ITAT Deletes Addition On Cash Deposits During Demonetisation

The Pune Bench of the Income Tax Appellate Tribunal (ITAT) has deleted the addition of cash deposits during demonetization.

The bench of R.S. Syal (Vice President) has observed that the assessee sold their ancestral agricultural land in 2013 for a sum of Rs. 38 lakhs along with his brother. The assessee’s share was Rs. 19 lakh. The assessee's share of Rs. 19 lakhs in cash was kept with his brother, who was looking after the agricultural operations previously, and both of them decided to purchase new agricultural land in their joint name. Unfortunately, the brother passed away in the month of June 2016, and his sister-in-law handed over his share of cash in the months of August and September 2016, which was deposited in the bank account in November 2016.

During the course of the assessment proceedings, the AO observed that the assessee deposited cash worth Rs. 17 lakhs in his bank account on different dates during the demonetization period. On being called upon to explain the source, the assessee submitted that he, along with his brother, sold certain agricultural land for a sum of Rs. 38 lakhs on April 12, 2013. The assessee’s share in such consideration was Rs. 19 lakh.

The assessee stated that the cash was kept with his brother for the purchase of another property in the nearby vicinity, but the transaction of the new purchase could not materialize. The AO called upon the assessee to furnish details of his monthly expenses, which were duly furnished along with source documentation.

The AO refused to accept the source of the cash deposit of Rs. 17 lakhs in a bank account during the demonetization period on the ground that the agricultural land was sold in 2013 and the cash was deposited in 2016. The AO made the addition.

The issue raised was in respect of the confirmation of the addition of Rs. 17 lakhs made by the AO towards cash deposited by the assessee in his bank account during the demonetization period.

The Tribunal held that once the availability of cash in hands was established, it was not shown by the AO that cash was spent elsewhere. The assessee's explanation for its application must be accepted.

Case Title: Mrs. Usha Narayan Chaware Versus ITO

Citation: ITA No.377/PUN/2022

Date: 24-02-2023

Counsel For Appellant: Sunil Ganoo

Counsel For Respondent: Ramnath P . Murkunde

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