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Facts
The assessee, a goldsmith, declared an income of Rs.4,93,800/- and deposited Rs.30,18,000/- in cash during the demonetization period. The assessee claimed the deposits were from business receipts, partly from customers and partly from self-deposits. The Assessing Officer added Rs.19,38,000/- after accepting Rs.5,00,000/- as savings from earlier years.
Held
The Tribunal held that the assessee failed to substantiate the cash deposits with credible documentary evidence, as confirmations were on plain paper without supporting documents. Given the unverifiable source of funds and the nature of the business, the Tribunal estimated 20% of the total cash deposits as additional income.
Key Issues
Whether the unexplained cash deposits during demonetization can be treated as income when the assessee fails to provide substantiating evidence and if an estimation is permissible in such circumstances.
Sections Cited
143(3)
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Income Tax Appellate Tribunal, ‘B’ BENCH: CHENNAI
Before: SHRI SS VISWANETHRA RAVI & SHRI JAGADISH
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 (NFAC), Delhi [hereinafter “CIT(A)”] dated 17.03.2025 in the matter of assessment framed by Ld. Assessing Officer [AO] u/s. 143(3) of the Income-tax Act, 1961 (hereinafter “the Act”) dated 09.12.2019.
Narayana Shet Sadananda :- 2 -:
The assessee is a goldsmith and had filed his return of income declaring a total income of Rs.4,93,800/-. The assessee has deposited cash of Rs. 30,18,000/- in his bank account during the demonetization period. The assessee explained that cash of Rs.18,38,000/- has been deposited in Karnatka by the customers and submitted confirmation letters from four customers claiming to have deposited Rs.5,00,000/-, Rs.4,88,000/-, Rs. 4,50,000/- and Rs. 5,00,000/-. The remaining cash of Rs. 10,80,000/- was stated to have been deposited by the assessee himself from his business receipts. The A.O, not being satisfied with the assessee’s explanation that the customers had deposited the demonetized currency on his behalf, made an addition of Rs.19,38,000/-. Out of the self-deposited cash of Rs.10,80,000/-, the A.O accepted Rs.5,00,000/- as savings from earlier years' business income and added the balance of Rs. 5,80,000/-. Aggrieved by these additions, the assessee filed an appeal before the Ld. CIT(A), who upheld the additions made by the A.O.
The Ld. Authorized Representative (A.R) of the assessee reiterated that the assessee was engaged in the business of goldsmith and that the cash deposits were from sale proceeds. The Ld. A.R Narayana Shet Sadananda :- 3 -:
submitted that confirmations had been furnished by four customers in support of the cash deposits totaling Rs. 19,38,000/-.
On the other hand, the Ld. Departmental Representative (D.R) relied on the orders of the lower authorities and submitted that the assessee did not maintain regular books of accounts and that the confirmations were on plain paper, without any supporting documentary evidence such as PAN numbers, bills, or other verifiable documentation.
We have heard the rival submissions and perused the materials available on record. It is an undisputed fact that the assessee has deposited cash amounting to Rs.30,18,000/- during the demonetization period, which is significantly higher than the income declared. Though the assessee explained the deposits as business receipts, he failed to substantiate his claim with credible documentary evidence. The confirmations submitted were on plain paper and lacked supporting documents such as bills, PAN numbers, or any other corroborative evidence. Moreover, the assessee does not maintain regular books of accounts. In such circumstances, where the source of funds remains largely unverifiable, a reasonable estimate needs to be made. Considering the nature of the assessee’s business and the Narayana Shet Sadananda :- 4 -: overall facts and circumstances of the case, we are of the view that it would be fair and reasonable to estimate 20% of the total cash deposits of Rs.30,18,000/- as the assessee’s additional income. Accordingly, we sustain the addition to the extent of Rs. 6,03,600/-, and delete the balance addition.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced on 30th day of July, 2025 at Chennai.