the cash book, purchases, sales register, stocks, etc. The AO did not reject the books of accounts of the assessee. The two-member bench of Challa Nagendra Prasad ( Judicial Member ) and Avdhesh Kumar Mishra ( Accountant Member ) has observed that there cannot be any addition under Section 69A of the Income Tax Act in respect of cash deposits made by the assessee into its bank account as unexplained income in the case of the assessee.

“Treating Cash Deposits from ‘Business Income’ as ‘Unexplained’ Results in Double Taxation”: ITAT Quashes S.69A Addition under Income Tax Nitin Kumar Bohra vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 1170 Recently in a decision, the Income Tax Appellate Tribunal ( ITAT ) of Bangalore, quashed an addition made under Section 69A of the Income Tax Act 1961 ( ITA ) holding that treating cash deposits from “business income” as “unexplained” can lead to double taxation. The bench Mr Laxmi Prasad Sahu and Mr Keshav Dubey considered both sides of the argument. The bench acknowledged that the assessee had declared a turnover of ₹78,71,394 with a net profit of 9.92%, and observed that the cash deposits in the assessee’s bank accounts were part of his business receipts, and that treating them as unexplained income resulted in double taxation. It ruled that once the authorities accepted the declared turnover and profit, they could not separately assess the cash deposits as unexplained. Moreover, the tribunal highlighted that the authorities failed to prove that the bank deposits exceeded the declared turnover. Source of Cash Deposits duly Explained: ITAT deleted Addition of Rs. 10.75 u/s 69A Dipak Balubhai Patel vs Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 959 The Ahmedabad bench of the Income Tax Appellate Tribunal deleted the addition made by AO under Section 69 of the Income Tax Act, 1961. The bench observed that the appellant had recorded the details of cash details in the book of account and also the source of cash deposits during demonetisation period. The bench, comprising of Annapurna Gupta (Accountant Member) and T.R. Senthil Kumar (Judicial Member), viewed that the AO has erred in invoking provisions of Section 69A of the Income Tax Act and charging tax under Section 115BBE of the Act. The bench allowed the appeal filed by the assessee and directed to delete the additions made by AO.

ITAT deletes ₹9.84 Lakh Addition u/s 69A after Verifying Cash Deposits Linked to ₹10 Lakh Earlier Withdrawal, not Additional Income Shri Bharat Kumar Chetri vs Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 1131 The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) deleted Rs.9.84 Lakh addition made under Section 69A of the Income Tax Act, 1961 after verifying that the cash deposits were from Rs. 10 Lakhs which was withdrawn earlier by the assessee. The two-member bench comprising Laxmi Prasad Sahu (Accountant Member) and Prakash Chand Yadav (Judicial Member) noted that the assessee made three specific cash deposits Rs. 4,50,000 on August 26, 2016, Rs. 6,00,000 on October 1, 2016, and Rs. 15,800 on September 14, 2016. The tribunal noted that the assessee’s withdrawal of Rs. 10 lakhs in August 2016 was verified through bank statements, and there was no legal bar on keeping cash on hand. It was also noted that there were no significant material investments made by the appellant, and he had no other sources of income apart from his salary. ITAT upholds addition of Cash Deposits in Bank Accounts due to failure to explain Sources Indra Sharma vs ITO CITATION: 2023 TAXSCAN (ITAT) 1661 The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) upheld the addition made on account of cash deposited in the bank account due to failure to explain the source. The tribunal determined that assessee who has failed to appear before the A.O. After filing the present Appeal has not appeared on even a single occasion and produced any document to refute the findings of the CIT(A).

After reviewing the facts and submissions, the two member bench of the tribunal comprising Dr. B. R. R. Kumar (Accountant Member) and Yogesh Kumar U.S (Judicial Member) upheld the addition made by the Assessing officer due to failure to explain the source cash deposited in the bank . Cash Deposits made from Sale Proceeds: ITAT directs Deletion of S.69 Income Tax Additions Ashoka Enterprises vs Asst. Commissioner of Income Tax CITATION: 2024 TAXSCAN (ITAT) 1195 The Income Tax Appellate Tribunal ( ITAT ), Visakhapatnam in a recent matter directed the Assessing Officer (AO) to delete additions made under Section 69A read with Section 115BBE of the Income Tax Act, 1961 in light of discovery that cash deposits in the Assessee’s bank accounts have been obtained through sale proceeds. In light of the findings made, ITAT directed the AO to delete additions made under Section 69A read with Section 115BBE of the Income Tax Act, 1961 while observing that the Revenue Authorities had accepted the total turnover claimed by the Assessee, but failed to take cognizance of the turnover during the demonetization period, which has been reflected by means of the disputed cash deposits. Undisputed Source of Cash Deposits in Bank Account during Demonetization: ITAT deletes Income Tax Addition Sheo Chand Yadav vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 2101 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that there is no vacillation to hold that the source of the cash deposited in the bank account has been undisputedly proved, hence deleted the addition made by the Assessing Officer (AO).

The Bench observed that Sheo Chand Yadav has a joint bank Account in Corporation Bank with his spouse Smt. Manju Yadav. Cash received from hawkers was credited in this joint account. It was further noticed that the assessee has also submitted the details of all the sub-vendors along with their addresses and contact numbers. During the assessment proceedings, the AO had asked to furnish the cash summary which was duly submitted but the AO had not considered the facts of the case that the cash was available in the books of accounts out of the sale made before demonetization period. No Addition u/s 69 of Income Tax Act when Cash Deposit, genuinely made in Bank Account: ITAT Shri Dashrathbhai Shivabhai vs ITO CITATION: 2022 TAXSCAN (ITAT) 1863 A Division Bench of the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench held that no addition can be made under Section 69 of the Income Tax Act, 1961 when cash deposit, genuinely made in bank account.

Suchitra Kamble, Judicial Member and Waseem Ahmed, Accountant Member observed that “The assessee has explained through evidences during the remand proceedings that the cash deposit was genuinely made in the bank account. The CIT(A) as well as the Assessing Officer was not right in making addition under Section 69 of the Income Tax Act.” Cash Deposit out of Gold Loan during Demonetization, duly Explained: ITAT deletes Addition Ashok Ravsaheb Tambe vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 853 The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) has set aside the appellate order and deleted the addition made by the Assessing Officer(AO) of considering gold loan amount as unexplained Income under Section 69A of the Income Tax Act, 1961. The bench consisting of G. D. Padmahshali (Accountant Member) and Shri Vinay Bhamore (Judicial Member), reversed the order of AO’s addition of considering gold loan amount as unexplained Income under Section 69A of the Income Tax Act. The bench thus set aside the impugned order and directed the AO to delete the additions made. Acceptance of Explanation of Cash Investment: ITAT Upholds CIT (A) Decision to Delete Cash Deposit Additions u/s 69A of Income Tax Act The Dy. Commissioner- of Income Tax vs M/s.Baashyaam Constructions- Pvt. Ltd CITATION: 2024 TAXSCAN (ITAT) 316 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has upheld the decision of the Commissioner of Income Tax (Appeals) [CIT (A)] to delete additions made under section 69A of the Income Tax Act, as it accepted the explanation provided for cash investments.

The ITAT bench considered the explanation of the assessee that it has cash in hand amounting to Rs.3.36 Crs. out of repayment of cash by Kolkata based companies and the same has been used for temporary requirement of working capital in the business of the assessee and finally cash in hand available with the assessee, was deposited into bank account immediately after demonetization, appears to be bona fide and reasonable explanation. AO and CIT (A) ignores Cash Deposit Evidences: ITAT deletes addition u/s 69A Pravinbhai Mumabhai Bharwad vs The Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 346 The Ahmedabad bench of the Income Tax Appellate Tribunal ( ITAT ) has ruled to overturn the addition made under section 69A under Income Tax Act, as both the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT (A)] overlooked crucial evidence pertaining to cash deposits. A single-member bench, presided by Suchithra Kemble, emphasized that the taxpayer had provided details regarding the land sale and associated consideration, as well as evidence of withdrawals from the father’s account. Regrettably, both the Assessing Officer and the CIT (A) had disregarded this crucial evidence.

Consequently, the taxpayer’s appeal was allowed. Addition u/s 69 of Income Tax Act Reduced without Considering Proper Evidences : ITAT Remands Matter Back to CIT(A) Income Tax Officer vs Rajeshkumar Theophilbhai Christie CITATION: 2024 TAXSCAN (ITAT) 857 The Ahmedabad bench of The Income Tax Appellate Tribunal ( ITAT ) recently allowed an appeal preferred by the Revenue against the decision made by Commissioner of Income Tax (Appeals) [ CIT (A) ] without considering the proper evidence in a case concerning unexplained cash deposits made during the demonetization period. After examining the appellant’s arguments, the bench comprising Mr Siddhartha Nautiyal and Mr Narendra Prasad Sinha observed that no compliance was made by the assessee in the course of assessment proceeding in spite of numerous opportunities provided by the AO. At the same time, the addition of Rs.7,30,32,566/- as made by the AO in respect of the entire credit transactions appearing in the bank account of the assessee was held not correct , as evidence gathered by AO through independent inquiries found the assessee made a payment of Rs.83,76,698/- in respect of purchase of Board CNG Steel Cylinders, which made it apparent that the assessee was engaged in certain purchase and sale transactions.

ITAT deletes addition made towards Cash Deposit in Bank Account without considering source of cash from PG Income Maltiben Gurudutt Yadav vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 2283 The Income Tax Appellate Tribunal (ITAT ) Ahmedabad bench deleted the addition made towards the cash deposit in the bank account of assessee without considering the source of the cash from PG Income. During the proceedings the tribunal observed that the assessee is a lady. Her major source of income is PG income. Assessee had returned as her income from business of Rs.2,54,951/- as a net profit from the business. The Assessing Officer has taken a figure of Rs.2,88,500/- as a gross receipt from the PG business, which records do not reveal from where he has taken. After considering the facts and circumstances, the single member bench of Annapurna Gupta (Accountant Member) deleted the addition made towards the cash deposit in the account of assessee when it was clearly substantiated the cash source was from the PG income. Cash Deposit Sources Insufficiently Verified before making Addition u/s 68 of Income Tax Act: ITAT Remands Matter Back to Assessing Officer for Re-Adjudication Bhavanji Jugaji Thakor vs Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 922 Recently in a case, The Income Tax Appellate Tribunal (ITAT) of Ahmedabad remanded a matter back to the Assessing Officer for re adjudication noting that Assessing Officer did not sufficiently verify the assessee’s explanation regarding the source of the cash deposits labeled as unexplained during the assessment. After examining the facts of the case, The ITAT, comprising Ms Suchitra Kamble (Judicial Member) and Mr Narendra Prasad Sinha (Accountant Member), ruled that Section 68 was applicable even in the absence of formal books of accounts since the bank statement served as a record of the transaction. However, the Tribunal found that the Assessing Officer did not sufficiently verify the assessee’s explanation regarding the source of the cash deposits. ITAT deletes Addition on Cash Deposits during Demonetization Period on Proper Explanation as to Utilization Mrs. Usha Narayan Chaware vs ITO CITATION: 2023 TAXSCAN (ITAT) 484 The Pune Bench of the Income Tax Appellate Tribunal ( ITAT ) has deleted the addition of cash deposits during demonetization on proper explanation as to utilization of the cash deposit. During the course of the assessment proceedings, the Assessing Officer (AO) observed that the assessee, Usha Narayan Chaware, deposited cash worth Rs. 17 lakhs in his bank account on different dates during the demonetization period. On being called upon to explain the source, the assessee submitted that the assessee, along with his brother, sold certain agricultural land for a sum of Rs. 38 lakhs. The assessee’s share in such consideration was Rs. 19 lakhs. The Tribunal of RS Syal, Vice President noted that “Once the availability of cash in hands was established and it was not shown by the AO that such cash was spent elsewhere, I am of the considered opinion that the explanation of the assessee as to its utilization has to be accepted.”

