Cash deposit during Demonetization: ITAT deletes the addition as a trail of cash flow established the source of the deposits.
1. The assessee challenged the order dated 18-11-2024 by the National Faceless Appeal Centre for AY 2017–18, contesting an addition of ₹15,00,000 under Section 69A of the Income Tax Act.
2. Key grounds included violation of natural justice, erroneous invocation of Sections 69A and 115BBE, and denial of video conferencing during the appellate hearing.
3. The case was selected for limited scrutiny based on cash deposits during the demonetization period (Nov–Dec 2016).
4. The assessee deposited ₹15,00,000 in Indian Overseas Bank during demonetization, which the AO treated as unexplained money and added it u/s 69A, applying the tax rate under section 115BBE.
5. The assessee claimed that the cash deposits were sourced from earlier withdrawals, especially from Kalupur Co-operative Bank, with records showing a cash balance of ₹15,62,500.
6. The assessee provided partial bank statements and a cash book for Nov 2016 but did not submit the full-year cash book or full account statements initially, raising questions on the adequacy of documentation.
7. The assessee argued that Section 115BBE (amended via the Taxation Laws (2nd Amendment) Act, 2016 on 15-12-2016) should not apply retrospectively to deposits made before that date.
8. The ITAT noted a trail of cash flow, including substantial withdrawals from the assessee’s accounts in earlier months and years, adequately explaining the source of the deposits.
9. The ITAT held that the cash trail was satisfactorily explained and thus the AO erred in making the addition under Section 69A. Consequently, the appeal was allowed in favour of the assessee.
10. The addition of ₹15,00,000 under Section 69A r.w.s. 115BBE was deleted, and the Tribunal ruled in favour of the assessee, setting aside the order of both AO and CIT(A).
The copy of the order is as under:
