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Facts
The assessee deposited Rs. 10,95,000/- (later corrected to Rs. 11,95,000/-) in cash during the demonetization period (Nov-Dec 2016). The Assessing Officer initiated reassessment proceedings and added the amount as unexplained money under Section 69A, completing the assessment ex-parte under Section 147 read with Section 144. The CIT(A) upheld the addition, stating the assessee failed to provide tangible evidence for the cash source.
Held
The Tribunal found that the assessee maintained sufficient cash balance from regular business operations and cash sales, including a significant withdrawal in July 2016, to justify the deposits during demonetization. It noted the assessee filed returns under Section 44AD and had substantial stock movements. Therefore, the addition made by the lower authorities was not justified.
Key Issues
The key legal issue was whether the cash deposits made during the demonetization period were from explained sources, specifically cash in hand from regular business sales, or constituted unexplained money.
Sections Cited
Section 69A, Section 147, Section 144, Section 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA (SMC
Before: SHRI S. RIFAUR RAHMAN
ORDER The assessee has filed this appeal against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 25.06.2025 for the Assessment Year 2017-18.
Brief facts of the case are, based on the information available with the Assessing Officer that the assessee has made cash deposit of Rs. 10,95,000/- in his bank account during the period from 09.11.2016 to 30.12.2016, during demonetization period in the bank account of Punjab National Bank. Accordingly, proceedings u/s 147 of the Act was initiated. During the re-assessment proceedings, It was observed that the assessee has declared total income of Rs. 4,95,700/-. Accordingly, notice u/s 148 and 142(1) of the Act were issued and served to the assessee. However, there was no response from the assessee. Based on the information collected from the bank, it was observed that the assessee has made deposit at Rs. 10,95,000/- in his current account and saving bank account. Accordingly, the Assessing Officer proceeded to make the addition u/s 69A of the Act to the extent of Rs. 11,95,000/- and completed u/s 147 r.w.s 144 of the Act.
3. Aggrieved with the above order, assessee preferred an appeal before NFAC, Delhi and filed a detailed submissions on various dates. After considering the detailed submissions of the assessee and the assessment order, the ld. CIT(Appeals) dismissed the appeal filed by the assessee with the following observations. 8.2.3. The submission of the appellant is perused but not acceptable. As has been brought out by the Ld. AO, that the appellant has deposited huge amount of Rs. 11,95,000/- from the period of 07.11.2016 to 22.11.2016. When compared with rest of the year, the appellant had not deposited any such amount for the rest of the financial year. Further, no tangible evidences or arguments have been put forward by the appellant. Mere providing a cash flow book cannot be considered to be evidence but appears to be more of a cover-up and after thought. No evidence of any agricultural activity or sale of agricultural products has been brought forward before the Ld. AO. Hence, there is no tangible evidence in support of the appellant's claim that the cash being deposited is out of his savings, cash sales and recovery of outstandings.
1. 2 | P a g e 8.2.4. In absence of any supporting evidences, I have to rely on the landmark decision of Hon'ble Supreme Court of India in the case of Sumati Dayal Vs. CIT (1995) 214 ITR 801, which elaborated the principle of "preponderance of probabilities in the civil cases, particularly in the context of Income Tax Law. This Principle plays a crucial role in adjudicating cases where absolute proof is not possible and decisions must be based on probable explanation rather than beyond a reasonable doubt. The Court emphasised that in civil proceedings like Income Tax Assessments, the standard of proof is not "beyond reasonable doubt but the "preponderance of probabilities". This means that a fact is considered proven if it is based on the evidence, its existence is "more probable than not". The principles as laid down in this case suggest that authorities can look beyond formal documents and superficial compliance to assess the genuineness of a claim. The authorities are allowed to make reasonable inferences based on the circumstances, human behaviour and logic.
1. 8.2.5. Thus, it is highly improbable for any individual or businessman to suddenly get accounted cash during the period of demonetization, when his routine business could not get such cash for the rest of the year in the Financial Year. Hence, the action of the Ld. AO to treat this cash deposit of Rs. 11,95,000/- as unexplained money u/s 69A is proper and as per law. I, herby, confirm the addition made by the Ld. AO. Hence, Ground No. 2 is dismissed.
