ITAT Deletes Demonetisation Addition, Accepts Inheritance Claim from Mother-in-Law

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has given relief to petitioner Raadhya Chandrachud by deleting an addition of Rs 23.54 lakh that was made by the Income Tax Department over cash deposits during the demonetisation period.

The case is related to the Assessment Year 2017-18. The assessee had filed her income tax return showing income of Rs. 8,27,690. Later, the Income Tax Department selected her case for limited scrutiny to verify cash deposits made during demonetisation.

During assessment proceedings, the Assessing Officer noticed that cash deposits totalling Rs 23,54,500 had been made in different bank accounts. Since the assessee could not initially provide complete documentary proof, the officer treated the entire amount as unexplained money under Section 69A of the Income Tax Act and taxed it under the stricter provisions of Section 115BBE.

The assessee explained that Rs 21,14,500 out of the deposits was money received from her late mother-in-law, Late Smt. Suhasini Sadashiv Chandrachud, as inheritance. According to her, the deceased had withdrawn substantial cash from banks over several years, and the remaining cash balance was handed over to her. She also stated that this amount had already been disclosed as exempt income in an earlier assessment year. The remaining Rs 2,40,000, she said, came from past savings.

Before the appellate authorities, the assessee submitted bank statements and an affidavit from the legal heirs. In the affidavit, the heirs confirmed that the deceased had cash available and that they had voluntarily relinquished their rights in favour of the assessee.

The CIT(A) rejected the explanation and held that there was no formal will, no proper evidence in support and certain inconsistencies in the figures mentioned by the assessee.

When the matter came up before the ITAT, the Tribunal noted that the Revenue could not produce any material to prove that the cash deposits came from undisclosed sources. It was further observed that the amount had already been disclosed earlier as exempt income, and this fact was not disputed by the department.

Relying on an earlier Delhi Tribunal ruling in the case of Om Parkash Nahar, the ITAT held that cash deposits during demonetisation cannot be treated as unexplained merely on suspicion if the taxpayer provides a reasonable and plausible explanation supported by evidence.

Accordingly, the tribunal deleted the entire addition of Rs 23,54,500 made under Section 69A and allowed the appeal of the assessee.