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Facts
The assessee declared a total income of Rs.36,860/-. The AO noticed cash deposits of Rs.10,50,000/- during demonetization and added it to the assessee's income under Section 68 as unexplained. The assessee claimed the cash was received from her mother and from past savings.
Held
The Tribunal held that the AO could not have made the addition as unexplained without contrary evidence. The cash deposits in HDFC Bank were linked to withdrawals, and deposits in State Bank of India consisted of small amounts throughout the year, supporting the assessee's claim of receiving funds from her mother and past savings.
Key Issues
Whether cash deposits made during the demonetization period are unexplained under Section 68 if the assessee provides plausible source of funds like gifts from mother and past savings, supported by withdrawal patterns and small intermittent deposits.
Sections Cited
68, 143(3), 115BBE, 270A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
Assessment Year: 2017-18 Sweta Bhalla v. The Income Tax Officer B1/62J, Sector J Ward 3(4) Aliganj, Lucknow Lucknow - New TAN/PAN:CEAPB4283C (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri Sanjeev Krishna Sharma, D.R. O R D E R
This appeal has been preferred by the Assessee against the order dated 07.03.2024, passed by the ld. Commissioner of Income Tax (Appeal), National Faceless Appeal Centre (NFAC), Delhi for Assessment Year 2017-18.
2.0 The brief facts of the case are that the assessee filed her return of income for the year under consideration, declaring a total income of Rs.36,860/-. The case of the assessee was selected for limited scrutiny under CASS for the reason ‘Large value cash deposits during demonization period as compared to returned income’. The Assessing Officer (AO) noticed from the return of income filed by the assessee that the assessee had made cash deposits totaling to Rs.10,50,000/- in her Bank Account No.33190263273 maintained with State Bank of India and Account No.50100093433868 maintained with HDFC Bank. The AO issued statutory notices, requiring the assessee to furnish the details as regards the nature and source of cash deposits made in the these Bank accounts during the demonetization period. As per the AO, the assessee failed to explain the source of aforementioned cash deposits, therefore the AO treated the same as unexplained and added the same to the income of the assessee under section 68 of the Income Tax Act, 1961 (hereinafter called “the Act’). The AO completed the assessment under section 143(3) of the Act, computing the total income of the assessee at Rs.10,86,860/-.
2.1 The AO also invoked the provisions of section 115BBE of the Act and initiated penalty proceedings under section 270A of the Act, separately.
2.2 Aggrieved, the Assessee preferred an appeal before the Ld. First Appellate Authority. Subsequently, the appeal of the assessee was migrated to NFAC, which dismissed the appeal of the assessee on merits.
2.3 Now, the assessee has approached this Tribunal challenging the dismissal of her appeal by the NFAC by raising the following grounds of appeal:
1. Because the authorities below have erred on facts and in law in disbelieving the submissions made by the assessee holding that the cash of Rs.10,50,000/- deposited in the bank, to be unexplained u/s.68 thereby making the addition, which addition is totally unwarranted, bad in law, be deleted.
2. Because the explanation filed by the assessee has not been found to be false or untrue there being no reason to disbelieve the same, the CIT(A) was not justified in upholding the addition of Rs.10,50,000/- made u/s.68 by the AO, the addition made be deleted.
