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Facts
The assessee deposited Rs. 12,04,500 in cash during the demonetization period, claiming the source was agricultural income and prior withdrawals. The Assessing Officer added the entire amount as unexplained money under Section 69A. The CIT(A) partly deleted the addition, allowing relief for Rs. 5,94,076 based on agricultural income and withdrawals, confirming the balance of Rs. 6,10,424.
Held
The Tribunal held that a satisfactory relief had already been granted by the CIT(A). However, considering the circumstances, it directed the Assessing Officer to sustain an addition of 10% of the remaining Rs. 6,10,424, which amounts to Rs. 61,042, and to tax this amount at normal rates, not under Section 115BBE.
Key Issues
The key legal issue was the source of cash deposits made during the demonetization period and the applicability of Section 69A for unexplained money, along with the appropriate tax rate.
Sections Cited
Section 143(3), Section 250, Section 143(1), Section 143(2), Section 142(1), Section 69A, Section 115BBE
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Income Tax Appellate Tribunal, “SMC”
Before: DR. ARJUN LAL SAINI
Appellant by : Shri Vimal Desai, Ld. AR Respondent by : Shri Abhimanyu Singh Yadav, Ld. Sr. DR Date of Hearing : 22/01/2026 Date of Pronouncement : 27/01/2026 आदेश / O R D E R Per, Dr. Arjun Lal Saini, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year 2017-18, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals), dated 19/09/2024, which in turn arises out of an order passed by the Assessing Officer dated 05/11/2019 u/s 143(3) of the Income Tax Act, 1961.
Grounds of appeal
raised by the assessee are as follows:
1. Order u/s. 143(3) of the Act is bad in law.
2. The Id. AO has erred in law as well as on facts in making the addition of entire cash deposits of Rs. 12,04,500 u/s. 69A of the Act on account of alleged unexplained money. Page | 1
The Id. CIT(A) has also erred in law and facts in confirming the addition of cash deposits to the extent of Rs. 6,10,424/-.
Succinctly, the factual panorama of the case is that assessee before us is an Individual and has filed his return of income for assessment year (A.Υ.) 2017-18 on 20.03.2018, declaring therein total income of Rs.4,330/- and agricultural income of Rs.2,42,046/-. The return of income was processed u/s 143(1) of the Act. Later on, the case of the assessee was selected through CASS for "Limited Scrutiny" for verification of cash deposited during demonetization period for the year under consideration. Hence to verify the genuineness of source of cash deposits made by the assessee for the year under consideration during demonetization period, statutory notice u/s 143(2) of the Act was issued on 08/08/2018 and duly served upon the assessee, through electronically. The notice u/s 142(1) of the Income Tax Act, 1961, dated 15/07/2019 was issued and served electronically upon the assessee requesting him to provide relevant details and documents. In response to the notices issued u/s 143(2) and 142(1) of the Act, the assessee has submitted relevant documents, before the assessing officer.
The assessee in his reply submitted before the assessing officer, regarding the source of cash deposit during demonetization, stating that earlier withdrawals and agricultural income were the main source to deposit cash in the bank account. The assessee is engaged in agricultural activities. The Assessee's primary source of income is from agricultural income. During the Demonetization period the assessee has deposited Rs. 12,04,500/- cash in his bank account as under:
Date Bank Name Account no. Amount deposited in Rs. 14/11/2016 Bank of India 311610100018580 12,00,000/- 31/12/2016 Bank of India 311610100018580 4,500/- However, assessing officer noticed that assessee`s agricultural income is very meager. By going through bank statement it was noticed that the assessee has almost was meager withdrawals to justify the deposit from earlier withdrawals. The opening Chaturbhai K. Detroja, cash balance shown by him is Rs. 12,04,647/-. The purpose of keeping that much cash in hand is explained by assessee that they are agriculturist and they have to made all the agricultural payments like daily wages and other dairy farming expenses, everyday, in cash. But after verifying his cashbook it is noticed that he has shown agricultural expenses of Rs. 59,494/- for the whole year and these expenses incurred only till demonetization. Thereafter no agricultural expenses incurred by the assessee. Agricultural income of assessee is meager, compared to cash-in-hand shown by him. The assessee's agricultural income for two previous years is as under: Assessment Year Agricultural Income 2016-17 Rs. 2,02,030/- 2017-18 Rs. 2,42,046/- Based on these facts, the assessing officer noticed that assessee has failed to prove source of the cash deposit, during the demonetization period. Therefore, addition of Rs. 12,04,500/-, as unexplained money u/s 69A rws 115BBE of the IT Act, was made by the assessing officer.
