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2025 Supreme(Online)(ITAT) 5583
INCOME TAX APPELLATE TRIBUNAL (AHMEDABAD BENCH)
Smt. Annapurna Gupta, AM, Ms. Suchitra Kamble, JM
Ms. Kinjal Shah – Appellant
Versus
Commissioner of Income Tax (Appeals) – Respondent
I.T.A. No. 584/Ahd/2024
For the Appellant: Shri Rignesh Das, Sr. DR
For the Respondent: N/A
Court reiterates that the onus is on Revenue to prove cash deposits as undeclared income; mere presumption is insufficient.
Headnote:(A) Income Tax Act, 1961 - Section 68 - Cash deposits during demonetization - Addition of Rs.46,32,000/- made by AO due to unexplained cash deposits during the demonetization period was disbelieved by the authorities on presumptive grounds - Assessee explained source of cash deposits, maintaining that it was from legitimate business operations. (Paras 1, 6.2 to 6.6, 12, 16)
(B) Burden of proof - It was held by the court that once the assessee discharged his burden of explaining the source of funds, the Revenue must substantiate its contradictory findings with tangible evidence rather than presumptions. (Paras 10, 11, 14, 16)
Facts of the case:
The cash deposits made by the assessee during the demonetization period were under scrutiny, with the AO disallowing them based on presumptive findings of undisclosed income. The appellant demonstrated regular business practices involving cash management.
Findings of Court:
The court found that the assessee had duly explained the source of cash and dismissed the assumptions made by the Revenue authorities regarding cash being unaccounted.
Issues: Whether the cash deposits during demonetization should be considered unaccounted income, with the argument that the explanations given are valid and coherent.
Ratio Decidendi: The court emphasized that the burden of proof lies on the Revenue to establish that cash deposits arise from undisclosed sources, especially when the assessee already provided their books evidencing cash flow and business practices.
Result: Addition made under Section 68 was deleted, appeal allowed.
| Table of Content |
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| 1. burden of proof lies on the revenue to demonstrate unaccounted cash. (Para 1 , 8 , 10 , 17) |
| 2. assessee justified cash flow and banking activities. (Para 2 , 3 , 6 , 12) |
ORDER
PER SMT. ANNAPURNA GUPTA, AM:
The present appeal has been filed by the assessee against the order of the Ld. Commissioner of Income Tax (Appeals), (hereinafter referred to as “CIT(A)”), National Faceless Appeal Centre (hereinafter referred to as “NFAC”), Delhi dated 19.02.2024 passed under Section 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) and relates to Assessment Year (A.Y.) 2017-18.
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2. Initially the assessee had raised grounds of appeal which were argumentative in nature and he was, therefore, directed to file concise grounds of appeal which was subsequently filed before us on 07.04.2025 and which read as under:
“I. The CIT(A) has erred both in Law and in Fact in confirming the applicability of Sec.68 of the Act and thereby upholding addition of Rs.46,32,000/-being cash deposited the Bank during demonetization period which was duly explained and hence addition be deleted.
II. (a) Your Appellant submits that he has been maintaining Regular Books of Accounts duly Audited on during course of business of the Appellant had made withdrawal and had maintained cash as per books of accounts for purposes of business and the amount of Rs.44,12,071/- was cash balance available with him on 8-11-2016 and therefore not liable to be added.
(b) Your Appellant submits that in view of nature of business and for any be emergency arises cash was maintained as per his business practice followed from year to year.
In view of facts and circumstances of the case, and transaction by through Banking Chanel it is submitted that Rs.46,32,000/- (Rs.44,12,071+Rs.2,19,929/-) is not liable to be added as unaccounted cash credit during demonetarization period.”
3. A perusal of the above would reveal that the solitary issue in the present appeal relates to addition made to the income of the assessee on account of the cash deposited in the bank account of the assessee during monetization period amounting to Rs.46,32,000/-, the source of which remained unexplained. The orders of the authorities below reveal that though the assessee justified the source of cash deposits as from explained sources by furnishing his cash book revealing the source, the same, however, was disbelieved by the AO with respect to the cash deposit made during demonetization period for the reason that:
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the assessee was noted to have made huge cash withdrawals without incurring corresponding expenses out of the same
the entire deposit during the demonetization period was noted to be in specified bank notes (SBNs) which allegedly was made out of balance available as at the beginning of demonetization i.e. on 08.11.2016. It was found unbelievable that all cash in hand on the said date was in SBN’s.
There was a difference between the availability of cash as on 08.11.2016 to that deposited during the demonetization period, approximating Rs.2,50,529/-. Since the assessee could not have legally taken SBNs after the commencement of demonetization, the explanation of the assessee was disbelieved.
Also noting the fact that despite entire cash being available in hand at the beginning of demonetization, it was however deposited in small tranches during the entire period of demonetization. This, as per the AO, was unusual and illogical behavior and, therefore, he was not convinced with the reply of the assessee that the cash deposited during demonetization period was out of cash in hand available as at the beginning of demonetization which was attributed to the withdrawals made from his banks.
4. The Ld. CIT(A) confirmed the order of the AO and his findings are recorded in Para 6.2 to 6.6 of his order as under:
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“6.2 The submissions of the appellant, as above, has been carefully considered. The appellant had made cash deposits totaling to Rs.46,32,000/- during the period of demonetizati