Because the appellant not is maintaining any books of account, section 68 is not applicable, the addition made being contrary to the provisions of law, the same be deleted. 3.0 The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the assessee was an individual and during the year under consideration, her income comprised of interest from Saving Bank accounts and Fixed Deposit receipts and the total interest amounted to Rs.36,860/- and, therefore, her income was below the taxable limit. It was submitted that during the period of demonetization, the assessee had deposited Rs.10,50,000/- in her Saving Bank accounts, viz. Rs.2.50 lakhs in the account with State Bank of India and Rs.8.00 lakhs in HDFC Bank account. The Ld. A.R. submitted that, as submitted before the AO as well as the Ld. First Appellate Authority, the assessee was receiving cash from her mother regularly and out of such cash received, she used to deposit the same in the two Bank accounts and then lump sum withdrawals used to be made and such withdrawn cash used to lie with the assessee. It was further submitted that in the wake of announcement of demonetization, the assessee had no option but to deposit such withdrawn cash again into her Saving Bank accounts. These deposits were treated as unexplained by the AO. The Ld. A.R. drew my attention to the copy of HDFC Bank account statement wherein it was demonstrated that on 22.06.2016, the assessee had withdrawn cash of Rs.2 lakhs, on 01.07.2016, there was another withdrawal of Rs.3 lakhs and on 16.07.2016, there was yet another withdrawal of Rs.3 lakhs. It was submitted that these cash withdrawals were lying with the assessee at her home and cash was deposited to the tune of Rs.2 lakhs on 16.11.2016 and Rs.6 lakhs on 30.11.2016. The Ld. A.R. further submitted that the assessee had also submitted a cash flow statement before the AO to demonstrate that the assessee had cash balance with her to have made deposits. A copy of such cash flow statement has been placed at page 13 of the paper book filed by the assessee. With respect to cash deposit of Rs.2.50 lakhs in the State Bank of India, my attention was drawn to the copy of Bank statement and it was submitted that it mostly comprised of small deposits throughout the year and such deposits by no stretch of imagination could be considered as unexplained.
3.1 The Ld. A.R. submitted that the submissions and explanations filed before the AO and again before the Ld. First Appellate Authority were not considered at all and the submissions were disbelieved and the entire deposits appearing in both the Saving Bank accounts were treated as unexplained. It was submitted that the AO had overlooked the aspect of past savings as well as amount received by the assessee from her mother duly evidenced by Certificate to this effect from assessee’s mother, Smt. Hina Bhalla, and also the amounts withdrawn from Saving Bank account and deposited again. The Ld. A.R. further submitted that there was no law barring holding or keeping cash at home and rather there was no law which could compel any assessee to keep all the money in Bank account and, therefore, the observations of the lower authorities that it was highly improbable that huge cash would be kept at home was not tenable.
4.0 Per contra, the Ld. Sr. D.R. placed reliance on the orders of both the lower authorities and submitted that necessary evidence to prove that the same amount of cash, which was withdrawn, was deposited back, was lacking in this case and, therefore, the appeal of the assessee deserved to be dismissed.
5.0 I have heard the rival submissions and have also perused the material on record. It is not in dispute that the assessee’s income was below the taxable limit during the captioned assessment year. It is also true that the assessee was not having regular source of income and the cash deposits in her Bank accounts raised a flag for the Department to initiate an enquiry into cash deposits of Rs.10,50,000/- during the captioned assessment year. However, the assessee had filed copy of Bank statement with HDFC Bank (available at pages 14 and 15 of the paper book filed by the assessee), wherein, entries show that there were cash withdrawals to the tune of Rs.8 lakhs in the month of June and July, 2016. In the same Bank account, there was a cash deposit of Rs.8 lakhs in the month of November, 2016. Although the AO has pointed out that it was not possible to link the cash deposits with the cash withdrawals made earlier, all the same, there is no finding by the AO that this cash available with the assessee was utilized elsewhere. Therefore, in such a situation, it is my considered opinion that the AO could not have made the addition for the reason that the source was unexplainable. If the AO was to disbelieve the contention of the assessee, some evidence to the contrary should have been brought on record to establish that the cash, as being claimed by the assessee, was not available for being re-deposited in the Bank account. Similarly, regarding the amounts deposited in State Bank of India, it is seen that the deposits consist of small-small amounts deposited throughout the year and, therefore, the contention of the assessee that they were from amounts received from the mother and also out of past savings, appears tenable. In this view of the matter, the order of the ld. CIT(A) is set aside and the grounds of appeal taken by the assessee are allowed.
6.0 In the final result, the appeal of the assessee stands allowed.
Order pronounced in the open Court on 04/07/2025.