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Facts
The assessee, engaged in agriculture and commission income, declared Rs. 3,32,480/- as total income for AY 2017-18. The Assessing Officer (AO) made an addition of Rs. 2,37,000/- on account of unexplained cash deposit during demonetization, which was confirmed by the CIT(A).
Held
The Tribunal held that the AO erred in treating the cash deposit of Rs. 2,37,000/- as unexplained investment under Section 69A of the Act. The assessee had consistently declared agricultural income, and the deposit was considered to be from past savings and current income.
Key Issues
Whether the cash deposit made during the demonetization period can be treated as unexplained investment under Section 69A of the Act without proper appreciation of the assessee's explanation and past income.
Sections Cited
69A, 143(3), 115BBE
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: SHRI MANU KUMAR GIRI & SHRI S. R. RAGHUNATHA
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal by the assessee is filed against the order of the Commissioner of Income Tax, Appeal, ADDL/JCIT (A)-2, Ahmedabad, for the assessment year 2017-18, vide order dated 30.11.2024.
The assessee has raised the following grounds of appeal:-
1. That the order of the Learned Commissioner of Income Tax (Appeals) in so far it is prejudicial to the interests of the Appellant is bad and erroneous in law and against the facts and circumstances of the case.
2. The Appellant denies being assessed on a total income of Rs.5,69,480/- as determined by Learned Assessing Officer and confirmed by Learned :-2-: ITA. No.:190 /Chny/2025 Commissioner of Income tax (Appeals) as against the correct return of income of Rs.3,32,480/- on the facts and circumstances of the case.
3. That the learned Commissioner of Income tax (Appeals) erred in law and facts in adding a sum of Rs.2,37,000/- as unexplained investment u/s 69A of the Act despite placing necessary information and documents on record to prove the sources of above deposits.
4. That the Learned lower Authorities grossly failed to appreciate the fact that the provisions of Section 69A of the Act are not applicable to the facts of the present case.
5. The learned lower Authorities erred in law and on facts in levying tax u/s l 15BBE of the Act for the transaction made before 15.12.2016. Each of the above grounds is without prejudice to one another and the appellant craves leave of the Hon’ble Income Tax Appellate Tribunal, Chennai to add, delete, amend or otherwise modify one or more of the above grounds either before or at the time of hearing of this appeal.
The assessee is an individual engaged in agriculture, sale of agriculture produces and earning commission income. The assessee filed its return of income for the A.Y. 2017-18 on 05.08.2017 declaring a total income of Rs.3,32,480/-. The case was selected for scrutiny under CASS for the reason “Large cash payments in bank account during the year”. Later, the statutory notices were issued to the assessee calling for details for completing the assessment. During the course of assessment proceedings, the assessee furnished the details of cash deposit and stated that he is earning commission from stamp vendor business and has made payment of Rs.2,94,55,000/- to the Sub-treasury office, Denkanikotta for purchase of stamp papers. The A.O. noticed that the assessee has deposited cash of Rs.4,87,000/- in SBNs on 12.11.2016 of Rs.2,50,000/- and on 21.11.2016 of Rs.2,37,000/-. In response to the show cause notice issued by the A.O., the assessee stated that source of cash deposits during the demonization period as “income from agriculture” and “income from house property” for the A.Y. 2015-16, 2016-17 and 2017-18.
:-3-: ITA. No.:190 /Chny/2025 4. Further, the assessee stated that during the A.Y 2015-16 to 2017-18, he has earned a total income of Rs.5,20,000/- as “income from agriculture” and Rs.1,32,405/- as “income from house property”, apart from the commission income. However, the AO was not convinced with the explanation furnished by the assessee and considered the cash deposit of SBNs of Rs.2,50,000/- which was made on 12.11.2016 as explained as available as on 09.11.2016 and the balance cash deposit of Rs.2,37,000/- made on 21.11.2016 as unexplained money u/s.69A of the Act by passing an order u/s.143(3) of the Act on 23.12.2019. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), ADDL/JCIT (A)-2, Ahmedabad.
