ITAT: Validates Cash Deposits During Demonetisation Sourced From Assessee’s Deceased Mother; Deletes Sec. 69A Addition

The Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) has allowed an appeal filed by Jamshed Naval Karanjia against the Commissioner of Income Tax for Assessment Year 2017-18 and deleted an addition of Rs 6.70 lakh made in respect of cash deposits during the demonetisation period.

Background of the case

The case originated after the Income Tax Department, under “Operation Clean Money“, identified cash deposits of Rs 14 lakh made during the demonetisation period. Since no return of income was filed and notices were allegedly not complied with, the Assessing Officer passed an order under Section 144 of the Income Tax Act and treated the deposits as unexplained income under Section 69A. During the course of appellate proceedings, the additions were restricted to Rs 6,70,000 as the assessee could not prove the nature of the cash deposit.

The assessee explained that he had travelled to India in 2016 to attend his daughter’s wedding. He had brought funds from Canada for wedding expenses, and the unspent amount, along with cash gifts received during the wedding, was deposited into the bank account. It was also submitted that part of the money represented savings of his late mother, which were handed over by his brother after her death. An affidavit was filed in support of this explanation.

After examining the records, the Tribunal observed that the explanation was supported by an affidavit and the Revenue failed to effectively disprove it. Considering the overall facts and family circumstances, the Tribunal held that the explanation could not be rejected merely on suspicion.

Accordingly, the Tribunal deleted the addition of Rs 6.70 lakh made under Section 69A read with Section 115BBE and allowed the appeal in favour of the assessee.