Taxpayer Substantiates Cash Deposit Source with Sufficient Evidence: ITAT Deletes Addition of 28 lakhs G A Advisory Private Limited vs ACIT, Circle-10(1) CITATION: 2024 TAXSCAN (ITAT) 595 The Delhi bench of the Income Tax Appellate Tribunal (ITAT) ruled in favor of the taxpayer, deleting an addition of 28 lakhs after the taxpayer successfully substantiated the source of a cash deposit with sufficient evidence. The two member bench of the tribunal comprising Balaganesh (Accountant member) and Amit Shukla (Judicial member) found that the assessee had shown cash withdrawals from its bank account which remains part of cash-in-hand of the assessee in the books. Since, it is a corporate entity and therefore, it had maintained regular books of accounts in regular course, wherein, the assessee has disclosed the cash withdrawals and the cash in hand in the regular books of accounts.

The assessee has explained the source of cash deposits from out of cash in hand representing earlier cash withdrawals two months ago for which the assessee had adduced sufficient evidence. No Income Tax Addition for Cash Deposit during Demonetization duly explained with Cash Flow Statement: ITAT Smt. Perminder Kaur Matharoo vs I.T.O CITATION: 2022 TAXSCAN (ITAT) 1696 The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) has held that Income Tax Addition for cash deposits duly explained with cash flow statements is not permissible. The ITAT bench of Shri N K Billaiya, Accountant Member and Shri Kul Bharat, Judicial member observed that once the cash flow statement is not controverted by the Assessing Officer as well as the CIT[A] when it was specifically submitted that the same is based on the entries made in the cashbook, then the source of a cash deposit in the bank account cannot be discarded by the authorities below. While allowing the appeal, the ITAT directed the Assessing Officer to delete the impugned addition under the Income Tax Act,1961. Shri Kapil Goel appeared for the assessee and Shri Sanjai Kumar Yadav appeared for the department. No Income Tax Addition can be made if Assessee Successfully Demonstrated Source of Cash Deposits in Bank Account during Demonitization Period: ITAT The DCIT vs M/s. Bhanu Infrabuild Pvt. Ltd. CITATION: 2023 TAXSCAN (ITAT) 2159 The Delhi Bench of Income Tax Appellate Tribunal (ITAT), held that the assessee has successfully demonstrated source of cash deposit to its bank account during demonetization period thus no income tax addition can be made under Section 68 of Income Tax Act, 1961.

It was observed that the financial statements of assessee clearly show that the assessee was consistently maintaining huge cash balance as per his business prudence and there was opening cash balance as well as huge cash withdrawals from 01.04.2016 till declaration of demonetization period amounting to Rs. 2,63,10,000/- which are much higher than the amounts of Rs. 1,24,50,000/- i.e. cash deposited by the assessee to its bank account during pre & post demonetization period. Ex-parte Addition of Cash Deposit made in Bank during Demonetisation Period u/s 69A of I-T Act: ITAT directs Readjudication Srimathi Pichara Karimnagar vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 1075 The Hyderabad Bench of Income Tax Appellate Tribunal (ITAT) decided to give opportunity to the assessee to produce all the relevant documents before the Assessing Officer (AO) for fact verification would meet the ends of justice. The bench noted that the assessee failed to appear before the AO after the assessment order was issued according to Section 144 of the Income Tax Act. Further, the assessee’s justification is that, as a woman and because of personal issues, she was unable to present before the AO and successfully prosecute the procedures.

Additionally, Covid Pandemic intervened for a significant amount of time with the proceedings before the first appellate authority. Thus allowed the appeal and directs for readjudication. Addition for Unexplained Cash Deposits justified if mismatch in ITR: ITAT Shri Praveen Garg Vs. The Income Tax Officer The Income Tax Appellate Tribunal (ITAT), Delhi Bench ruled that the addition for unexplained cash deposits is justified if it did not match with the returned income. The issue raised in this case was whether CIT(A) has made addition of a new source of income while enhancing the income of the assessee. The coram of N.K.Billaiya and Bhavnesh Saini clarified that there is no dispute with regard to the legal proposition that the First Appellate Authority cannot consider a new source of income. However, the Tribunal observed that in the present case the AO reopened the assessment because it was found that there were cash deposits in several Bank accounts of the assessee which do not match with the returned income shown by the assessee.

