RAMASAMY DINESH,GOBICHETTIPALAYAM vs. ITO, WARD-2(1),, ERODE

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ITA 2008/CHNY/2025Status: DisposedITAT Chennai15 October 2025AY 2017-186 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had discharged the onus to explain the source of cash deposits by furnishing sale bills and disclosing the capital gain in the return of income. The AO had not properly considered the evidence. The Addl. CIT(A) had not doubted the sales bills but confirmed the addition solely on the ground that the cash was deposited after a gap of three months and during the demonetization period. The Tribunal found no bar or restriction in law against keeping cash at home for three months. Therefore, the Addl. CIT(A) was not justified in confirming the addition. The Tribunal reversed the order of the Addl. CIT(A) and directed the AO to delete the addition of Rs. 13,10,000/-. The issue regarding the rate of tax under Section 115BBE was not expressly decided as the addition itself was deleted.

What were the facts?

The assessee, Ramasamy Dinesh, filed an appeal before the Income Tax Appellate Tribunal (ITAT) against the order of the Additional Commissioner of Income Tax (Appeals) [Addl. CIT(A)] for Assessment Year 2017-18. The appeal arose from an assessment framed by the Assessing Officer (AO) under Section 143(3) of the Income-tax Act, 1961. The AO had made an addition of Rs. 13,10,000/- as unexplained money under Section 69A of the Act. The assessee had declared a total income of Rs. 9,22,470/-, including LTCG on jewellery sale. The case was selected for scrutiny due to cash deposits during demonetization. The assessee explained the source as sale of jewellery, providing sale bills. The AO did not accept this, and the Addl. CIT(A) confirmed the addition, despite acknowledging receipt of Rs. 12,46,640/- from jewellery sale, citing the retention of cash for three months and subsequent deposit during demonetization.

What were the issues?

1. Whether the addition of Rs. 13,10,000/- as unexplained money under Section 69A of the Income-tax Act, 1961, is justified, considering the assessee provided sale bills for jewellery and disclosed the capital gain in the return of income? (Question of law and fact) 2. Whether the Addl. CIT(A) erred in dismissing the appeal without properly considering the assessee's submissions and violating principles of natural justice? (Question of law) Assessee's Contentions: - The source of cash deposits was the sale of old jewellery, and sale bills were submitted to the AO. The capital gain was included in the return. - Cash received was kept at home and deposited after demonetization was announced. - There is no legal restriction against retaining cash for a few months. - The addition made by the lower authorities should be deleted. Revenue's Contentions: - The sale bills submitted do not show payment from the jeweller to the assessee, nor is there proof of cash payment. - The prevailing market practice for old gold jewellery purchase is exchange for new gold, as indicated by negative prices on the bills. - The assessee failed to conclusively prove the receipt of cash on sale of old gold. - Without prejudice, the addition to the extent of Rs. 63,360/- needs to be sustained as the explanation was only for Rs. 12,46,640/-.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 69A,Section 115BBE

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI JAGADISH

For Respondent: Ms. R. Anitha, Addl. CIT
Hearing: 09.10.2025

आदेश / O R D E R

PER JAGADISH, A.M : Aforesaid appeal filed by the assessee for Assessment Year (AY) 2017-18 arises out of the order of Learned Commissioner of Income Tax, Appeal, Addl/JCIT(A), Panchkula [hereinafter “Addl. CIT(A)”] dated 09.07.2025 in the matter of assessment framed by the Assessing Officer [AO] u/s. 143(3) of the Income-tax Act,1961 (hereinafter “the Act”) on 27.12.2019.

2.

The grounds of appeal raised by the assessee are as under:

“1. The grounds of appeal raised by the assessee are as under:

1.

1. 1. The order of the CIT(A) is erroneous and bad in law as the same is opposed to the facts of the case and provisions of law.

2. The CIT(A) erred in dismissing the appeal without properly considering the submissions filed by the Appellant in violation of the principles of natural justice.

3. The AO erred in making the addition of Rs.13,10,000/- as unexplained money u/s.69A of the Act and the CIT(A) erred in failing to delete the same.

