Cash deposits made during demonetization allowed:
Vivek Prahladbhai Patel Vs Income tax Officer, Ahmedabad [ITANo.370/Ahd/2024]
[A.Y. 2017-18]
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, has deleted department’s addition on account of cash deposits made, stating that the deposits were made on account of assessee’s parent’s savings and agricultural income.
The assessee submitted their income tax return, outlining their entire amount of taxable income of INR 6,49,001. The assessee made significant cash deposits of up to INR 9,04,000 in his bank account during the demonetization period, which is why the matter was chosen for further examination by CASS. The AO added INR 4,28,000 u/s 69A of The Income Tax Act as unexplained money to the assessee’s income out of the total amount.
The assessee contented that the cash deposits came from assessee’s parents’ combined savings and agricultural earnings for the purpose of renovation of house. The assessee provided the Assessing Officer (AO) with affidavits from his mother and father to support his claim. However, the AO was not satisfied and moved on with the addition.
Without properly considering the affidavits, the CIT(A) upheld the AO’s decision, even though the assessee provided the justification. The CIT(A) did not appreciate the fact that the affidavits submitted were from credible sources, being the parents of the assessee, and did not investigate further into the matter to ascertain the veracity of the claims made therein.
The Hon’ble Tribunal noted that the AO did not conduct any independent verification or enquiry into the claims made in the affidavits. The AO has simply dismissed the affidavits without assigning any cogent reasons. The CIT(A), too, has upheld the AO’s order without addressing the merits of the affidavits and the explanation provided by the assessee.
Also, the Tribunal relied on the judgment of the Hon’ble Supreme Court, in the case of CIT v. P.K. Noorjahan [1999], wherein it held that the burden of proof is on the revenue to show that the amount in question is income of the assessee. In the instant case, the affidavits provided by the assessee’s parents, explaining the source of cash deposits, were disregarded without any substantial counter evidence.
The Tribunal found that the section 69A addition was unsustainable, stating that AO and CIT(A) failed to conduct a fair investigation into the cash deposits source. Revenue must carry out the necessary verification when the assessee provides a reasonable explanation maintained under affidavits before drawing any unfavourable conclusions. The assertions made by the taxpayer and the affidavits were not verified by the AO or the CIT(A).
Ld. Departmental Representative, on the other hand, stated that there is no proof of agricultural income. However, neither AO nor CIT(A) had asked the assessee to produce any proof for the agricultural income.
Therefore, in the interest of justice, the ITAT set aside the order of the CIT(A) and direct the AO to delete the addition of INR4,28,000/- made under section 69A of the Act.
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