No independent investigation conducted – ITAT Surat curtailed addition of cash deposit done during demonetization period
Here is an interesting case of cash deposits during demonetization period. The case detail is as under:
Case Name: Sureshbhai Bhiukhabhai Patel vs. Income Tax Officer, Ward-1, Bardoli by ITAT Surat
Appeal No.: ITA No. 657/SRT/2024
Date: November 14, 2024
Let us have a short overview of the case:
Cash Deposits: Assessee deposited a total of ₹ 46,32,500, out of which ₹27,14,000 was in the form of Specified Bank Notes (SBNs), raising doubts from the Assessing Officer (AO).
AO’s Observation:
The AO and CIT(A) questioned the source of these deposits, noting that no cash-in-hand was reported in the ITR for AY 2015-16 and 2016-17.
Assessee’s Argument:
1. The assessee, an agriculturist, claimed the deposits originated from agricultural income and past cash savings.
2. ITRs for earlier years showed cash-in-hand of ₹9,67,166 (AY 2012-13) and ₹8,25,082 (AY 2013-14).
3. Agricultural income for AY 2015-16 and 2016-17 was ₹6,57,420 and ₹2,87,660 respectively.
4. The AO accepted a portion of the deposits (₹19,15,500).
Tribunal’s Observations:
1. Agricultural Income:
• The Tribunal noted that no independent investigation was conducted into the agricultural holdings or receipts from the produce.
• Given the lack of conclusive evidence, a reasonable ad hoc disallowance of 10% on ₹ 27,14,000 was considered sufficient to address revenue leakage concerns.
2. Section 115BBE (Enhanced Rate of Tax):
• The Tribunal held that the enhanced rate under Section 115BBE was not applicable for AY 2017-18.
• Reference was made to precedents from various benches of the Tribunal, including Samir Shantilal Mehta vs. ACIT (ITA No. 42/SRT/2022), and others.
Decision by ITAT:
• Partly Allowed:
• The cash deposit addition was reduced by applying a 10% ad hoc disallowance.
• The applicability of Section 115BBE for enhanced tax rates was dismissed.
As various other judgments, this one also highlights the importance of substantiating cash deposits with proper documentation, particularly for agriculturists, and the non-applicability of Section 115BBE for AY 2017-18 as clarified in multiple Tribunal rulings.
The copy of the order is as under:
