Cash Deposit During Demonitization: ITAT Deletes Penalty on Savings of Women Who Worked in Unorganized Sector

The assessee, Ms. Lena Purshottam Patel, filed her income tax return for AY 2017–18 on 29.03.2018, declaring an income of ₹2,40,380 after a deduction of ₹10,000 under Chapter VIA.

The return was processed under Section 143(1) and subsequently selected for limited scrutiny under CASS to verify cash deposits during the demonetization period.

It was found that the assessee deposited a total of ₹10,63,000 in three bank accounts:

• ₹3,80,000 in Bank of India
• ₹3,33,000 in Bassein Catholic Co-op Bank
• ₹3,50,000 in HDFC Bank

The assessee explained that the deposits were from her lifetime savings and some cash received from her son.

However, the AO, finding the explanation insufficient and unsupported by documents, added the full ₹10,63,000 as unexplained income under Section 69A r.w.s. 115BBE of the Income-tax Act, 1961.

On appeal, the CIT(A) granted partial relief of ₹5,00,000, considering her senior citizen status, but sustained the addition of ₹5,63,000.

The appellant claimed to have worked for 40 years as a house cleaner, babysitter, and caretaker. She asserted that the deposited cash represented her lifetime savings, kept for medical emergencies and her own marriage. She further argued that some cash was also received from her son, a professional photographer.

Here, the emphasis was that in informal, unorganized employment, no documentary evidence like salary slips or contracts exists.

The Department maintained that without such proof, the cash deposits remained unexplained and rightly taxable under Section 69A.

The Tribunal acknowledged that the assessee belonged to the unorganized sector and worked in roles like housekeeping and babysitting for over 40 years. The Court Held that in such vocations, documentary proof is naturally unavailable, but plausible explanations based on human conduct must be accepted.

The Tribunal was satisfied with the explanation that the savings had accumulated over decades and that some amount was contributed by her son.

The Tribunal held that the mere absence of documentation in informal jobs cannot justify penal addition under Section 69A.

Concluded that the addition lacked sustainable legal grounds in the peculiar facts and circumstances of the case.