Loading judgment…
Facts
The assessee, a salaried individual, deposited Rs. 5,19,000 in cash during the demonetization period. The Assessing Officer added this amount as unexplained income under Section 69A of the Income Tax Act. The CIT(A) upheld the AO's order.
Held
The Tribunal held that the assessee was entitled to a benefit of Rs. 2.50 Lakhs as per CBDT Circular No. 3/2017 for cash deposited in demonetization period. The remaining addition of Rs. 2,69,000/- was upheld. The Tribunal also directed that the remaining addition be taxed at the normal rate, not at the enhanced rate under Section 115BBE, as the amended provision is not retrospective.
Key Issues
Whether the cash deposit made during demonetization period is unexplained income, and whether Section 115BBE is applicable retrospectively.
Sections Cited
69A, 115BBE
AI-generated summary — verify with the full judgment below
(AY: 2017–18) (Physical hearing) Aman Rajendrakumar Jain Vs. Income Tax Officer, Flat No. 501/C, Ward 20(1)(1),Room No. 124, 5TH Floor Sumer Tower No. 3, 1st floor, Piramal Chambers, Seth Motisha Lane, Lalbaug, Parel, Mazgaon, Mumbai-400010. Mumbai-400012. PAN: APKPJ9325E (Appellant) .. (Respondent) Assessee by Shri. Manish Ranka, CA Revenue by Shri. Vijay Kr. G. Subramanyam, Sr. DR Date of Hearing 23/04/2025 Date of Pronouncement 23/04/2025 Orde under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICAIL MEMBER, 1. This appeal by the assessee is directed against the order of Learned Commissioner of Income Tax (Ld. CIT(A)) dated 31.12.2024 for A.Y. 2017-18. The assessee has raised the following grounds of appeal:
“1. Incorrect addition of Rs. 5,19,000/- as unexplained income u/s 69A of the Income Tax Act, 1961 • The appellant would like to state that the Id, CIT(A) has erred in law and in facts by not considering the contention of the appellant and overlooking the fact that the initial cash withdrawal was appropriately reported in the income tax return of respective AYs. • The appellant disclosed a gross total income of Rs. 6.08,105/- and claimed a deduction of Rs. 1.72.135/-under Chapter VI-A, resulting in a Net taxable income of Rs 4,35,970/- Aman Rajendrakumar Jain • The appellant made cash deposit of Rs. 5,19,000/- during the demonetization period (8 November 2016-31 December 2016), which was added in the income of the appellant as unexplained income u/s 69A of the Income Tax Act, 1961 • The source of cash deposits were cash withdrawals made by the appellant during the previous and current assessment years (AY 2016-17 and AY 2017- 18), amounting to Rs. 4,78,500/- • The appellant deposited the cash towards the end of the demonetization period, given the imminent risk of the currency becoming invalid. This decision of depositing the cash near to the end of demonetization was influenced by the appellant's urgent medical need to pay for the treatment of an elderly grandmother suffering from serious health issues. • The source of these withdrawals was salary income, which had already been disclosed in the appellant's income tax returns for the respective years. • The appellant asserts that the cash deposit of Rs. 5,19,000/- was not unexplained money, as the source of the deposits can be traced directly to legitimate salary income and withdrawals made during AY 2016-17 and AY 2017-18 • The appellant acted prudently in depositing the cash before the demonetization deadline. fearing that it would lose its value if not deposited on time. Given the medical crisis in the family. this decision was made in good faith, • To substantiate the claim that the cash deposits originated from legitimate sources, the appellant would like to provide supporting documents as appended below: i) Bank statements for AY 2016-17 (from 01 April 2015 to 31 March 2016) and AY 2017-18 (from 01 April 2016 to 31 March 2017), showing cash withdrawals and deposits ) ii) Salary slips for the relevant assessment years to verify the source of the income • These documents demonstrate that the appellant's cash deposits were not unexplained but were sourced from income that was already disclosed in the tax return.
2. Violation of the Principles of Natural Justice: Audi Alteram Partem (Right to be Heard):
Aman Rajendrakumar Jain • It is a fundamental principle of natural justice that every party must be given an opportunity to be heard before an adverse decision is made. The appellant was not provided with a reasonable opportunity to present their case. • The appellant responded to the notice issued on 12-12-2024, requesting an opportunity to be heard in person to provide better clarification regarding the matter. However, despite this request, no personal hearing was granted, and an order was issued on 31-12-2024. • Given the denial of an opportunity to be heard and the failure to consider the appellant's explanation and supporting documentation, the appellant respectfully requests the Hon'ble ITAT to set aside the order passed by the learned CIT(A). • Upholding the principles of natural justice and providing the appellant with a fair opportunity to present the case would ensure that justice is served, and the public trust in the system is maintained 3. Principle of Prudence and Fairness: • The appellant submits that the actions taken were based on prudence and fairness. Given the circumstances of the demonetization and the urgent medical needs of the appellant's grandmother, the decision to deposit the cash was reasonable and was made in good faith. • The appellant further submits that no addition should be made to the income as the cash deposits are traceable to salary income that had already been disclosed in the returns for the relevant years. • The appellant contends that the addition of Rs. 5,19,000/- to the income, as unexplained money under Section 69A, is unjustified. The appellant has disclosed all sources of income, and the cash deposit was sourced from legitimate income and withdrawals made during the year • The cash deposits were made under genuine and pressing circumstances and should not be treated as unexplained income, especially given that the appellant had already disclosed the source of income in the filed returns. • The appellant respectfully prays that the Hon'ble ITAT consider the facts of the case in light of the supporting documentation provided and the principles of natural justice. • The appellant requests that the addition of Rs. 5,19,000/- be deleted from the income, as it is not unexplained and is sourced from disclosed salary income.