The AO, therefore, reopened the assessment on having reason to believe that income chargeable to tax on account of unexplained cash deposits in the Bank accounts of the assessee has escaped assessment. Income Tax Addition for Cash Deposits not valid when Certificates from the Bank denies the existence of Bank Accounts: ITAT Yaminiben Sandkumar Bhatt vs DCIT CITATION: 2022 TAXSCAN (ITAT) 1705 The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT) has held that Income Tax Addition for Cash deposits is not valid when certificates from the Bank denies the existence of Bank accounts. The ITAT bench of Smt.Annapurna Gupta, accountant member and Smt.SuchitraKamble, judicial member analysed the certificates submitted by the assessee which were issued by both the banks disclaiming the existence of Bank accounts that the Revenue had alleged belonged to the assesses. The assessee has produced certificates from the Bank denying the existence of any such Bank accounts.

Higher Sales Shown during Demonetization Period to Cover up Cash Deposits to Bank Accounts: ITAT Directs to treat Addition as Income from Business and Tax at Normal Rates Mohamed Thajudeen Abuthahir vs The Income tax Officer CITATION: 2023 TAXSCAN (ITAT) 2204 The Income Tax Appellate Tribunal (ITAT) Chennai bench while directing to treat addition as the income from business and Tax at the normal rates observed that Assesee showed higher sales during demonetization period to cover up cash deposits to bank account. It was observed by the tribunal that sales for the earlier financial year was about roughly more than one crore. Further, assessee is claiming huge trade payables in its books of accounts. When the assessee is having sufficient cash balance of Rs. 38.41 lakhs, then why he would not paid trade payables is not properly explained. Hence it was observed that the assessee has shown higher sales during the demonetization period to cover up the cash deposits to bank account. Also the explanation of the assessee that source for cash deposits is out of business receipts and cash in hand available before the date of demonetization is not correct, the tribunal bench remarked. Explanation as Past Savings of HUF and Members, No other Deposits during Demonetization: ITAT deletes Income Tax Addition Sudhir Kumar Tiwari vs Income Tax Officer 2022 TAXSCAN (ITAT) 1464 The Income Tax Appellate Tribunal (ITAT), Allahabad Bench deleted Income Tax Addition on the ground that the explanation was past savings of HUF and its members and no other deposits were made during demonetization.

A Single Bench of the Tribunal consisting of Vijay Pal Rao, Judicial Member observed that “Accordingly, in the facts and circumstances of the case when the assessee has explained the source of Rs.1,00,000/- as past savings of the assessee HUF and its members and there are no other deposits during the demonetization the addition made by the Assessing Officer is deleted.” Cash Deposits during Demonetization Period: No Addition if AO Accepted Documents and BoA containing Cash Credits, rules ITAT Arun Garg vs ITO CITATION: 2022 TAXSCAN (ITAT) 1257 The Income Tax Appellate Tribunal (ITAT), Chandigarh bench held that addition in respect of unexplained cash credit under sections 68 and 69A of the Income Tax Act, 1961 cannot be made when documents and books of account submitted by assessee accepted by Assessing Officer (AO) in respect of cash credits during demonetization period. The Bench consisting of NK Saini, Vice President, and Sudhanshu Srivastava, Judicial Member observed that “the opening stock, purchases, sales and closing stock in the hands of the assessee have been accepted by the Assessing Officer and the books of accounts of the assessee have also not been rejected u/s 145(3) of the Act and as such the entries relating to the related parties in effect stand accepted and, as such, the confirmation of the two additions i.e. both in regard to the number of Rs.28 lacs and Rs.48.50 lacs are not justified.”

Assessee adopted an Evasive/lackadaisical Approach and didn’t Participate in Assessment Proceedings: ITAT upheld Addition u/s 69A of Income Tax Act M/s. Adim Jati Seva Sahkari Samiti Maryadit Korba vs The Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 2405 The Raipur bench of the Income Tax Appellate Tribunal (ITAT) upheld the addition under Section 69A of the Income Tax Act, 1961 for the unexplained cash as the assessee adopted an evasive or lackadaisical approach and didn’t participate in the assessment proceedings. The Assessing Officer observed that the assessee did not respond to the notice on the said date. Accordingly, he was constrained to proceed with the best judgment assessment under Section 144(1)(b) of the Income Tax Act. The assessee had failed to come forth with any explanation as regards the source of the cash deposits in its bank accounts, therefore, the Assessing Officer after treating the same as its unexplained money under Section 69A of the Income Tax Act made an addition in its hands of Rs. 2,47,65,369/-. Mere Assumption that Withdrawn Amount Spent for Other Purposes Without any Adverse Positive Material cannot be the Reason for Disputing Source of Cash Deposits: ITAT The ACIT vs M/s. Omaxe Forest SPA And HillsDevelopers Ltd. CITATION: 2023 TAXSCAN (ITAT) 2209 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) held that The Assessing Officer (AO) has ignored main cash book while disputing the source of cash and making addition and the Commissioner of Income Tax (Appeals) [CIT(A)] considered entire facts and circumstances in the right prospective and thereafter granted relief to the assessee, upholding the decision of CIT(A).

