2025 (7) TMI 41 - AT - Income Tax

Unexplained cash deposit during the demonetization period - assessee is aged about 78 years and filed return of income for A.Y. 2017-18 declaring income which mainly comprises rental income and bank interest and assessee has also claimed exempt agricultural income - information available with the department case of the assessee selected for scrutiny and inspite of assessee s claim that the said sum is out of the withdrawals made in the preceding years the addition for the total cash deposit was made HELD THAT - Assessee is not into any business activity and mainly earns income from rent bank interest and agriculture. No regular books of account are maintained still the paper book showing the cash book starting from the opening cash in hand at Rs. 5, 89, 314.99 as on 01.04.2010. Bank statement has also been filed. CIT(A) has stated that assessee has not furnished these details before the lower authorities. Even in the bank statement the entries reflected are from 18.06.2013. Withdrawals of cash from the bank account partially supports the contention of assessee coupled with the fact that assessee is a senior citizen and she must be having accumulated cash in hand from past savings including agriculture income. Considering all these facts and being fair to both the parties we find that assessee has been able to explain the source of cash deposit to the extent of Rs. 11.50 lakh which includes cash withdrawals referred above and also accumulated past savings. We accordingly grant part relief to the assessee.

Summary

The core legal question considered in this appeal is whether the addition of Rs. 14.50 lakh as unexplained cash deposit during the demonetization period, made under section 69A of the Income-tax Act, 1961, is justified, given the assessee's claim that the amount deposited was accumulated cash in hand from previous years and legitimate sources.

The principal issue revolves around the applicability and interpretation of section 69A, which deals with unexplained cash credits or deposits, and whether the assessee has satisfactorily explained the source of the cash deposits made during the demonetization period.

Additional sub-issues include the evidentiary value of the cash book and bank statements submitted by the assessee, the timing and verification of cash withdrawals from the bank account, and the assessment of the genuineness of the claimed accumulated cash considering the assessee's income sources and personal circumstances.

Issue-wise Detailed Analysis:

Issue: Legitimacy of Cash Deposits under Section 69A of the Income-tax Act

Relevant Legal Framework and Precedents: Section 69A of the Income-tax Act empowers the Assessing Officer to make additions to income where cash credits or deposits are found unexplained by the assessee. The burden lies on the assessee to satisfactorily explain the source of such cash deposits. The principle is that if the assessee fails to provide a plausible explanation, the amount is liable to be treated as income and added accordingly. Precedents emphasize the need for credible documentary evidence or consistent financial records to substantiate the source of cash deposits.

Court's Interpretation and Reasoning: The Tribunal examined the cash book and bank statements submitted by the assessee, which spanned several years prior to the demonetization period. The cash book, prepared from April 2010 onwards, showed an opening cash balance of Rs. 5,89,314.99, and the bank statements reflected multiple cash withdrawals, including Rs. 4.50 lakh on 09.12.2014, Rs. 1.00 lakh on 19.10.2015, Rs. 50,000 on 02.11.2015, and Rs. 1.00 lakh on 30.11.2015.

The Tribunal noted that the cash withdrawal of Rs. 5.00 lakh on 20.04.2013 could not be verified from the bank statement since the statements commenced from 18.06.2013. However, the other withdrawals were duly reflected and supported the assessee's claim of accumulated cash.

Given the assessee's age (approximately 78 years), the nature of income (rental income, bank interest, and exempt agricultural income), and the absence of any business activity, the Tribunal found it plausible that the assessee had accumulated cash savings from past years, which were deposited during the demonetization period.

Key Evidence and Findings: The cash book and bank statements were critical pieces of evidence. The cash book demonstrated a running balance of cash in hand over several years. The bank statements corroborated multiple cash withdrawals, which partially explained the source of the cash deposits. The Tribunal also considered the personal circumstances of the assessee, including medical expenses related to the ill health and subsequent demise of the husband, which necessitated cash usage.

Application of Law to Facts: Applying section 69A, the Tribunal recognized the burden on the assessee to explain the source of cash deposits. The evidence provided was sufficient to explain Rs. 11.50 lakh of the total Rs. 14.50 lakh deposited. The Tribunal accordingly granted partial relief by deleting additions to the extent of Rs. 11.50 lakh while sustaining the addition of Rs. 3.00 lakh as unexplained cash.

Treatment of Competing Arguments: The Revenue's representative supported the addition upheld by the CIT(A), arguing that the assessee failed to furnish adequate details before the lower authorities. The Tribunal, however, observed that while the details were not submitted earlier, the evidence placed before it was credible and merited consideration. The Tribunal balanced the interests of both parties by granting partial relief rather than complete deletion of the addition.

Significant Holdings:

The Tribunal held that:

"Considering all these facts and being fair to both the parties, we find that assessee has been able to explain the source of cash deposit to the extent of Rs. 11.50 lakh which includes cash withdrawals referred above and also accumulated past savings."

This statement underscores the principle that the burden of proof lies with the assessee, but a plausible and partially verifiable explanation supported by contemporaneous records can lead to partial relief.

The Tribunal established the core principle that in cases of unexplained cash deposits, partial explanation supported by credible evidence and consistent with the assessee's profile and income sources can justify deletion of part of the addition, while unexplained portions may be sustained.

Final determinations on the issue were:

• The addition of Rs. 14.50 lakh made under section 69A was partly justified.
• Rs. 11.50 lakh of the cash deposits were satisfactorily explained by the assessee through cash book entries, bank withdrawals, and accumulated savings.
• The remaining Rs. 3.00 lakh stood unexplained and was rightly added to income.
• The appeal was accordingly partly allowed.