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Facts
The assessee, an individual, deposited Rs. 16,00,000/- in cash into their HDFC bank account during the demonetization period on 12.11.2016. The assessee claimed the cash was from earlier withdrawals for construction purposes.
Held
The Tribunal held that the assessee had provided a prudent explanation for the source of the cash deposit, tracing it to earlier withdrawals from EPF and a housing loan. Therefore, the addition made by the AO was deleted.
Key Issues
Whether the cash deposits made during the demonetization period were genuinely explained as per Section 69A of the Income Tax Act, 1961.
Sections Cited
69A, 115BBE, 143(3), 234B, 142(1)
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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K & SHRI S.R. RAGHUNATHA
आदेश /O R D E R
PER S. R. RAGHUNATHA, AM:
1. This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, [herein after “ld. CIT(A)] dated 14.06.2024 and pertains to assessment year 2017-18.
2. The assessee has raised the following grounds of appeal:
:-2-: ITA. No:1995 /Chny/2025
“For that the order of the Commissioner of Income Tax (Appeals) is contrary to law, facts and circumstances of the case to the extent prejudicial to the interests of the appellant and is opposed to the principles of natural justice, equity and fair play.
For that the Commissioner of Income Tax (Appeals) failed to appreciate that the order of the Assessing Officer is without jurisdiction.
For that the Commissioner of Income Tax (Appeals) erred in upholding the addition of cash deposits to the tune of Rs.16,00,000/- into the bank account of the appellant as unexplained money u/s.69A in the hands of the appellant. 4. For that the Commissioner of Income Tax (Appeals) failed to appreciate that the addition u/s.69A is not warranted in the facts and circumstances of the case. 5. For that all cash credits in the bank account of the appellant cannot be considered as income in the hands of the appellant. 6. For that the appellant has proper source for the cash deposits made in the bank account of the appellant. 7. For that the Commissioner of Income Tax (Appeals) failed to appreciate the explanation and documents furnished the appellant. 8. For that the provisions of section 115BBE are not invocable in the facts and circumstances of the case. 9. For that the addition cannot be taxed at the rate specified u/s.115BBE of the Income Tax Act, 1961. 10. For that the appellant objects to the levy of interest u/s.234B of the Income Tax Act, 1961.”
3. In brief, the solitary issue before us raised by the assessee is the ld.CIT(A) has erred in confirming the addition of Rs.16,00,000/- u/s.69A r.w.s. 115BBE of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).
The brief facts of the case are that the assessee is an individual. For the year under consideration, the assessee filed his return of income on 10.10.2017 declaring a total income of Rs.13,62,220/-. The case was selected for scrutiny.
The assessee deposited cash of Rs.16,00,000/- into the HDFC bank account, Nungambakkam branch during the demonetization period on 12.11.2016. In :-3-: ITA. No:1995 /Chny/2025 this regard it was submitted that the cash deposits were out of cash withdrawal made earlier. The source of the cash withdrawals was also clearly established.
Withdrawals from employees PF Rs,4,80,000/- credited to the bank account on 26.08.2016 against which the assessee had withdrawan cash of Rs.1,80,000/- and Rs.2,00,000/-. Rs.12,00,000/- housing loan taken from HDFC Ltd to the bank account on 27.10.2016 against which the assessee had withdrawn cash of Rs.8,00,000/- and Rs.4,00,000/- respectively. Thereafter, the AO completed the assessment u/s.143(3) of the Income Tax Act,1961 on 16.12.2019 by assessing the total income of the assessee at Rs.29,62,220/- by making the following additions of cash deposit during the demonetization period u/s.69A of the Act by holding as under:
“The assessee in his reply stated that the money was kept with him for construction purpose and the builder had insisted the assessee for payment in cash before demonetization period and after the demonetization period he has deposited the same in the bank on 12.11.2016 at HDFC bank, Nungambakkam branch. He has also stated that the money was withdrawn from EPF on 29.08.2016 and 03.09.2016 of Rs.1,80,000/- and 2,00,000/- respectively and the balance amount of Rs.8,00,000/- and Rs.4,00,000/- were the loan amount from HDFC bank, Nungambakkam branch. As the proof is not an sustainable evidence for same money the provisions of 69A of the IT Act is invoked and the amount of Rs.16,00,000/- and it is added to the total income of the assessee. All the submissions has been carefully examined and verified and placed on records. After considering all the submissions of documents and records submitted by the assessee, the assessment is completed as follows:” -
Aggrieved by the assessment order of the AO, the assessee preferred an appeal before the ld. CIT(A). On perusal of the documents and details furnished by the assessee, the ld. CIT(A) confirmed the additions made by the AO by holding as under: -
“5. Having considered the appellant’s submission and the facts of the case, I hold the following: -
:-4-: ITA. No:1995 /Chny/2025
It is found from the record that the appellant had deposited an amount of Rs.16,00,000/- during the demonetization period on 12.11.2016 (09.11.2016 to 30.12.2016). The appellant stated in his submissions that the money was kept with him for construction purposes and the builder had insisted on payment in cash before the demonetization period and after the demonetization he has deposited the same in the bank on 12.11.2016 at the HDFC bank, Nungambakkam branch. He has also stated that the money was withdrawn from his EPF on 29.08.2016 and 03.09.2016 of Rs.1,80,000/- and Rs.2,00,000/- respectively and the balance amount of Rs.8,00,000/- and Rs.4,00,000/- was the loan amount from HDFC bank. As the proof submitted by the appellant is not sustainable evidence for the above cash deposit, the provisions of 69A of the I. T Act are invoked correctly by the AO. Since the appellant has failed to give any satisfactory explanation about the nature and source of such cash deposited in the HDFC bank. The action of the A.O is justified. Therefore, I have no reason to interfere with the addition of Rs.16,00,000/- as unexplained money under Section 69A of the Income Tax Act, 1961, made by the A.O.”
Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us.
Before us, the ld. AR for the assessee submitted that the ld. CIT(A) has erred in confirming the impugned additions in spite of explaining the source of cash deposit was out of cash withdrawals made earlier. The ld. AR has filed a copy of the HDFC bank Statement, Nungambakkam branch. Further, the ld.AR of the assessee submitted that the assessee had deposited cash amounting to Rs.16,00,000/- on 12.11.2016 which is after demonetization. The source of the cash withdrawals was duly established, being withdrawals from employees’ EPF amounting to Rs.4,80,000/-, which was credited to the assesses bank account on 26.08.2016. Against the said credit, the assessee withdrew cash of Rs.1,80,000/- on 29.08.2016 and Rs. 2,00,000/- on 03.09.2016 and further submitted that an amount of Rs.12,00,000/- towards housing loan taken from HDFC Ltd was credited to the bank account on 27.10.2016 against which the :-5-: ITA. No:1995 /Chny/2025 assessee had withdrawn cash of Rs.8,00,000/- on 26.10.2016 and Rs.4,00,000/- on 31.10.2016 respectively. Subsequent to demonetization, the assessee deposited a sum of Rs.16,00,000/- into his HDFC Bank account on 12.11.2016. The source of the said deposit was duly explained as comprising of cash withdrawals, as elaborated hereinabove, amounting to Rs.15,80,000/- together with PIN money cash savings from earlier years of Rs.20,000/- aggregating in all to Rs.16,00,000/-. Further, the assessee stated that the money was kept with him for construction purposes and the builder had insisted on payment in cash before the demonetization period and after the demonetization he had deposited the same in the bank on 12.11.2016 at the HDFC bank, Nungambakkam branch and hence, prayed for deleting the addition which is confirmed by the ld. CIT(A).
Per contra, the ld. DR for the revenue supported the orders of the authorities below and pleaded for the dismissal of the appeal of the assessee.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below along with copy of the HDFC bank statement, Nungambakkam branch. The fact with regard to the impugned dispute is that the assessee has deposited a sum of Rs. 16,00,000/- on 12.11.2016 in cash during demonetization period to the HDFC bank Account, Nungambakkam branch. The case was selected for scrutiny to verify the source for cash deposited and the AO called for certain details. The assessee deposited cash of Rs.16,00,000/-, after announcement of demonetization by Government of India on 08.11.2016. The assessee deposited cash into the :-6-: ITA. No:1995 /Chny/2025 bank account, the source of which was duly explained as arising from the cash withdrawals made prior to the demonetization period. In response to the notice issued u/s. 142(1) of the Act, the assessee furnished documentary evidence, including proof of EPF withdrawal, the loan sanction letter from HDFC Ltd., and the bank statement of HDFC Bank, Nungambakkam Branch, substantiating the deposits made into the bank account and the subsequent cash withdrawals therefrom.
On perusal of the records and facts and circumstances of the case, we observe from the bank statement of HDFC bank, Nungambakkam branch that a sum of Rs.4,80,000/- representing employees’ EPF was credited to the assessee’s bank account on 26.08.2016. Against this credit, the assessee made cash withdrawals of Rs.1,80,000/- on 29.08.2016 and Rs.2,00,000/- on 03.09.2016. Further, we observe that an amount of Rs.12,00,000/- was credited to the said bank account on 27.10.2016 towards a housing loan sanctioned by HDFC Ltd. Out of this, the assessee withdrew cash of Rs.8,00,000/- on 26.10.2016 and Rs. 4,00,000/- on 31.10.2016. Thus, the total cash withdrawals made by the assessee from the aforesaid transactions aggregate to Rs.15,80,000/-, comprising withdrawals related to both the EPF credit and the housing loan credit along with his PIN money savings of Rs.20,000/-, in all totaling to Rs.16,00,000/- was deposited in HDFC bank, Nungambakkam branch on 12.011.2016. We observe that the assessee has a prudent explanation for the source for cash deposit in bank account. We are thus of the considered view that the assessee has genuinely explained the source of cash deposit amounting to Rs.16,00,000/- on 12.11.2016 into the HDFC bank account,
:-7-: ITA. No:1995 /Chny/2025 Nungambakkam branch and therefore are inclined to set aside the order of the ld. CIT(A) and direct the AO to delete the additions u/s.69A of the Act.
In the result, appeals filed by the assessee is allowed.
Order pronounced in the court on 23rd October, 2025 at Chennai.