Before the ld.CIT(A), the assessee reiterated the facts of source of cash deposits, the nature of income earned and prayed for deleting the additions made by the AO u/s.69A of the Act. Further, the assessee submitted that, no additions u/s.69A of the Act could be made on account with the deposits made during the demonetization period where there was no material brought into records to substantiate the deposits as undisclosed. In support of his arguments, the assessee relied on the following decisions of the Tribunal. (a) Shri Madhusudan Dhakad Harda vs. ITO [2022] 140 taxmann.com 666 (Indore-Trib.) (b) Om Parkash Nahar vs. ITO [2022] 135 taxmann.com 377 (Delhi- Trib.) (c) Uma Agarwal vs. ITO [2021] 127 taxmann.com 735 (Agra-Trib.) (d) Abdul Razaak vs. Income-tax Officer, (International Taxation) [2023] 153 taxmann.com 180 (Chennai-Trib.)
:-4-: ITA. No.:190 /Chny/2025 6. On perusal of the submissions made by the assessee, the ld.CIT(A), NFAC who was not convinced and hence, confirmed the additions made by the AO by holding as under: “7.2. In the instant case, the appellant had filed his Return of income (ROI) for the AY 2017-18 relevant to the previous year ending March 31 2017 on August 09, 2018 electronically, declaring a Taxable Total Income of Rs.3,32,480/-.The assessee had shown agricultural income, income from house property, commission income and income from business of selling vegetables. The return of income was processed under section 143(1) of the Income tax Act, 1961(the Act). The case was selected for limited scrutiny for the reason of Large cash payments in bank account during the year. During the year under consideration the appellant has made cash deposits of the demonetized currencies to the tune of Rs.4,87,000 (Four Lakh Eighty-Seven Thousand} in his Bank account. This amount was deposited in two tranches of Rs.2,50,000/- on November 12, 2016 and Rs.2,37,000/on November 21 2016 respectively. While finalizing the case, the Learned AO after considering the facts of the case as evident from the ROI and the submission made by the assesses, treated the cash deposit of Rs.205000 deposited on November 12, 2016 as explained money/funds. However, the Learned AO treated cash deposit of Rs.2,37,000 deposited on November 21, 2016 as unexplained money u/s 69A of the Act. As a result of which the sum of Rs.2,37,000/- was added to the income of the assesses u/s 69A of the Act. 7.3 During the appellant proceedings the appellant were requested to furnish the explanation regarding cash deposits during the year under consideration. The appellant has stated in his reply that the cash deposits amounting to Rs.2,37,000/- is pertains to past savings and income from selling of vegetable. The A.O in his order has given a detailed finding that the assessee has not produced his books of account especially the cash book when asked. The A.O has also noted that when the cash was available to the appellant, why the same was not deposited into the bank account during the same dates. These finding of the A.O is valid and applying the principle of human probability, it is clear that the appellant has not been able to explain the transaction with specific evidence and logic. It merely states that the deposit is from the previous year saving and agricultural income. The logic of the appellant is not very sound and the appellant has failed to explain the transaction to the satisfaction of the Assessing Officer. Hence, looking at the facts and circumstance of the case, the action of Assessing officer in adding the deposit of Rs.2,37,000/-as unexplained money u/s 69A is confirmed. Accordingly, this ground of appeal is dismissed. Ground no. 1 to 3 is dismissed.”
7. Aggrieved by the order of the ld.CIT(A), the assessee preferred an appeal before us.
The ld.AR for the assessee submitted that the ld.CIT(A) has erred in confirming the order of the AO without appreciating the fact that the assessee is :-5-: ITA. No.:190 /Chny/2025 having sufficient source of cash to deposit in the bank account during the demonetization period. The ld.AR submitted that during demonetization period the assessee has made a cash deposit in two tranches of Rs.4,87,000/- (2,50,000/- in first tranche and Rs.2,37,000/- in second tranche). The Assessing officer in his impugned assessment order had held that the cash deposit of Rs.2,37,000/- made by the assessee as unexplained investment u/s.69A of the Act and added to income of the assessee. The ld.AR submitted that the assessee is in business of agriculture over 3 decades and the nature of activity involves cash transactions. The assessee has made the cash deposits of Rs.2,37,000/- purely on account of sale of agricultural produce and past savings of the assessee. It can be seen from the Return of Income filed for the earlier years showing agricultural income. Therefore, the evidence for earlier year saving has been proved. The details of the income declared are as under.