4. The Appellant having submitted the source for the cash deposits before the AO and the CIT(A), the CIT(A) ought to have deleted the addition of Rs. 13,10,000/-when the source was not disproved.

5. The addition having been made merely for the reason that cash was kept in hand for 3 months, the CIT(A) went wrong in falling to delete the same. 6 Alternatively, the AO having taxed the addition @60% u/s. 115BBE of the Act instead of 30%, the CIT(A) ought to have taxed the addition at the appropriate rate for A.Y.2017-18.”

3.

The assessee has filed his return of income on 18.10.2017, declaring a total income of Rs. 9,22,470/-, including Long Term Capital Gain (LTCG) of Rs. 25,270/- on the sale of jewellery. The case was selected for limited scrutiny for the reason that the assessee had made cash deposits in his bank account during the demonetization period.

During the course of assessment proceedings, the assessee explained the source of such cash deposits as sale of jewellery and furnished copies of the sale bills in support of his claim. However, the A.O did not accept the explanation, holding that the assessee failed to conclusively furnish material evidence regarding the sale of jewellery.

Aggrieved, the assessee preferred an appeal before the Ld. Addl.

CIT(A). The Ld. Addl. CIT(A) accepted that the assessee had received Rs.12,46,640/- in cash from the sale of jewellery on 07.08.2016, 08.08.2016, and 10.08.2016. However, he confirmed the addition on the ground that the assessee failed to justify why such a substantial amount of cash was retained outside the banking system for an extended period and deposited only after three months, during the demonetization period.

4.

The Ld. Authorized Representative (A.R.) for the assessee submitted that the assessee had explained source of cash deposit sale of old jewellary and had uploaded copies of the sale bills of jewellary before the A.O. The Ld. AR submitted that the capital gain arising from the sale was duly included in the return of income. It was further submitted that the cash received on sale was kept at home and deposited in bank after demonetization was announced. The Ld. AR argued that there was no restriction in law against retaining cash for a few months. Therefore, the Ld. A.R. pleaded that the addition made by the lower authorities be deleted.

5.

The Ld. Departmental Representative (D.R.), on the other hand, supported the order of the Ld. Addl. CIT(A) and submitted written submission as under:

“In the case of appellant for a cash deposit of Rs. 13,10,000/- made during demonization period assessee explained the sources to be out of cash received on sale of old gold jewellery for an amount of Rs. 12,46,640/-. Assessee also furnished the copy of sale bills for the sale made to Sree Kumaran Thanga Maligai, Erode. 2. in this regard it is submitted that a perusal of the sale bills submitted does not show any payment being made by the jeweller to the assessee and even if paid there is no proof that the payment was made in cash. It is to be noted that the prevailing market practice in respect of purchase of old gold jewellery is always vide exchange in lieu of purchase of new gold, the same is also evident from the bills submitted by the appellant wherein the price is indicated in negative.

3. Hence, it is submitted that appellant has failed to conclusively prove the receipt of cash on sale of old gold. Without prejudice since, explanation on cash deposits is offered only to an extent of Rs. 12,46,640/- the addition to an extent of Rs.63,360/-needs to be sustained.”

6.

We have heard the rival submissions and perused the materials available on record. The assessee has filed his return of income showing LTCG of Rs. 25,270/- on the sale of jewellery. During the assessment proceedings, the assessee has explained the source of cash deposits as sale of old jewellary and also furnished copies of sale bills. However, the A.O., without properly considering the evidence furnished, held that the assessee failed to conclusively prove the sale transaction. The Ld. Addl. CIT(A) has not doubted the sales bill, but confirmed the addition solely for the reason that the cash was deposited after a gap of three months of sale and during the demonetization period. In our view, there is no bar/restriction in law against keeping cash at home for three months , and the assessee’s has discharged the onus to explain the source of cash by furnishing the sale bills and also disclosing the same in return of income. The Ld Addl. CIT(A) was, therefore not justified to confirm the addition. We, accordingly, reverse the order of Ld. Addl. CIT(A) and direct the A.O to delete the addition.

7.

In the result, the appeal filed by the assessee is allowed.

Order pronounced on 15th day of October, 2025 at Chennai.

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