The Bench observed that it is not the case of the AO that the assessee did not file details and documentary evidence before him and the same was filed before the CIT(A) which was relied by him while granting relief to the assessee. Thus the Bench presume that entire evidence which was before the CIT(A) was also produced before the AO during assessment proceedings. Acceptance of Demonetized Currency from 08.11.2016 Contrary to RBI Notification:ITAT Directs AO to Accept 50% Cash Deposits as Sale Proceeds received in Cash and Balance as Unexplained Money M/s. J. Kalappa Naidu Sons vs The Income tax Officer CITATION: 2023 TAXSCAN (ITAT) 2190 The Chennai Bench of Income Tax Appellate Tribunal (ITAT) has directed the Assessing Officer (AO) to accept 50% of cash deposits as sale proceeds received in cash and balance as unexplained money as the assessee had accepted the demonitized currency from 8.11.2016 contrary to Reserve Bank of India (RBI) notification. A Single Bench of Manjunatha. G, (Accountant Member)observed thatthe only reason given by the Assessing Officer to reject explanation offered by the assessee was notification issued by Government of India and RBI, not to deal with specified bank notes during demonetization period and neither the assessee proved its case with necessary evidence nor the Assessing Officer had proved with conclusive evidence that cash deposits during demonetization period is unexplained money of the assessee.

ITAT Upholds Addition in respect of Cash deposited in Joint Bank Account with Accountant Shri Shiv Shankar Sharma Vs. The Income Tax Officer The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) has upheld an addition in respect of cash deposited in joint bank account by assessee with his accountant by holding that it was created to cover up unaccounted transactions of the assessee. Refusing to grant relief to assessee, the bench held that “There is no reason why a professional will provide his own money and operate bank account with the assessee. If there was money of Shri Mahesh Sharma, he could have given confirmation or would have appear before A.O. for recording his statement. However, he did not support the case of the assessee and did not appear before A.O. for recording his statement. The explanation of assessee is clearly an afterthought.” ITAT upholds Addition since assessee failed to explain the source of Cash Deposit in her Bank Account during Demonetization period Leela Devi Vs. ITO The Income Tax Appellate Tribunal (ITAT), Delhi Bench upheld the addition on the ground that the assessee failed to explain the source of cash deposit in her bank account during the demonetization period. The coram consisting of Bhavnesh Saini noted that when the matrimonial dispute was not settled till August, 2019, there was no reason for the assessee to keep the cash at home.

The ITAT further said that when assessee made cash deposits of Rs. 15 lakhs in three installments in her bank account in November, 2016, would lead to irresistible conclusion that assessee was keeping unaccounted cash money of Rs. 15 lakhs with her at the time of demonetization period and the assessee realizing that such currency cannot be used anywhere, she deposited same in her bank account and purposely the return of income was filed belatedly after expiry of the period provided under section 139(1) for filing of the return of income within the period of limitation. ITAT deletes Addition for Cash Deposits in Bank since Assessee had sufficient Cash in hand, says No Need to Tally Notes Withdrawn & Deposited Dy. C.I.T. Vs. Shri Sudhir Shankar Halwasiya While hearing the case of Dy.C.I.T vs. Shri Sudhir Shankar Halwasiya, Lucknow bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition for cash deposits in Bank considering the fact that the assessee had sufficient cash in hand and also held that in such a situation the assessee is not supposed to tally notes withdrawn and deposited. After considering the rival submissions and findings, the tribunal bench comprising of Judicial Member Partha Sarathi Chaudhury and Accountant Member T.S.Kapoor also upheld the order passed by the CIT (A) by holding the fact that the assessee had sufficient fund in his hand for made a huge deposit in the bank and he has also submitted all solid evidence to prove the source of the aforesaid fund. In such circumstances, it is not possible to make any addition on account of the huge cash deposit. No Addition If Delay in Depositing Cash withdrawn was explained by way of Oral Evidence: Delhi High Court Jaya Aggarwal Vs. Income Tax Officer The Delhi High Court annulling the decisions of Income Tax Appellate Tribunal (ITAT) and Commissioner of Income Tax (Appeals) held that if there is a delay in depositing withdrawn cash to the assessee’s bank account and the assessee has offered sufficient oral evidence to justify the delay, the same cannot be added as unexplained income under Section 68 of the Income Tax Act.

While allowing the appeal filed by the assessee, the High Court relying upon the ‘Prudent Man’s Behavior Test’ and ‘Principle of Preponderance of Probability’ held that an oral evidence cannot be disregarded being the only evidence relied upon by a party. The Court while referring to Murray’s English Dictionary went on further to explain the meaning of ‘Probability’ as, “likelihood of anything to be true. Probability refers to the appearance of truth or likelihood of being realized which any statement or event bears in light of the present evidence.” The Court ruling in favor of the assessee directed that the addition made under Section 68 should be deleted. Failure of Lower Authorities to Consider Assessee’s Evidence on Bank Deposits: ITAT Remands Case to CIT(A) Faeza Nisarahmed Soniwala A-605 vs The ITO CITATION: 2024 TAXSCAN (ITAT) 1485 The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) remanded the case to the Commissioner of Income Tax(Appeals) [CIT(A)] for fresh adjudication after finding that the lower authorities failed to adequately consider the evidence provided by the assessee regarding bank deposits. The two member bench comprising Suchitra R.Kamble(Judicial Member) and Dr.BRR Kumar(Accountant Member) noted that the Revenue authorities had not fully considered the assessee’s evidence and decided to remand the case to the CIT(A) for a fresh review. The CIT(A) was instructed to issue a new notice to the assessee and adjudicate the matter, ensuring timely compliance and disposal of the case. ITAT Remits Case to CIT(A) for Reassessment of Cash Deposits after Admission of Additional Evidence Janaki Ram Babji Rao Annam vs Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 1344 The Visakhapatnam Bench of Income Tax Appellate Tribunal(ITAT) remitted the matter back to the Commissioner of Income Tax(Appeals)[CIT(A)] for reassessment of cash deposits made by the assessee, after recognizing the necessity to consider additional evidence that had been previously rejected.

