Demonetisation Deposits: Petty Trader Who Deposited ₹10K Got ₹10.15 Lakh Income Tax Notice; ITAT Grants Fresh Hearing After Bank Records Contradicted Department’s Claims

The taxpayer (assessee) has filed an appeal against the order dated 6 November 2025 issued by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, under Section 250 of the Income Tax Act, 1961. The appeal relates to the Assessment Year 2017-18.

The taxpayer had deposited Rs 6 lakh in cash and Rs 4,15,125 through credits during the demonetisation period but had not filed an income tax return. The Income Tax Department issued a notice under Section 142(1) by email, but the taxpayer did not respond. As a result, assessment proceedings under Section 144 were started.

Since the taxpayer could not be found at the last known address, a notice server pasted the notice at the address in the presence of two witnesses, following CBDT guidelines. As there was still no response, the assessing officer, through an order dated 16 December 2019, treated the entire deposit of Rs 1,015,125 as unexplained money under Section 69A and added it to the taxpayer’s income.

The Commissioner of Income Tax (Appeals) dismissed the taxpayer’s appeal due to a delay in filing it, despite giving several opportunities for the taxpayer to present their case. Dissatisfied with this decision, the taxpayer has now filed an appeal before the tribunal.

During the hearing, the taxpayer’s representative argued that the taxpayer is a small trader who travels from village to village to buy and sell goods and, due to the nature of the business, does not have a fixed place of business or residence. It was further submitted that the taxpayer had not made the cash and credit deposits alleged by the assessing officer during the demonetisation period.

In support thereof, bank statements of State Bank of India and Karnataka Bank were produced which show that no cash was deposited in the account of SBI and only Rs 10,000 was deposited in cash in the account of Karnataka Bank during the relevant year. Similarly, credit deposits were only Rs 27,299 in the account of SBI and Rs 149 in the account of Karnataka Bank. The representative, therefore, submitted that the findings of the assessing officer were based on wrong assumptions and did not reflect the correct facts.

The department’s representative, in reply, submitted that these facts and bank records were not placed before the assessing officer or the commissioner (appeals). Therefore, the claims made by the taxpayer require proper verification before they can be accepted.

The matter was therefore sent back to the assessing officer for a fresh examination of the case after considering the documents and submissions made by the taxpayer. In the result, the appeal filed by the assessee is allowed for statistical purposes.