Loading judgment…
Facts
The assessee, an individual, deposited Rs. 13,50,000/- in her bank account during the demonetization period. The AO added this amount as unexplained investment under section 69A of the Income Tax Act. The CIT(A) reduced the addition to Rs. 11,00,000/-.
Held
The Tribunal held that the assessee had sufficient opening cash balance and had explained the source of the cash deposit through her rental income and for medical treatment. The addition made by the AO was not sustainable.
Key Issues
Whether the cash deposit made during demonetization was an unexplained investment under Section 69A of the Act when the assessee had sufficient opening cash balance and explained the source.
Sections Cited
69A, 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI PAWAN SINGH, JM &
(Assessment Year: 2017-18) Smt. Leena Hitesh Jhaveri, ITO, Ward-19(2)(1), New Add: 70/72, Niraj Building, Piramal Chambers, Dr. S.S. Marg, 2nd Floor, Flat No. 7, Walkeshwar Road, Vs. Lalbaug, Mumbai-400012. Mumbai-400006. PAN: AHJPJ6030B Appellant) : Respondent) Appellant /Assessee by : Shri Nishit Gandhi, Adv. Revenue / Respondent by : Shri Surendra Mohan, Sr. DR : 10.07.2025 Date of Hearing : 16.07.2025 Date of Pronouncement O R D E R Per Padmavathy S, AM:
This appeal by the assessee is against the order of the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi [In short 'CIT(A)'] passed under section 250 of the Income Tax Act, 1961 (the Act) dated 13.12.2024 for Assessment Year (AY) 2017-18. The assessee raised the following grounds of appeal:
“1. The learned Assessing Officer erred in making Addition of Rs. 13,50,000/- u/s. 69A of the Income Tax Act, 1961 without considering the fact of the case that the appellant has deposited the said cash in bank during demonetisation Smt. Leena Hitesh Jhaveri period is out of her opening cash balance of Rs. 14,12,362.52/- and her income of Rent from Lonavala Bunglow of Rs. 4,95,000/- and Learned CIT(Appeal) erred in restricting the addition to Rs. 11,00,000/-only.
2. The Learned Assessing Officer erred in making addition of Rs. 13,50,000/- u/s. 69a of the Income Tax Act, 1961 without appreciating the Income Tax Authority DDIT(INV.) Unit-3(4), Air India Building, Nariman Point, Mumbai dealt with the case on 17/05/2019 without any adverse observation and learned CIT(A) erred in not considering the fact that the cash deposit in bank during the demonetisation period was already dealt with by the investigation authority.”
The assessee is an individual and filed the return of income for AY 2017-18 on 28.06.2017 declaring a total income of Rs. 3,46,500/-. The income of the assessee includes rental income received from Tourist in respect of hear Bunglow at Lonawala from which the assessee derived a rent to the tune of Rs. 4,95,000/-. The case was selected for scrutiny under CASS for verification of cash deposit during the demonetization period. The Assessing Officer (AO) based on the date available in ITBA notices that the assessee has deposited an amount of Rs. 13,50,000/- in the bank account with Kotak Mahindra Bank during the demonetization period. Since the assessee did not file any further details, the AO added the sum of Rs. 13,50,000/- as unexplained investment under section 69A of the Act. Aggrieved, the assessee filed further appeal before the CIT(A). The CIT(A) reduced the addition to Rs. 11,00,000/- by giving credit to the tune of Rs. 2,50,000/- as per the CBDT Press release dated 18.11.2016.
At the outset, the ld. AR argued that the assessee is suffering from Cancer and that main source of income for the assessee is through the head ‘Income from House Property’. The ld. AR further submitted that the assessee rents the property in Lonawala to Tourists and collects the rent in cash for the number of days of stay. The ld. AR also submitted that the assessee retains cash for the purpose of medical treatment and the opening cash balance as on 01.04.2016 was Rs. 14,12,362/-. The Smt. Leena Hitesh Jhaveri ld. AR in this regard submitted a Paper Book containing the income tax return filed by the assessee from AY 2011-12 to AY 2017-18 along with the financial statements (page 3 to 23 of PB). The ld. AR submitted that when the cash receipts are recorded in the cash book, no addition could be made under section 69A of the Act. The ld. AR submitted that the cash deposit during demonetization period is exempt by the revenue for the purpose of examining whether it is out of undisclosed source whereas in assessee’s case, the source for cash has been clearly explained by way of entries in books of account and the rental income. The ld. AR also submitted that the AO while making the addition has accepted the rental income offered by the assessee and therefore, he is not correct in making the addition towards the cash deposit under section 69A of the Act which is sourced from the accumulated rental income offered over a period of time.
The ld. DR on the other hand vehemently argued that the cash deposited by the assessee are in SBN and therefore, unless the source for the cash is clearly explained, the AO / CIT(A) are right in making the addition under section 69A of the Act.
We heard the parties and perused the material on record. We notice from the details of returns furnished for earlier AYs that the opening cash balance in the hands of the assessee as on 01.04.2016 was Rs. 14,12,362/-. Further we notice that the assessee has submitted various details such as the Bank statements, computation of income, copy of ITR, cash book, cash transactions entered into by the assessee, etc. and no adverse finding with regard to the details submitted by the assessee have been recorded by the lower authorities. We also notice that the income of the current year alone cannot be considered for the purpose of examining the source of the cash deposit and in assessee's case the accumulated cash balance at the beginning of the Smt. Leena Hitesh Jhaveri year is more than the cash deposited into the bank. When the assessee is having sufficient opening balance of cash then it is a settled position that addition on the ground that source is not explained cannot be made. It is also relevant to take into consideration the medical condition of the assessee, and the reason as submitted by the assessee for holding huge cash being for medical treatment has merits. Considering the documentary evidences submitted by the assessee in our view the assessee has discharged the onus of substantiating the source for the cash deposit. In view these discussions, the facts peculiar to the case and evidences submitted, we are of the considered view that the addition made by the AO under section 69A of the Act is not sustainable. Accordingly, we direct the AO to delete the addition of Rs. 11,00,000/- made towards the cash deposit during demonetization period.
In result, appeal of the assessee is allowed.