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Facts
The assessee declared income for AY 2017-18 and was selected for scrutiny due to large cash deposits during demonetization. The AO added Rs. 11,00,000/- as unexplained investment, stating a shortfall in matching denominations after withdrawal and redeposit of funds.
Held
The Tribunal held that the assessee had sufficient funds from her retirement gratuity. The AO failed to provide evidence of any other source of income or that the withdrawn amount was used elsewhere, and the explanation of currency exchange was plausible. Therefore, the addition was deleted.
Key Issues
Whether the addition of Rs. 11,00,000/- as unexplained investment is justified when the assessee provided a plausible explanation for the cash deposit and the AO failed to prove otherwise.
Sections Cited
69A, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “SMC’’ : NEW DELHI
Before: SHRI MAHAVIR SINGH, HON’BLE
ORDER This appeal by the assessee is emanating from the order of the Ld. Addl/JCIT(A)-1 Thane, dated 15.07.2025 pertaining to assessment year 2017-18 on the solitary ground relating to sustaining the addition of Rs. 11,00,000/- made by the AO u/s. 69A of the Act by treating the cash deposit as unexplained investment.
The brief facts of the case are that the appellant, filed her return of income for the AY 2017-18 on 23.03.2018, declaring total income of Rs. 6,31,400/-. The case was selected for scrutiny under CASS for reasons including large cash deposited during the demonetization period. During the assessment proceedings, the case of the assessee was selected on the reasons “Large cash deposited during the demonetization period and business filed for the first time, abnormal increase cash deposit in cash deposited during the period demonetization period as compared to pre-demonetization period”. The AO observed that the assessee had withdrawn Rs. 34,00,000/- from her SBI savings account on 07.10.2016 (Rs. 23,00,000) and 14.10.2016 (Rs. 11,00,000), and subsequently re- deposited Rs. 31,00,000 on 22.11.2016. On verification, it was observed that there was a shortfall of Rs. 11,00,000/- in matching denominations, specifically (Rs. 1,000 x 1,100).
The assessee submitted an affidavit stating the cash was kept with her daughter during the intervening period and some currency was exchanged. However, the AO held the explanation unsatisfactory due to lack of documentary evidence reconciling the denomination mismatch. The AO treated cash deposit of Rs. 11,00,000/- explained cash income under section 69A and completed the assessment proceedings assessing total income at Rs. 17,31,400/-. Aggrieved, Assessee preferred the appeal before the CIT(A), who had confirmed the action of the AO. Against the above, assessee filed the appeal before the Tribunal.
Ld. AR for the assessee submitted that the assessee was retired as Nursing Superintendent with Government Hospital under the Ministry of Health and Family Welfare and was having the sufficient funds in bank accounts on receiving gratuity etc. It was further submitted that assessee withdrawn Rs. 23 lacs on 07.10.2016 and Rs. 11 lacs on 14.10.2016, thus, an aggregate withdrawal in the month of October, 2016 was Rs. 34,00,000/-. Upon declaring demonetization by the Government on 08.11.2016, the assessee re-deposited Rs. 31,00,000/- with the same bank. However, the AO added Rs. 11 lacs that there is change in denomination of currency of its deposit as compared to its withdrawal. Assessee further submitted an affidavit during the assessment proceedings that she got exchanged some currency during the intervening period form 14.10.2016 to 08.11.2016 either on her own or by giving to her daughter to have some purchases for her
2 | P a g e including jewellery or property transactions, if any. It was further submitted that AO has not placed any evidence or material that the assessee was having any other source of income from where she might have derived the receipts and also not proved that the amount withdrawn have been used anywhere else and Rs. 11 lacs was a fresh deposit from any other source. Whereas the assessee filed an affidavit and her daughter also confirmed by filing an affidavit that the money was also given to her to have some purchase for the assessee which could not materialize irrespective of the fact that the giving and taking of the currency was held, thus the amount was refunded to redeposit if on account demonetization. Hence, it was requested that the addition in dispute may be deleted and appeal of the assessee may be allowed accordingly.
Ld. DR relied upon the orders of the authorities below.
After hearing both the sides and perusing the records, I note that assessee was having the sufficient funds in bank accounts on receiving gratuity etc. on her retirement from govt. service. It is undisputed fact that assessee withdrawn Rs. 23 lacs on 07.10.2016 and Rs. 11 lacs on 14.10.2016, thus, an aggregating withdrawal in the month of October, 2016 of Rs. 34,00,000/-. After demonetization, the assessee re-deposited Rs. 31,00,000/- with the same bank. However, the AO added Rs. 11 lacs that there is change in denomination of currency of its deposit as compared to its withdrawal. Assessee further submitted an affidavit during the assessment proceedings that she got exchanged some currency during the intervening period form 14.10.2016 to 08.11.2016 either on her own or by giving to her daughter to have some purchases for her including jewellery or property transactions, if any. I note plausible contention in argument of the Ld. AR that AO has not placed any evidence or material that the assessee was having any other source
3 | P a g e of income from where she might have derived the receipts and also unable to prove that the amount withdrawn have been used anywhere else and Rs. 11 lacs was a fresh deposit from any other source. Even otherwise, the assessee filed an affidavit and her daughter also confirmed by filing an affidavit that the money was also given to her to have some purchase for the assessee which could not materialize irrespective of the fact that the giving and taking of the currency was held, thus the amount was refunded to redeposit if on account demonetization. The factual background of the instant case, clearly justifies the source of transaction and its genuine reasons for depositing the amount in the bank and therefore the same is fully explainable and addition of Rs. 11,00,000/- deserve to be deleted. I hold and direct accordingly and allow the ground raised by the assessee.
The instant assesseee’s appeal is allowed in the aforesaid terms.
Order pronounced on 28.10.2025.