4. Aggrieved, the assessee is in appeal before ITAT, raising following grounds:
1. That, impugned order of assessment is arbitrary, illegal, unjustified and seems to have been passed without considering the facts of the case in proper context
2. That, learned CIT (A) also failed to understand the facts of the case in proper context
(i) That, learned assessing authority as well as first appellate authority failed to take cognizance of the facts that cash deposited during demonetization period in the current account of his proprietary business was out of cash in hand available in his regular books of accounts maintained in regular course of business.
1. (ii) That, learned assessing authority failed to appreciate the nature of business of assessee, in which trading of agricultural pumps is being done and before and 3 | P a g e after Diwali for the next crop season, farmers prefers to buy new pumps during this period and due to abrupt declaration of demonetization all the cash was forced to be deposited immediately otherwise the same would have been immediately otherwise the same would have been deposited in regular course of business.
1. (iii) The learned assessing authority considered the cash deposited during demonetization period at Rs 1195000 which is incorrect because of the correct figure of cash deposit during demonetization period was Rs 1095000 as would be evident from copy of bank statement available on record.
(iv) That, learned assessing authority failed to take appreciate facts of the case in proper context and in the light of nature of business of assessee in which cash is regularly deposited in bank account of assessee out of sale proceeds of the crop season which is substantially in cash because most of the agricultural pumps are being sold to farmers only.
That, Learned assessing authority ought to have appreciated that regular cash is being deposited in bank account by assessee because during the month of may 2016 cash deposit was Rs 400000 and during the month of July 2016 was Rs 10,60,000 hence the cash deposit in bank account of assessee is a regular feature and ought to have been accepted in the light of the facts of the case.
5. No proper opportunity of being heard was afforded to the applicant.
6. Other Grounds of appeal will be urged at the time of hearing.
Applicant craves leave to add, alter or amend any or all the grounds mentioned here in before at the time of hearing of appeal.
At the time of hearing, ld. AR of the assessee submitted that the assessee made cash deposits between 10.11.2016 to 22.11.2016 to the extent of Rs. 11, 85,000/-. He brought to our notice page 24 of the paper book and he brought to our notice cash summary indicating cash sales during the pre-demonetization period and submitted that the assessee has 4 | P a g e sufficient source of cash sales to make above cash deposits during the period. He submitted that from 1st April to 8th November. The assessee has made cash deposit at Rs. 19,45,725/- and during the demonetization period, the assessee has made Rs. 11,85,000/-. He objected to the observations of the ld. CIT(Appeals) at page 12 of the appellate order,” I observe that it is improbable and sudden cash deposit during demonetization when the assessee has routine business could not get such cash for the rest of the year.” Further, he brought to our notice return of income wherein the assessee has declared the income u/s 44AD of the Act and submitted that the cash deposit is out of cash sales and further submitted that there is no requirement for the assessee to maintain any books of accounts as per section 44AD of the Act.
On the other hand, ld. DR has submitted that the Assessing Officer had no occasions to verify submissions of the assessee. Since, the assessment was completed u/s 144 of the Act. Even before ld. CIT(Appeals), assessee has not brought on record any evidence to substantiate source of cash and hence, relied on the lower authorities.
Considered the rival submissions and the material placed on record. I observe from the record that the assessee has deposited cash of Rs. 5 | P a g e 11,85,000/- during demonetization period and also observed that the assessee is on the regular business and filed the return of income u/s 44AD of the Act. Further, the assessee has submitted the comparative statement of cash sales and subsequent deposits, for the sake of brevity, it is reproduced below:-
The assessee has filed a summary cash book from the 1st April, 2016 8. to 8th November, 2016 and he has withdrawn cash from the bank. I observe that the assessee has reported sufficient cash sales. I observe that in the month of July, the assessee has withdrawn of Rs. 10,60,000/- and since then continued to maintain closing cash balance till 31st October, 2016 with a closing cash balance of R. 19,02,700/- out of the above closing cash
6 | P a g e balance, made cash deposit of Rs. 11,95,000/- during the period 07.11.2016 to 22.11.2016. Therefore, I observe that the assessee has deposited the cash during demonetization period of Rs. 11,95,000/-. In my considered view, the assessee had sufficient cash balance available with the assessee to make the above deposits during demonetization. Since, there is a substantial stock movements and regular trading which substantiate that the assessee is having sufficient source of cash deposit during demonetization period. Therefore, I inclined to allow the grounds raised by the assessee are allowed.
In the result, appeal filed by the assessee is allowed.