Aman Rajendrakumar Jain • In light of the facts and circumstances, the appellant seeks the cancellation of the order passed by the CIT(A) and a fair reconsideration of the case.”
Though, the assessee has raised multiple grounds of appeal
. However, in my considered view the substantial grounds of appeal relates to addition of Rs. 5,19,000/- on account of cash deposit during demonetization period.
3. Brief facts of the case are that assessee is a salaried person (individual), filed his return of income for A.Y. 2017-18 declaring income of Rs. 4,35,970/-. Case was selected for scrutiny. During assessment the Assessing Officer (AO) noted that during demonetization period the assessee made cash deposit in his bank account aggregating of Rs. 519,000/-. Such cash deposit in saving bank account during demonetization period. The AO was of the view that a person holding specified bank note in hand out of earlier withdrawal would have deposited immediately on announcement of demonetization period. The AO issued detail show cause notice to the assessee as to why such cash deposit should not treated as unexplained money and tax under section 115BBE of the Act. The AO recorded that no compliance was made by assessee. Thus, sources of cash deposit remained unexplained. The AO added cash deposit of Rs. 5,19,000/- as unexplained money under section. 69A.
4. Aggrieved by the additions in the assessment order, the assessee filed appeal before Ld. CIT(A). Before ld. CIT(A) the assessee submitted that cash deposit during the relevant period was out of withdrawal during or before the demonetization period. The Ld. CIT(A) on considering the submissions of assessee held that assessee failed to discharge the onus in providing source of Aman Rajendrakumar Jain cash deposit during demonetization period and thereby upheld the action of AO. Further, aggrieved the assessee has filed present appeal before this Tribunal.
5. I have heard the submissions of Learned Authorized Representative (Ld. AR) of the assessee and the Leaned Senior Departmental Representative (Ld. DR) for the revenue. The Ld. AR of the assessee submits that cash deposited during demonetization period was out of case withdrawal on earlier occasion. The Ld. AR of the assessee also furnished copy of bank statement with HDFC bank from 01.04.2016 to 31.03.2017. The Ld. AR by referring various withdrawal on different occasions would submit that assessee was having sufficient cash in hand for deposit in the bank during demonetization period. The assessee also made deposit of cash in hand with various family members. The assessees faced with unforeseen situation during demonetization period and have no option except to deposit, high denomination note during demonetization period. The Ld. AR of the assessee also furnished cash flow statement of cash in hand and would submit that entire addition is liable to be deleted to support his submission. To support his submissions, the Ld. AR is relied on the decision of Mumbai Tribunal in Shail Jay Shah v. ITO in dated 02.02.2003.
On the other hand, the Ld. DR for the revenue supported the order of authorities below. The Ld. DR for the revenue submits that no source of cash deposit was explained either before AO or before Ld. CIT(A). The assessee has filed cash flow statement as cash in hand for the first time before Tribunal. The document filed by assessee was not filed before lower authorities. Lower authorities clearly held that no source of cash deposit was explained.
Aman Rajendrakumar Jain 7. At the time of hearing, I enquired about the source of income of the assessee. The Ld. AR of the assessee submits that the assessee is a salaried person. Further, no cash was shown in the return of earlier assessment year. At the time of hearing the Ld. AR of the assessee was asked to certify the list of documents whether such document was filed before lower authorities or not. The Ld. AR after going through the details submits that he will take the instruction and only after taking the instruction from the assessee or instructing CA would be able to sign such certificate and the paper book was handed over to the bench clerk.
I have considered the rival submission of both the parties and I have gone through the orders of lower authorities carefully. I have also deliberated on the decision of Mumbai Bench relied by Ld. AR of the assessee in Shail Jay Shah V ITO (Supra). I find that lower authorities have made addition by taking view that no source of cash deposit was explained. Before me, the ld AR of the assessee vehemently relied on the statement of bank and cash flow statement about cash in hand. The assessee while filing such documents has not given certificate (verified), if such documents were filed before lower authorities or not. On perusal such bank statement, I find that there is withdrawal of cash of Rs. 500, 2500, 10,000 or 20,000 on various occasions. Majority of such withdrawal are from ATM. The assessee is a salaried employee, no justification is given about having such cash in hand by the person who has offered taxable income of Rs. 4,35,970/-. Still I find that the lower authorities have not given the benefits Central Board of Direct Taxes (C.B.D.T.) Circular No. 3/2017, wherein it was directed to allow benefits of Rs. 2.50 Lakhs to the individual Aman Rajendrakumar Jain assessee, wherein cash was deposited in the form of currency notes of 500 or 1000 during demonetization. Therefore, the assessee is allowed such benefit of Rs. 2.50 Lakhs and remaining of cash deposit of Rs. 2,69,000/- is upheld.
So far as taxing the addition under section 115BBE at enhanced rate of tax @ 60% under Section 115BBE of the Act, is concerned, we find that that Division Bench of Surat Tribunal in case of Samir Shantilal Mehta Vs ACIT (Surat Trib), ArjunsinhHarisinh Thakor Vs ITO in and in Jitendra Nemichand Gupta Vs ITO ITA No. 211/Srt/2021 and Indore Bench in DCIT Vs Punjab Retail Pvt. Ltd 677/Ind/2019 (Indore Trib) and Jabalpur Bench in ACIT Vs Sandesh Kumar Jain in ITA No. 41/Jab/2020 held that applicability of amended provision of section 115BBE is not retrospective. Thus, the Assessing Officer is directed to tax the remaining addition at normal rate of tax and applicable surcharges if any. Thus, the assessee is allowed relief against taxing the addition at higher rate under section 115BBE. In the result, the ground of appeal
raised by the assessee is partly allowed.
10. In the result, the appeal of the assessee is partly allowed. Order pronounced in open court on 23.04.2025.