Assessment Year Agricultural Income 2015-16 1,90,000 2016-17 1,75,000 2017-18 1,55,000
9. The ld.AR further stated that it is pertinent to note that section 69A of the Act is applied when the assessee offers no explanation to the source of income or explanation of the assessee is not in satisfaction to the opinion of the assessing officer. In present case, the assessee has furnished all the bank statements for the entire financial year which shows that the withdrawal was made in the past also and the deposit also contains the past saving of family members. This agricultural income was also disclosed in Return of Income filed. Further, merely because the deposit was not made in one day, it is incorrect to assume that the cash deposits are from unexplained sources.
:-6-: ITA. No.:190 /Chny/2025 Therefore, the ld.AR stated that under these circumstances, the section 69 A of the Act has no application.
Further, the ld.AR also submitted that the AO has not brought anything on records to demonstrate that the cash deposit of the assessee is from the unexplained sources or in contrary to the return of income filed by the assessee. The AO has also not stated valid reason for considering only a part of deposits as unexplained in nature. The ld.AR also relied on the decision of Kolkata tribunal in case of Manju Baheti v. Assessing Officer [2023] 152 taxmann.com 434 (Kolkata - Trib.). The extracts of the decision given below for ready reference:
“We have heard the rival contentions and perused the material on record. Admittedly, it is an undisputed fact that the assessee has been regularly filing her income tax returns for past several years as tabulated herein above reporting substantial income in her hands. Deposit of cash in Bank accounts during the demonetization period arose out of unavoidable circumstances, which prevailed during that time. The amount deposited by the assessee is Rs.6,50,000/- as stated above, which is adequately substantiated and supported by gross total income as well as the exempt income reported by her in regular returns of income, placed on record. There is nothing brought on record by the authorities below to demonstrate anything otherwise or contrary in respect of the returns filed by the assessee. Considering the facts on record, we do not find any justification in the approach adopted by the Id. Assessing Officer in making an addition of Rs.5,50,000/- by giving an adhoc relief of Rs. 1,00,000/- on an estimate basis by assuming that the assessee had cash in hand of Rs.1,00,000/- on 8-11-2016 i.e. on the date of announcement of demonetization. We accordingly direct the ld. Assessing Officer to delete the addition made in this respect. Accordingly, the grounds taken by the assessee are allowed.
In the result, the appeal of the assessee is allowed.”
Per contra, the ld.DR relied on the orders of the A.O. and that of the CIT(A) and prayed for confirming the order of ld.CIT(A).
We have heard the rival contentions perused the material available on record and gone through the orders of the authorities along with submissions
:-7-: ITA. No.:190 /Chny/2025 and case laws relied upon by both the parties. It is undisputed fact that the assessee is having an agricultural income and filed his return of income in the earlier assessment years by declaring the agricultural income. Further, the AO has accepted the cash deposit made on the first time as explained source for Rs.2,50,000/- out of the total deposit of SBN of Rs.4,87,000/-. We find that the balance amount of Rs.2,37,000/- has been added u/s.69A of the Act as unexplained source without assigning any reason. On perusal of the submissions made by the ld.AR, we find that the assessee has been regularly filing his return of income and also has declared the agricultural income as his regular source of income. Further, we also find that the assessee is having regular income from commission from selling the stamp paper and also income from house property. Further, the assessee has explained the source of cash deposit was from his current year income along with savings from the income of past years and furnished the proof of return of income filed for the A.Y. 2015- 16, 2016-17 & 2017-18.
Further, we also take a note of the tribunal decision of the Manju Baheti v. Assessing Officer [2023] 152 taxmann.com 434 (Kolkata - Trib.) (supra), wherein the Tribunal held that the AO has not brought on record anything otherwise or contrary in respect of the returns filed by the assessee by declaring the exempt income regularly and placed on record.
In the present facts and circumstances of the case and relying the decision of the Tribunal (supra), we are of the considered view that the AO has erred in making the addition of Rs.2,37,000/- as unexplained u/s.69A of the Act and hence we are inclined to set aside the order of the ld.CIT(A) and direct the :-8-: ITA. No.:190 /Chny/2025 AO to delete the addition. Thus, we allow the grounds of appeal filed by the assessee.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 06th June, 2025 at Chennai.