Tribunal upholds addition of unexplained cash deposits during demonetization period

The Tribunal upheld the addition of unexplained cash deposits made by the assessee during the demonetization period under section 69A of the Income Tax Act, 1961. Despite the assessee's explanation of receiving the cash for transferring on behalf of another individual, the Tribunal found the lack of evidence, such as a confirmation letter, to substantiate the claim. As per section 69A, failure to explain the sources of unaccounted money leads to it being treated as income. The appeal was dismissed, affirming the addition of unexplained cash deposits as justified.

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Issues:
The judgment involves the issue of unexplained cash deposits made by the assessee during the financial year, leading to an addition under section 69A of the Income Tax Act, 1961.

Summary:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals) arising from an assessment order passed under section 143(3) of the Income Tax Act, 1961 for the Assessment Year 2017-18. The assessee had declared a net taxable income of Rs.9,78,280, but during scrutiny, it was found that the assessee made total cash deposits of Rs.3,26,61,800, which exceeded the gross turnover declared. The unexplained cash deposits of Rs.34,88,060 during the demonetization period were treated as unexplained money and brought to tax under section 69A of the Act.

On appeal before the CIT(A), the addition made by the Assessing Officer was upheld, leading the assessee to appeal before the Tribunal. The grounds raised in the appeal included the contention that the addition under section 69A was unjustified. The assessee explained that the cash received was for transferring on behalf of another individual for the purchase of IMFL, supported by various financial documents.

The Tribunal considered the submissions of both parties and noted that the assessee failed to substantiate the claim with evidence, such as a confirmation letter from the individual involved. As per section 69A of the Act, if the assessee fails to explain the sources of unaccounted money, it may be deemed as income. Since the assessee did not provide sufficient evidence to support the explanation, the addition under section 69A was deemed justified. The appeal of the assessee was dismissed, and the order was pronounced on 1st June 2023.

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