Aggrieved by the order of the Ld. Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) who has partly deleted the addition made by the assessing officer. The Id.CIT(A) noticed that opening cash on hand was arising from the accumulated savings from the agriculture income of the past years. Agriculture income of the assessee for two previous years, were Rs. 2,02,030/- & 2,42,046/-for A.Υ. 2016-17 & 2017-18 respectively. In this connection the assessee has also submitted that the assessee has withdrew an amount of Rs. 1,50,000/-, on 24/08/2016. In this regard the assessee's contention sympathetically considered and relief of Rs. 5,94,076/- (202030+242046+150000) allowed. Balance addition of Rs.6,10,424/- (Rs.12,04,500 - Rs. 5,94,076), was confirmed by the learned CIT(A).
Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal.
I have carefully considered the facts of the case, the submission of the Learned Counsel for the assessee and Id DR for the Revenue and evidences on record. Learned Counsel for the assessee submitted that during the demonetization period the assessee has deposited the cash in the bank account to the tune of Rs. 12,04,500/-. On appeal by the assessee, before the Ld. CIT(A), the Ld. CIT(A) has considered the submission of the assessee and noted that the assessee had deposited the amount in the demonetization period out of the opening cash on hand and out of the agricultural income of the past years. Therefore, Ld. CIT(A) provided relief to the assessee to the tune of Rs. 5,94,076/-. However, the assessee, now is in appeal before this Tribunal for the balance amount of the addition which comes to Rs. 6,10,424/- (Rs. 12,04,500 - 5,94,076). The Ld. Counsel for the assessee submitted that since the Ld. CIT(A) has considered the opening cash balance in the hands of the assessee and also considered that the assessee is engaged in the agricultural activities and because of these submissions, the part addition was deleted by the Ld. CIT(A). The Ld. Counsel submitted that assessee does not have any other source of income except the agricultural income, therefore, remaining addition sustained by the Ld. CIT(A) should also be deleted.
On the other hand, the Ld. DR for the Revenue relied on the findings of the Ld. CIT(A) and stated that Ld. CIT(A) has given the reasonable relief to the assessee. Therefore, assessee does not deserve further relief and hence the addition sustained by the Ld. CIT(A) should be confirmed.
I have considered submissions of both the parties and noted that assessee has deposited the amount during the demonetization period in the bank account, out of the cash balance available on hand and out of the agricultural income of the Chaturbhai K. Detroja, assessee, and these documents were already considered by the learned CIT (A) and part relief had been given to the assessee. However, I also note that the assessee has not filed entire documents and evidences to prove his claim and a satisfactory relief has already been granted by the CIT(A) on account of agricultural income and on account of opening cash on hand. However, I note that balance addition of Rs.6,10,424/-, sustained by the learned CIT(A), should not be added in the hands of the assessee and a profit element embedded therein should be added in the hands of the assessee, to meet the end of Justice. Therefore, considering the facts and circumstances of the assessee, I direct the Assessing Officer to sustain the addition @10% of Rs. 6,10,424/-, which comes to Rs.61,042/-. (10% of Rs. 6,10,424/-). Therefore, I direct the assessing officer to make the disallowance in the hands of the assessee to the tune of Rs.61,042/-.
Before parting, I make it clear that assessee has explained sources of the cash deposit in the bank account which should not be taxable under Section 115BBE of the Act, therefore, I direct the Assessing Officer to compute the tax on Rs.61,042/-, in the hands of the assessee, by applying the normal rate of income tax.
In the result, the appeal filed by the assessee is partly allowed in above terms.
Order pronounced in the open court on 27/ 01/ 2026.