Cash deposits during Demonetization and explanation of accumulated saving belonging to the family members – Issue before Delhi ITAT
In Neha Singh v. Income Tax Officer, Ward 72(1), Delhi [ITA No. 874/Del/2025, decided on June 11, 2025], the primary issue before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, cash deposits made during the demonetization period, which the Assessing Officer (AO) alleged were from undisclosed sources.
The assessee, Neha Singh, had deposited a total amount of ₹28,88,000/- in her bank accounts during the demonetization window. Specifically, she deposited ₹13,50,000/- in her SBI account and ₹1,53,50,000/- in her City Bank account. The AO held that the assessee failed to satisfactorily explain the source of these cash deposits. During the assessment proceedings, despite being given ample opportunities, the assessee contended that the cash deposits were sourced from the accumulated savings of her mother and sister. However, the AO rejected the explanation on the grounds that the linkage between the bank accounts of the assessee’s family members and the cash deposits was not properly established. Furthermore, the AO found the assessee’s explanation for holding such large amounts of cash at home un-convincing, particularly in the context of the demonetization exercise.
The CIT(A (Appeals) concurred with the AO’s findings. The CIT(A) noted that neither the earning capacity nor the cash-holding pattern of the mother and sister were substantiated with credible evidence. He emphasized that the assessee had not provided reasonable proof regarding how such substantial amounts were kept at home, leading him to sustain the addition in full.
Before the Tribunal, the assessee argued that the CIT(A) had erred in sustaining the addition of ₹28,88,000/- without fully appreciating the family background and savings pattern. It was asserted that the cash deposits genuinely belonged to the assessee’s mother and sister and that the assessee had later returned the amount to her mother upon opening a bank account in her name. To substantiate these claims, the assessee filed a voluminous paper book containing detailed financial records, including:
• Copies of income tax returns of the assessee for AY 2011-12 to AY 2017-18, demonstrating consistent income.
• A comprehensive summary of deposits and withdrawals made by both the assessee and her sister from AY 2012-13 to AY 2019-20.
• Bank statements evidencing substantial transactions over multiple years.
• Detailed records of the assessee’s and her sister’s employment and salaries.
• Documentation of specific cash withdrawals made by both the assessee and her sister, along with records of amounts transferred between them.
Upon careful examination of the facts, documents, and rival contentions, the Tribunal observed that neither the assessee had fully discharged the burden of explaining the entire cash deposits, nor could the Revenue summarily dismiss the extensive evidentiary record produced. The Tribunal acknowledged that the peculiar facts and the volume of evidence warranted a balanced approach. The addition was substantially reduced to around Rs. 4 Lakh. The ITAT observed as under:
“5. Upon careful consideration, I note that it was the contention of the assessee before the AO, that the addition made by the AO on account of cash deposited worth Rs. 28,88,000/- during demonetization period. The assessee deposited Rs. 13,50,000/- in SBI and Rs. 1,53,50,000/- in City Bank and during the assessment proceedings, the AO provided various opportunities to the assessee and the assessee made the submission that the cash is deposited out of accumulation of her mother and her sister. However, the AO did not accept the submission as source of the cash was not properly linked with the Bank accounts of the mother and sister of the assessee. AO observed that reasonable explanation was not supplied to him by the assessee for holding of so much amount of cash in the house and depositing the same after the demonetization order. Similarly, Ld. CIT(A) noted that the earning of the mother and the sister and their source of cash has not been explained before him and it is also not clear how so much amount of cash was kept at home and in the absence of evidences, Ld. CIT(A) sustained the addition. Before me, Ld. AR has submitted that Ld. CIT(A) sustained the addition of Rs. 28,88,000/- failing to appreciate that the said cash deposit was in fact out of cash savings by mother and other family members. It was further submitted that the said cash belonged to the mother of assessee and given back to her mother after opening bank account in mother’s name.
In order to prove his version, he filed a Paper Book containing pages 1-148 which includes copy of acknowledgement of return of income filed by the assessee for the assessment years 2011-12 to 2017-18 showcasing adequate income of the assessee; copy of summary sheet of total deposits and withdrawals made by the assessee and her sister starting from AY 2012-13 upto AY 2019-20.; copy of statement of account bearing account no. 02050040005717 maintained by the assessee with Kotak Mahindra Bank for the period 29.8.2011 upto 08.10.2018 reflecting total deposit of Rs. 30,49,642.53 and total withdrawal of Rs. 27,39,095.49; copy of statement of account bearing account no. 632201530033 maintained by assessee’s sister namely Anjana Singh with ICICI Bank for AY 2012-13 upto AY 2017-18; copy of details of salary earned by the assessee for the period 27.11.2009 upto 29.5.2015 amounting to a total of Rs. 34,02,576/-; copy of withdrawals made by the assessee from her City Bank account; copy of details of salary earned by Anjana Singh (sister of the assessee); copy of cash withdrawal by Anjana (sister of the assessee); copy of details of amount transferred by Anjana Singh (sister of assessee) to the assessee and other relevant documents/evidences mentioned in the said Paper Book, as referred above. I have given my thoughtful consideration to the assessee’s contentions before the lower authorities and the documents/evidences placed before me as well as Revenue’s contention in support of the impugned addition.
I find no reason to accept either parties stand in entirety. This is for the precise reason that neither the assessee has been able to properly explain the source of full cash deposits nor the department could simply brush aside all the relevant evidences at one go. Be that as it may, the tribunal is of the considered view that in these peculiar facts, it is deemed appropriate in the larger interest of justice to confirm the impugned addition of Rs.28,88,000/- to Rs.3,88,000/- only with a rider that the same shall not be as a precedent. The assessee gets relief of Rs. 25,00,000/- in other words. Necessary computation shall follow as per law.
6. So far as assessee’s assessment u/s. 115 BBE of the Act is concerned, in view of Hon’ble Madras High Court in SMILE Microfinance Ltd. vs. ACIT in WP(MD) no. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.) has already settled the issue against the department that the law applies to the transaction on or after 01.04.2017 only.
7. The instant assesseee’s appeal is partly allowed in the aforesaid terms.
Order pronounced in the Open Court on 11.06.2025”.
The copy of the order is as under:
