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Facts
The assessee, a 72-year-old senior citizen, deposited Rs. 13,54,000/- in Specified Bank Notes (SBNs) during the demonetization period for AY 2017-18, claiming the source was from past savings, rental income, and debtor collections. The Assessing Officer rejected the explanation and made an addition of Rs. 11,04,000/- under Section 69A, which was subsequently upheld by the First Appellate Authority.
Held
The Tribunal condoned the delay in filing the appeal due to the assessee's age and health issues. It considered CBDT Instruction No. 3/2017, which allows for no further verification for senior citizens' cash deposits up to Rs. 5,00,000/- without business income. The Tribunal also noted the assessee's regular income history and cited relevant case laws to find the addition under Section 69A unwarranted.
Key Issues
1. Whether the delay in filing the appeal should be condoned. 2. Whether the addition of unexplained cash deposits under Section 69A was justified for a senior citizen during demonetization, in light of CBDT instructions and case law.
Sections Cited
250, 143(2), 143(3), 69A
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Income Tax Appellate Tribunal, ‘B’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R This appeal filed at the instance of the assessee is directed against the order of Addl/JCIT(A), Panaji dated 10.06.2024 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
2 -: 2. There is a delay of 76 days in filing the appeal. The assessee has filed petition for condonation of delay along with affidavit stating therein the reasons for belated filing of this appeal. The reasons stated in the condonation petition for belated filing reads as follows: “It is humbly prayed that I am senior citizen, aged 66 years. Due to my age, I have been experiencing certain health-related issues that required continuous medical attention. This situation hindered my ability to complete and file the appeal within the stipulated time. I was under medical supervision and had limited mobility during this period, making it challenging to coordinate and prepare the necessary documentation for the appeal. It is humbly prayed that I was unable to file the appeal within the prescribed timeline as provided in the Income Tax Act, 1961, which has caused delay of 98 days in filing of the appeal. The delay was inadvertent and was not intentional.”
The assessee has also produced medical certificate in support of his contention. On perusal of the same, I find there is sufficient reason for delay in filing this appeal before the Tribunal. Hence, I condone the delay in filing the appeal and proceed to dispose off the appeal on merits.
Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2017-18, the return of income was filed declaring total income of Rs.5,64,820/-. The assessment was selected for scrutiny and notice u/s.143(2) of the Act was issued on 09.08.2018. During the course of 3 -: assessment proceedings, the assessee was directed to explain the source of cash deposits made during the demonetization period amounting to Rs.13,54,000/- in Specified Bank Notes (SBNs). The assessee submitted that deposits were made from cash in hand and collections from debtors. The assessee had filed cash flow statement to support his claim. The cash flow statement showed opening balance of Rs.12,24,672/- as on 01.04.2016 and also showed receipts of Rs.121,672/- from debtors on various dates from 15.06.2016 to 19.08.2016. On being asked about the huge cash in hand from 01.04.2016 to 08.11.2016, the assessee submitted that he received interests, income from house property only by way of cash and they are retained for giving sundry loan and for Thirumala Tirupathi reservation. The explanation and submissions of the assessee was rejected by the AO and he passed the assessment order making addition of Rs.11,04,000/- to the total income as unexplained money u/s.69A of the Act (assessment order dated 20.12.2019 passed u/s.143(3) of the Act). The AO gave a credit of Rs.2,50,000/- for the rental income received in cash.
Aggrieved by the assessment completed, the assessee filed an appeal before the First Appellate Authority (FAA). The FAA 4 -: confirmed the order of the AO. The relevant finding of the FAA reads as follows:- “The AO vide 7 to 10 of the assessment order has very categorically and logically explained the reasons for not accepting the contention of the appellant. The onus to Prove the nature of source of cash deposits in the appellant’s bank account squarely lies on the appellant and appellant utterly failed to proving the genuineness of cash in hand as on 01.04.2016 and as on 08.11.2016. Further appellant also failed to adduce any evidence as regards booking done for Tirupathi Tirumala. Therefore assessment order passed by the AO does not require any intervention.”
Aggrieved by the order of the FAA, the assessee has filed the present appeal before the Tribunal. The assessee has filed a paper-book enclosing therein the details filed during the course of assessment proceedings, appellate proceedings, the case laws relied on, etc. The assessee has also filed written submission reiterating the submissions made before the FAA.
The Ld.DR supported the orders of the AO and the FAA.
I have heard rival submissions and perused the material on record. The assessee is senior citizen aged 72 years, and resides at Hosur. During demonetization, he has deposited Specified bank notes (SBN) into his bank account amounting to Rs. 13,54,000/-. The AO rejected the explanation of assessee that amount is his personal savings and reflected in books as cash in 5 -: hand. Thereby the AO made addition of Rs.11,04,000/- (Rs. 13,54,000/- less Rs. 2,50,000/- towards rental income). The above reduction is not deduction as per Notification No.3/2017 dated 21/02/2017 (which is 2,50,000/- general persons and 5,00,000/- for senior citizen). As per this notification the assessee is entitled for Rs. 5,00,000/- deduction. The Delhi Bench of the Tribunal in the case of Amar Singh Vs ACIT in (order dated 20.09.2022) has extracted the above notification at para 11 of the order. The relevant para 12 reads as follows:- “12. Having considered rival submissions and perused the material on record, it is observed, CBDT vide Instruction No. 3/2017 dated 21.2.2017 has issued standard operating procedure to be followed by the assessing officer in verification of cash transaction relating to demonetization. In the Annexure to the said instruction, the following guideline has been issued, qua, cash deposit made by an individual having no business income: “1. Cash out of earlier income or savings 1.1 In case of an individual (other than minors) not having any business, no further verification is required to be made if total cash deposit is up to Rs.2.5 lakh. In case of taxpayers above 70 years of age, the limit is Rs.5.0 lakh per person. The source of such amount can be either household savings/savings from past income or amounts claimed to have been received from any of the sources mentioned in paras 2 to 6 below. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. The basis for verification can be income earned during past years and its source, filing of ROI and income shown therein, cash withdrawals made from accounts etc.””
6 -: 9. The assessee is regular in filing his income and during present year he has filed his return of income admitting income of Rs. 5,64,000/- and hence the AO allowing only Rs. 2,50,000/- is not justified. Hence, even if considered only return of income and notification amount total sum amounts to Rs. 10,40,000/- which is almost near to amount deposited. Further, average income in all previous years of 7 years is around 5 lakhs. Hence, the potential for accumulation by senior citizen for emergency needs is more than 13 lakhs. The Mumbai Bench of ITAT in the case of Hemlatha Kamalakar Deo Vs ITO reported in [2025] 173 taxman.com 96 (Mumbi-Trib)- ITAT SMC – held at Para 7, as “Even if we calculate by taking into consideration the amount well below the minimum exemption limit for the past seven years, then also it would justify the claim of assessee” [i.e., 2.5 lakhs 7 = 17.5 lakh]
The reasoning that assessee is not supposed to receive amount the SBN after demonetization announced is misconceived. The Chennai Bench of the Tribunal in case of Umamahesswari Vs ITO at para 6 has held that “appointed date is 31/12/2016, and by relying on Sri. Tatiparti Satyanarayaa in held there is no prohibition under Act to deal with specified Bank Notes upto 31/12/2016.”