The Division Bench of Duvvuru RL Reddy(Judicial Member) and S.Balakrishnan(Accountant Member)determined that the CIT(A) should have accepted the additional evidence to evaluate the case properly. Therefore, it remitted the matter back to the CIT(A) to admit the additional evidence under Rule 46A and decide the case on its merits, ensuring the assessee had a fair chance to be heard. In conclusion,the appeal was allowed for statistical purposes. Unexplained Cash Deposits of Rs. 3.13 Crore: ITAT Directs AO to Consider Bank Withdrawals in Reassessment Prakash Govindbhai Patel vs Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 1182 The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) directed the Assessing Officer (AO) to consider bank withdrawals while reassessing the unexplained cash deposits totaling Rs. 3.13 crore. The CIT(A) observed that the assessee remained non-compliant throughout the proceedings and upheld the addition of Rs. 3,13,34,845/- under Section 69A.

The appeal was dismissed as the assessee failed to provide a valid explanation for the unexplained cash credits. The assessee repeatedly sought adjournments but showed no intention of appearing or presenting the case. Despite being given a “last opportunity,” the assessee failed to attend the hearing or file an adjournment application, leading the tribunal to decide the case on merits. CIT (A) cannot Dismiss Appeal for Non-Prosecution u/s 250 (6): ITAT orders for Fresh-Adjudication Shreenath Developers vs Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 981 The two member bench of the Income Tax Appellate Tribunal ( ITAT ), Ahmedabad has ruled that the Commissioner of Income Tax (Appeals) [CIT (A)] cannot dismiss an appeal for non-prosecution under Section 250(6) of the Income Tax Act, 1961, without considering the merits of the case, and has accordingly set aside the case to the file of CIT (A) for fresh adjudication based on its merits. The bench, after hearing the arguments and reviewing the case material, noted that the CIT (A) had issued an ex-parte order dismissing the appeal due to non-appearance, without addressing the merits of the case or the grounds raised by the assessee. The bench observed that the CIT (A) is required to address each point arising from the appeal, even in an ex-parte order, as per Sections 250(4) and 250(6) of the Income Tax Act.

The CIT (A) does not have the authority to dismiss an appeal on the grounds of non-prosecution without discussing the case’s merits. Cash Deposited by 77-year-old Assessee looking to Saving for Old Age holding cannot be added u/s 68 of Income Tax Act: ITAT Aayodhya Jajra vs Commissioner of Income Tax(Appeals) CITATION: 2024 TAXSCAN (ITAT) 639 The Jodhpur Bench of the Income Tax Appellate Tribunal(ITAT) has held that cash deposited by a 77-year-old age assessee looking to save for old age holding cannot be added under section 68 of the Income Tax Act, 1961. A two-member bench of Dr S Seethalakshmi, Judicial Member & Shri Rathod Kamlesh Jayantbhai, Accountant Member observed that the assessee is 77 years age and looking to the old age holding the cash out of the accumulated savings to the extent of Rs. 9,50,597/- cannot be doubted. The court viewed that the assessee has deposited cash into her bank account for an amount of Rs. 11,00,000/- cannot be added as unexplained income under section 68 of the Act for the year under consideration and directed to delete the addition made in hands of the assessee. While allowing the appeal, the ITAT directed to delete the addition made in the hands of the assessee.

No Addition shall be made on behalf Farmer assessee in respect of Cash Deposited in Joint Bank Account by Second Account Holder: ITAT Devender vs ITO CITATION: 2023 TAXSCAN (ITAT) 1729 The Income Tax Appellate Tribunal (ITAT) of Delhi Bench ruled that no addition should be made on behalf of the assessee in respect of cash deposited in a joint bank account by the second account holder. It was observed by the tribunal that no addition was made in the hands of the assessee in respect of cash deposited in the joint savings bank account where assessee is the other holder along with primary holder Shri Heera Singh. The tribunal after reviewing the facts and submissions of the both parties the Two member bench of Annapurna Gupta (Accountant Member) and Madhumita Roy (Judicial Member) observed that the cash deposited by the second holder of the joint account and the amount was the sale consideration earned from sale of agricultural land. Cash Deposited in Bank Accounts during Demonetization Period reflected in Books of Account of Company: ITAT deletes Addition DCIT vs Bawa Jewellers Pvt. Ltd. CITATION: 2023 TAXSCAN (ITAT) 1586 The Delhi Bench of the Income Tax Appellate Tribunal (ITAT), while deleting the addition made by the Assessing officer (AO), determined that the cash deposited in bank accounts during the demonetization period was reflected in the books of account of the company.

After determining the facts and submissions made by both parties the bench consisting of two members, Narendra Kumar Billaiya (Accountant Member) Challa Nagendra Prasad (Judicial Member) observed that the assessee was maintaining complete stock tally, the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds. Thus, the bench dismissed the appeal filed by the revenue. Cash Deposited in Bank account of Assessee, is not sufficient for Formation of “Belief of Escapement of Income” by AO: ITAT sets aside Assessment Order Shri Vasantkumar Prahladbhai vs The ITO CITATION: 2023 TAXSCAN (ITAT) 860 The Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench, has recently, in an appeal filed before it, while setting aside an assessment order, held that the cash deposited in bank account of the assessee, is not sufficient for the formation of “belief of escapement of Income” by the AO.

