Back
2025 Supreme(Online)(ITAT) 5152
INCOME TAX APPELLATE TRIBUNAL (CHENNAI BENCH)
Manu Kumar Giri, J, S. R. Raghunatha, AM
Assessee – Appellant
Versus
Commissioner of Income Tax, Appeal – Respondent
Income Tax Appeal | ITA No.:713/Chny/2025
For the Appellants/Petitioners:Shri. S.Sridhar, Advocate (Erode)
For the Respondents: Ms. Gouthami Manivasagam, J.C.I.T.
The assessment of cash deposits during demonetization requires credible sourcing evidence, affirming that previously accumulated agricultural income and savings are legitimate explanations.
Headnote:(A) Income Tax Act, 1961 - Section 69A - The appellant contested the addition of cash deposits as unexplained, which were made during the demonetization period, asserting these funds were sourced from agricultural income and previous savings. The Assessing Officer's reasoning rested upon prohibition of cash transactions in SBNs during demonetization and the appellant's assertions of legitimate source were found credible. (Paras 11, 12)
(B) Burden of Proof - The duty to substantiate sources for cash deposits rests with the appellant; prior rulings provided a framework supporting the legitimacy of such sources during prohibitory periods. (Paras 10, 11)
Facts of the case:
The assessee, earning from agriculture, deposited significant cash during demonetization, claiming it arose from legitimate agricultural transactions. The assessment raised concerns regarding the unexplained cash in contravention of demonetization regulations.
Findings of Court:
The income was verified as genuine and consistent with historical cash handling patterns, leading to acceptance of the appellant's explanations and the rejection of erroneous additions by the lower authorities.
Issues: The propriety of treating cash deposits as unexplained under section 69A amidst stringent scrutiny of demonetization regulations.
Ratio Decidendi: Cash accumulated from operations prior to the prohibition was validated against statutory references, leading to overturning prior additions framed on insufficient procedural basis.
Result: Appeal allowed.
| Table of Content |
|---|
| 1. assessee’s claimed income sources. (Para 2 , 3) |
| 2. court's reasoning on financial legitimacy and preferring documented sources. (Para 5 , 7 , 11 , 12) |
| 3. arguments supporting legitimacy of cash deposits. (Para 6 , 10) |
| 4. final determination on the appeal's outcome. (Para 13) |
आदेश/ORDER
PER S. R. RAGHUNATHA, AM:
This appeal by the assessee is filed against the order of the Commissioner of Income Tax, Appeal ADDL/JCIT (A)-1 Visakhapatnam, for the assessment year 2017-18, vide order dated 09.01.2025.
2. The brief facts of the case are that the assessee is an individual deriving income from agriculture and sale of agricultural commodities like coconut, tapioca, brinjal, fruits etc. and filed her return of income on 28.03.2018 admitting a total income of Rs.40,97,100/- and agricultural income of Rs.12,75,000/-. The case was selected for scrutiny under CASS for verifying the abnormal cash deposit during demonetization period and statutory notices were issued to the assessee. During the A.Y. 2017-18 the assessee had deposited SBNs to the tune of Rs.10,39,500/- on 26.12.2016. The assessee has stated that the said sum is out of savings from agricultural income, commission on sale of agricultural commodities and cash balance as on 08.11.2016. However, the AO was not convinced and made an addition of Rs.10,39,500/- as unexplained money u/s.69A of the Act stating that the assessee was prohibited to transact in SBN as per the demonetisation notification w.e.f. 09.11.2016 and passed an order u/s.143(3) of the Act on 26.12.2019. Aggrieved by the order of the AO the assessee preferred an appeal before the ld.CIT(A), NFAC.
3. The ld.CIT(A) issued notices to the assessee by providing opportunity to file the written submissions and further details in support of the claim of the assessee. The assessee filed the detailed submissions explaining the source of the cash deposit during the demonetisation period. Further, the assessee submitted that the cash was deposited on 24.12.2016 and has paid the taxes on 26.12.2016. The source of cash deposit was from savings and agricultural income, commission on sale of agricultural produce along with cash balance held on 08.11.2016.
4. The assessee relied on the decisions of the Tribunal in support of his claim in explaining the source of cash deposit.
a) Shri Raju Dinesh Kumar Vs. DCIT – ITA No.1321/2023 dated 19/01/2024
b) Amar Sparklers Factory vs ITO - ITA No. 808/Chny/2023 dated 11/10/2023
5. On perusal of the submissions of the assessee the ld.CIT(A), NFAC, was not convinced with explanation and hence dismissed the assessee’s appeal by confirming the order of the AO by passing an order dated 09.01.2025. Aggrieved by the order of the ld.CIT(A), the assessee is before us.
6. The ld.AR for the assessee submitted that the ld.CIT(A) has erred by confirming the action of the AO in making addition of cash deposit in SBNs without considering the details and documents submitted in support of explaining the source of cash deposit. Further, the ld.AR submitted that the AO has not doubted the transactions or the source of the cash deposit in the bank account made but only stated that the assessee was prohibited to transact in SBN as per the demonetization notification w.e.f. 09.11.2016. The ld.AR stated that the assessee is 85 years old individual and having agricultural land of around 40 acres situated at Mallur Village, Salem District, has filed his return of income regularly and for the impugned assessment year also the total income declared was Rs.40.97 Lakhs apart from agricultural income of Rs.12.75 Lakhs. The cash deposit in SBNs to the tune of Rs.10.39 lakhs has been made from the savings from agricultural income, commission on sale of agricultural commodities and cash balance as on 08.11.2016.
7. Further, the ld.AR also submitted that there is no prohibition to accept SBNs during the demonetization period by the assessee, as per the Specified Bank Notes (Cessation of Liabilities) Act, 2017, no pers