7 -: 11. The AO has also disbelieved the source of cash deposits for the reason that assessee has not deposited entire cash available with him at one go. The AO in his reply dated 16.12.2019 had explained about reason of selecting 2.5 lakh in each trench is fear of losing the amount in crowd. The reasoning of AO is not valid in eyes of law. The Raipur Bench of ITAT in the case of Inderpal Singh Chawla Vs ITO reported in [2024] 168 taxmann.com 572.Bom (Raipur-Trib) at para 17 to 20 address all the reasons raised by AO. The relevant finding of the Tribunal reads as follows:- “ 17. Apropos the observation of the A.O that if the assessee had cash in hand available with him, then why did he not deposit the entire amount of cash of Rs.62 lacs (supra) in SBNs in a single go in his bank account, but had spread over the same in tranches, we are unable to concur with the drawing of the adverse inferences by the A.O on the said count. Admittedly, it is a matter of fact borne from record that the assessee had made cash deposits in SBNs of Rs.62 lacs in his bank accounts, during the demonetization period, viz. (i) Savings bank A/c. No.02981000008865 : Rs.3,00,000/-; (ii) Savings Bank account No.02981100004062 : Rs.36,00,000/-; and (iii) Current Bank account No.11571100000074 : Rs.23,00,000/-. Although the observation of the A.O that in case the assessee was having substantial amount of demonetized currency/cash available with him then he ought to have deposited the entire amount in a single go during the demonetization period at the first blush appeared to be convincing but are afraid that the same is far from ground reality. At the threshold, we are of the view that spread over of the cash deposits in SBNs by the assessee during the demonetization period in tranches is supported by the fact that the amounts had been deposited by him in his three bank accounts. Apart from that, we are of the view that as carrying substantial amount of cash during the demonetisation period was vulnerable to the risk of theft, snatching etc, therefore, the said reason could have also weighed in the mind of the assessee for spreading over the
Be that as it may, we are of the view that as long as the assessee has a plausible explanation as regards the source of the subject cash deposits, there can be no justification for the A.O to have drawn adverse inferences for the reason that the subject deposits were made in tranches over a period of time and not in a single go.
Apropos the observation of the A.O that as to why the assessee had not deposited the entire amount of cash that was withdrawn by him in the month of September, 2016 from his bank account i.e. 19.09.2016 to 30.09.2016, and had kept the same with himself, we are of the view that there could be multiple reasons for the same. As observed by us hereinabove, it is neither discernible from the record nor claimed by the Ld. DR before us that the cash withdrawals made by the assessee from his bank account were thereafter, utilized/invested by him or not available with him to source the cash deposits in SBNs during the year under consideration. No material has been placed before us to dislodge the availability of cash in hand in SBNs of Rs.62 lacs (supra) with the assessee, out of the cash withdrawals of Rs.78.80 lacs (supra) made from his bank account during the pre-demonetisation period. We, thus, are unable to concur with the adverse inferences drawn by the A.O as regards the explanation of the assessee about the source of the cash deposits made in his bank account in SBNs, inter alia, for the reason that he had not earlier deposited the amount of cash withdrawals made by him in the month of September, 2016 in his bank account.
We shall now deal with the observation of the A.O that now when it was claimed by the assessee that the cash withdrawals of Rs.98.80 lacs (supra) were made for business purposes then why the cash deposits in SBNs of Rs.62 lacs (supra) were made by him in his savings bank account and not in his current account, i.e. CA No.11571100000074 with Punjab and Sind Bank, Raipur. We are unable to comprehend the aforesaid observation of the A.O. As the government after announcing the demonetization had provided a window to the citizens for depositing the demonetized currency in their bank accounts within a specified time frame i.e. 09.11.2016 to 31.12.2016, therefore, the assessee at the relevant point of time would have been driven by need of depositing the said demonetized currency/SBNs in his bank accounts. Apart from that, we are unable to fathom as to how the A.O could have regulated the manner in which the 9 -: cash deposits in SBNs were to be made by the assessee in his bank accounts. As the aforesaid observation of the A.O is devoid and bereft of any substance, therefore, we are unable to persuade ourselves to subscribe to the same.”
The assessee being a senior citizen and on material record, I am of the view that addition of Rs.11,04,000/- u/s.69A of the Act is not warranted on the facts of the instance case. It is ordered accordingly.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 1st July, 2025 at Chennai.