No addition u/s 69A can be made on opening balance of cash deposited during demonization: ITAT

No addition u/s 69A can be made on opening balance of cash deposited during demonization: ITAT Mumbai Tribunal in the matter of Shri Shail Jayesh Shah vs ITO concluded that no addition u/s 69A can be made on the opening balance of cash deposited during demonization. The brief facts of the case as emanating from the record are: The assessee is an individual and is a professional architect doing consulting activities. During the year under consideration, the assessee earned income from salary, profits and gains of the business, capital gains, and income from other sources. The assessee filed its return of income on 29/07/2017, declaring a total income of Rs. 8,61,560. During the assessment proceedings, it was observed that the assessee has deposited cash of Rs.6 lakh, in its bank account during the demonetization period. Accordingly, the assessee was asked to explain the source of the cash deposited along with documentary evidence. In response thereto, the assessee submitted that the cash of Rs. 6 lakh was deposited on 01/12/2016, in its bank account maintained with Kotak Mahindra Bank. As regards the source of cash deposit, the assessee provided the following details: The assessee had deposited cash of Rs.6,00,000/- on 01.12.2016 in Kotak Bank only.

Source of Cash Deposit:

Cash withdrawal from Kotak Ban on 18.10.2016: Rs.1,00,000/– Cash withdrawal from HDFC Bank on 26.04.2016 to 08.10.2016: Rs.40,000/– Cash on hand as per Return filed on 05.08.2016 Rs. 4,96,031/– The Assessing Officer did not agree with the submissions of the assessee and vide order dated 25/12/2019, passed under section 143(3) of the Act made the addition of Rs. 6 lakh under section 69A of the Act. The learned CIT(A) vide impugned order dismissed the appeal filed by the assessee and, inter-alia, held that from the details submitted by the assessee it is seen that as per the cash book the cash in hand as on 01/11/2016 is Rs.5,25,114, which does not tally with the cash deposited by the assessee on 01/12/2016. The learned CIT(A) further held that the assessee has not been able to prove the nature and source of cash deposited during the demonetization period. ITAT observed that from the copy of the bank statement of Kotak Mahindra Bank, the assessee had deposited Rs. 6 lakh in cash in 600 old currency notes of Rs. 1000 denomination on 01/12/2016. At a glance, it may appear that since the assessee had sufficient cash in hand amounting to Rs. 6,36,031, therefore, the aforesaid deposit of cash would have been made on 01/12/2016, out of the said balance. Further, the Bench added that it cannot be oblivious to the fact that the assessee had also incurred certain expenses in cash. From the perusal of the cash book of the assessee for the year under consideration, forming part of the paper book from pages 4–7, it can be analysed that as on 01/11/2016, the assessee had an opening balance of Rs. 5,25,114. Further, they said that, it cannot be disputed that the demonetization was declared on 08/11/2016, and therefore the cash available with the assessee till that day can only be in old currency notes. Further, from the cash book, it is evident that after 08/11/2016, assessee withdrew total cash of Rs. 1,12,000 (Rs. 60,000 + Rs. 2000 + Rs. 2000 + Rs. 24,000 + Rs. 24,000) on various dates from its bank accounts maintained with Kotak Mahindra Bank, HDFC Bank, and Syndicate Bank. The assessee also has shown to have incurred an expenditure of Rs.27,453, in cash in November 2016. Thus, as on 01/12/2016, the assessee had an opening balance of Rs.6,09,661. It is pertinent to note that after 08/11/2016, the old currency notes were not legal tender and thus any cash which was withdrawn by the assessee after that date can only be in the new currency or the valid currency. Therefore, the cash withdrawn after 08/11/2016, cannot be said to have been in old currency notes which were available for deposit with the assessee on 01/12/2016. Hence, cash in hand till 08/11/2016, can only be in old currency notes which can be considered to have been deposited by the assessee on 01/12/2016. As noted above, as per the cash book, the opening balance as on 01/11/2016 was only Rs.5,25,114. Since the assessee had deposited Rs.6 lakh in cash in 600 old currency notes of Rs. 1,000, denomination on 01/12/2016, therefore, the ITAT bench was of the considered view that the source of deposit of only Rs.5,25,114, in old currency notes can be said to have been satisfactorily explained by the assessee. Therefore, to this extent, the AO was directed to delete the addition. As regards the balance amount of Rs. 74,886, the assessee has not given any satisfactory explanation and thus, the addition was upheld to an extent of Rs. 74,886. Accordingly, the sole ground raised by the assessee was partly allowed. For Official Judgment Download PDF Given Below: