ITAT deletes penalty on Cash Deposited by Farmer during demonetization:

ITAT deletes penalty on Cash Deposited by Farmer during demonetization The assessee, being a legal heir to his late father, filed his return for AY 2017-18 declaring a total income of Rs. 3,56,370. The case was selected for scrutiny of cash deposits made during the demonetization. He explained that the deposits were sourced from prior cash withdrawals and agricultural sales. Despite furnishing cash books and various other documentary evidence, including claimed agricultural land ownership, the assessing officer rejected the explanation and treated Rs. 2,75,680 in agricultural income as “income from other sources” and added Rs. 13,50,000 under Section 69A as an unexplained amount. Aggrieved, the assessee went into appeal, but CIT (A) upheld the two additions made by AO.

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Main Issue before Tribunal: Can demonetization cash deposits be treated as unexplained money if the assessee provides a matching cash trail and agricultural income proof, and were the AO and CIT (A) right in ignoring documentary proofs like land ownership, cash book entries, and banking trails?

ITAT's Decision: The Hon'ble ITAT held that the assessee had submitted supporting documents, including ownership proof of agricultural land, cash books, and detailed records of cash withdrawals preceding the demonetization deposits. These materials had been disregarded by both the authorities, i.e., the AO and CIT(A). The Tribunal observed that the CIT(A)'s reliance on the Supreme Court's decision in Sumati Dayal v. CIT regarding human probability was inappropriate, as the assessee had deposited substantial amounts in logical tranches within days of the demonetization announcement. Therefore, the tribunal rejected the finding that the agricultural income was bogus and held that the addition of Rs. 13.5 lakh under Section 69A was unsustainable given the matching withdrawal and deposit pattern. Thus, the tribunal allowed the appeal and deleted both additions made by the AO. To Read Full Order, Download PDF Given Below: