Addition under Section 68 upheld for unexplained cash deposits during demonetization period despite offered income

ITAT Mumbai upheld addition under Section 68 for cash deposits made during demonetization period. Assessee offered additional income before ITSC but failed to establish nexus between offered income and cash deposits with documentary evidence. Despite opportunities, assessee could not prove source of deposits made on 25/11/2016. ITAT found assessee's arguments as afterthought, noting offered income pertained to assessment years 2009-10 to 2016-17. CIT(A)'s order was set aside, AO's addition affirmed, and Revenue's appeal allowed.

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Issues involved:
The appeal challenges the deletion of addition under section 68 of the Income Tax Act related to cash deposits during the demonetisation period.

Summary:
1. Issue 1: Deletion of addition under section 68 - Lack of documentary evidence
The Revenue challenged the deletion of the addition of Rs. 1,63,92,000 made under section 68 of the Income Tax Act due to cash deposits during demonetisation. The Assessing Officer found the assessee's explanations vague and lacking in supporting evidence. The AO emphasized the failure to establish the link between income offered before the Income Tax Settlement Commission and the cash deposits. Consequently, the AO treated the cash deposit as unexplained credit under section 68 and added it to the total income.

2. Issue 2: CIT(A)'s decision on the deletion of addition
The Commissioner of Income Tax (Appeals) (CIT(A)) deleted the addition, stating that the assessee had earned unaccounted income from the sale of land and brokerage, which was offered before the Income Tax Settlement Commission. The CIT(A) noted that the Settlement Commission had accepted the additional income offered by the assessee. The CIT(A) emphasized that the cash deposited was from the income earned and accepted by the Settlement Commission, thus justifying the deletion of the addition under section 68.

3. Judgment and Decision
The ITAT Mumbai considered the submissions and material on record. Despite the assessee's claims, the ITAT found that the assessee failed to establish a clear link between the additional income offered before the Settlement Commission and the cash deposits during demonetisation. The ITAT noted that the cash was deposited before the application to the Settlement Commission, and the assessee could not provide concrete evidence of the link. As a result, the ITAT set aside the CIT(A)'s decision and affirmed the addition made by the AO under section 68. The appeal by the Revenue was allowed, and the addition of Rs. 1,63,92,000 was upheld.

This judgment highlights the importance of providing concrete evidence and establishing a clear link between income sources and cash transactions to avoid additions under the Income Tax Act.

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