Thus, the ITAT finally held: “In view of the same, we hold that jurisdiction assumed by the AO to reopen the case of the assessee was not in accordance with law in the absence of formation of belief of escapement of income by the AO. The assessment order so framed is therefore not sustainable in law, and is set aside as invalid. Since we have set aside the assessment order passed under section 147 itself, adjudication of addition on merits is merely an academic exercise. Accordingly, the same are disposed off. In the result, the appeal of the assessee is allowed in above terms”. Enquiry and Investigation as per CBDT Instructions on Cash Deposited in Post Demonetisation period is necessary, Addition u/s 68 not allowable: ITAT restores the issue M/s. Bhavana Cooperative Credit Society Niyamita vs The Income-tax Officer CITATION: 2022 TAXSCAN (ITAT) 1565 Addition under section 68 of the Income Tax Act, 1961 is not allowable when the enquiry and investigation as per CBDT Instructions on cash deposited in post demonetisation period which is necessary to be not done, the Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) has restored the issue for fresh adjudication. A Coram of Shri Chandra Poojari, AM and Smt. Beena Pillai, JM viewed that the various standard operating procedures laid down by the central board of direct taxes issued from time to time give a hint regarding what kind of investigation, enquiry, and evidence the assessing officer was required to take into consideration to assess such cases.

Further observed that it is important to examine whether the case of the assessee falls into any of the above parameters are not and the assesseewas directed to establish all relevant details to substantiate its claim in line with the above application instructions. Professional Fee received in Cash Deposited to bank Account cannot be suspected: ITAT Sarita Tyagi Vs. ITO The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has recently held that no addition under the Income Tax Act, 1961 can be made towards the deposit of cash received as a professional fee received by the assessee, a medical practitioner. The assessee submitted that he has opening cash in hand of Rs. 343108/- and professional fees receipt of Rs. 685010/-.

He received Rs. 3 lakhs from Priyadarshi Hospital as remuneration and further Rs. 48000/- as a gift from relatives therefore, the total deposit of Rs. 1376118/- deposit in the bank account is fully explained. On the second appeal, the Tribunal found that the assessee is carrying on his professional practice where from he has shown the net professional income of Rs. 345590/- and remuneration of Rs. 247065/- from Priyadarshi Hospital. The opening balance shown by the assessee is also deposited in the savings bank account. ITAT Overturns AO’s Rejection of Books, deletes Addition of Cash Deposits as Unexplained Income Citing Lack of Evidence of Specific Discrepancies Kshetrapal Gold Private Limited vs Income Tax Officer CITATION: 2024 TAXSCAN (ITAT) 1369 The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) overturned the Assessing Officer’s (AO) rejection of books and deleted the addition of Rs.4,12,67,000 as unexplained income, citing the lack of evidence of specific discrepancies in the books of accounts.

The two member bench comprising T.R.Senthil Kumar(Judicial Member) and Annapurna Gupta (Accountant Member)set aside the AO’s rejection of the books and reversed the addition of Rs. 4,12,67,000 under Section 68 of the Act. All grounds raised by the assessee were allowed, underscoring that assumptions alone were insufficient grounds for rejecting books and making income additions. In conclusion the appeal filed by the assessee was allowed. Addition on unaccounted Cash based on Deposit During Demonetisation Period: ITAT directs Assessee to Establish Genuineness of Money Shri T. Sriranga vs Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 946 The Income Tax Appellate Tribunal (ITAT), Bangalore bench in a matter of addition to unaccounted cash based on deposits during demonetisation directed the assessee to establish the genuineness of money. The Coram comprising Smt. Beena Pillai, (Judicial) directed the assessee to establish all relevant details to substantiate its claim. The ITAT viewed that “not every deposit during the demonetisation period would fall under the category of unaccounted cash. However, the burden is on the assessee to establish the genuineness of the deposit to fall outside the scope of unaccounted cash.

Addition on Cash Deposit during Demonetisation is not permissible when opportunity to adduce evidence to prove the Source was given: ITAT Devarajulu Natarajan vs ITO CITATION: 2022 TAXSCAN (ITAT) 1517 The Chennai Bench of the Income Tax Appellate Tribunal (ITAT)has held that addition on cash deposit During Demonetisation is not permissible when the opportunity to adduce evidence to prove the source was given to the assessee. A Coram consisting of single member Shri Manoj Kumar Aggarwal, AM observed that the onus is on the assessee to substantiate the source of the cash deposit of Rs.8.50 Lacs and granted another opportunity to the assessee to substantiate its case before AO. The issue was restored to the file of AO with a direction to the assessee to substantiate the source of the deposit. Addition u/s 68 based on Cash Deposit not allowable in the Absence of Corroborative Evidence: ITAT Prashant Pratap Ahir vs Asst. Commissioner of Income Tax CITATION: 2022 TAXSCAN (ITAT) 1853 The Pune bench of the Income Tax Appellate Tribunal(ITAT) has held that addition under section 68 of the Income Tax Act,1961 based on Cash deposit is not allowable in the absence of the Corroborative evidence Per contra, the Revenue failed to bring on record any deprecative material in rebutting the present claim of the appellant.

A Coram of Shri S S Viswanethra Ravi, Judicial Member and Shri G D Padmahshali, Accountant Member observed that the material facts strongly indicate a probability that, the appellant had occasioned to receive on-money (cash) in the sale transaction of a capital asset, and another very strong probable factor is that the said cash was deposited into bank account after the occurrence of the sale transaction. Cash Deposits not Corroborated with Business Receipts or Cash Withdrawals: ITAT upholds Addition u/s 68 M/s. Sneh Developers Pvt. Ltd vs DCIT CITATION: 2022 TAXSCAN (ITAT) 947 The Income Tax Appellate Tribunal (ITAT), Delhi Bench has held that cash deposits are not corroborated with business receipts or cash withdrawals and upholds addition under section 68 of IT Act. The Coram of Mr. Aakash Deep Jain, Vice President, and Dr. B. R. R. Kumar, Accountant Member while upholding the addition held that “keeping in view, the entirety of the facts and circumstances, we hold that justice would be well served by directing the revenue to estimate the profits at 8%”. The Tribunal further held that “we unequivocally hold that the cash deposits cannot be treated as the integral part of the receipts reflected in Form 26AS”. Deposit of Cash kept for Medical Emergency Post- Demonetization: ITAT deletes Addition Krishna Goyal, Vs ACIT, Circle-14, New Delhi. CITATION: 2023 TAXSCAN (ITAT) 308 Addition made under section 69A of the Income Tax Act, 1961 was deleted by the Delhi Bench of Income Tax Appellate Tribunal (ITAT) as the cash deposit was kept for the medical emergency. The single bench of Saktijit Dey (Judicial Member) observed that the department does not have any contradictions on the illness of the assessee and also it’s a serious matter that should be considered.

Furthermore, considering the fact that the assessee face a serious medical condition, her explanation that cash withdrawals made earlier were kept at hand for meeting any medical emergency, to some extent, is believable and thus directed to delete the addition. Mere basis of sales being made through cash not enough reason addition: ITAT Metro Filling Station vs Ito CITATION: 2023 TAXSCAN (ITAT) 2071 The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that there is no justification in making any addition since nothing adverse was found in the books of accounts. After hearing both the parties, the two member bench consisting of B.R.R Kumar (Accountant member) and Kul Bharat (Judicial member) held that the assessee’s accounts are duly audited and book results have not been disturbed. Therefore, merely because the sales have been made in cash ought not to have been the basis for making the addition. Moreover, the business of the assessee was exempted in respect of pecuniary limit despite of deposit of demonetize currency. It is not the case where the AO found any discrepancy related to stocks.

If the sales were matched with purchases no addition was called for. No addition can be made on Cash Deposited to Bank Account from Husband’s Savings for pay of Bank Loan: ITAT Ramesh Rani Chatwal vs ITO CITATION: 2023 TAXSCAN (ITAT) 1590 The Delhi Bench of the Income Tax Appellate Tribunal (ITAT) held that addition could not be made on cash deposited to the bank account from husband’s savings for payment of bank loan. Om Prakash, Department Representative opposed these submissions and supported the orders of the authorities below. The tribunal after reviewing the facts observed that without proper verification of the facts AO made additions towards the deposits.

Thus, the lower authorities were not justified in making the entire amount deposited in the bank as an unexplained income. Hence, a single bench of tribunal Kul Bharat Judicial Member deleted the addition made by the assessing officer and allowed the appeal filed by the assessee. Addition of Part of Cash Deposit to Total Income on Surmises and Conjectures: ITAT upholds deletion of Addition u/s 69A Roop Fashion vs The DCIT CITATION: 2022 TAXSCAN (ITAT) 789 The Income Tax Appellate Tribunal, Chandigarh Bench has held that addition of part of cash deposit to total Income on surmises and conjectures and upholds the deletion of addition u/s 69A. The Tribunal observed that the AO accepted the cash deposited in the bank by the assessee during the demonetization period was out of the cash sales and the realization from the trade debtors duly shown in the book of accounts. The assessee had deposited Rs. 2,47,50,000/- during the demonetization period in the bank account, the AO accepted Rs. 1,50,00,000/- as cash sale on estimated basis but no basis or method was adopted for that estimation, the AO considered the aforesaid estimated sales only on the basis of surmises and conjectures which is not tenable in the eyes of law.

Jewellery Owner’s Late ITR Filing Rejected: ITAT Upholds Addition of Demonetization Period Deposits Due to Lack of Justification Varun Kumar Jain vs The ITO CITATION: 2024 TAXSCAN (ITAT) 1489 The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) upheld the addition of cash deposits made by a jewellery business owner during the demonetization period citing the rejection of the late Income Tax Return (ITR) filing and lack of satisfactory justification. The AO found that the late filing of the income tax return rendered it invalid and completed the assessment proceedings under Section 144 of the Income Tax Act. The AO treated the cash deposits of Rs. 12,34,000 as unexplained income under Section 69A of the Income Tax Act due to the lack of any evidence or documentation justifying the source of funds. The two-member bench comprising A.D. Jain (Vice President) and Krinwant Sahay (Accountant Member) observed that the income tax return filed on 23.09.2019 was invalid and could not form the basis of the assessee’s appeal. The tribunal dismissed the assessee’s appeal, upholding the addition of Rs.12,34,000 as unexplained money under Section 69A due to the lack of a valid return and satisfactory explanation.