2025 (2) TMI 1385 - AT - Income Tax

Addition of cash deposit during demonetisation as unexplained money denied; only income element estimated and partial relief granted.

Addition of a cash deposit during the demonetisation period as unexplained money was contested. ITAT found the sum had been immediately used for online ... Addition of the cash deposit during demonetization period as unexplained u/s 69A - Estimation of income - HELD THAT:- Where the alleged sum has been immediately utilised for making payments through on line mode to other authorities including universities on behalf of the students and also considering the fact that the assessee has been regularly carrying out the said activities in the past also, it is of the considered view that firstly the alleged sum cannot be categorized as unexplained money u/s 69A r.w.s. 115BBE of the Act and secondly only the income element can be estimated. But since the assessee has not provided complete details of the students, estimate the income of Rs. 50,000/- on the alleged sum of Rs. 10,00,000/- and give part relief to the assessee. Accordingly grounds of appeal raised by the assessee are partly allowed. Issues: Whether the Commissioner of Income Tax (Appeals) erred in upholding the addition of Rs. 10,00,000/- as unexplained cash under Section 69A read with Section 115BBE of the Income-tax Act for deposits made during the demonetization period.Analysis: The assessee operates an MP Online Kiosk and received receipts which were deposited in the bank and subsequently utilised to make online payments on behalf of customers, including payment of examination fees to universities. A portion of the total bank credits was accepted by the assessing officer as genuine business transactions while Rs. 10,00,000/- deposited during the demonetization period was treated as unexplained cash and added as income invoking Section 69A read with Section 115BBE. The deposited amount was shown to have been immediately applied towards payments for students, with documentary details supplied for part of the sum and evidence of recurring similar business activities presented. The assessing authority's contention regarding authorization to accept old denomination notes was held to be a matter for other authorities and not determinative of income assessment. Given the utilisation of the receipts in the ordinary course of business and partial documentary support, the Tribunal found that the amount could not be categorised entirely as unexplained money and that only the income element could properly be estimated.Conclusion: The addition of Rs. 10,00,000/- as unexplained cash under Section 69A read with Section 115BBE is not sustained in full; only the income element is estimated at Rs. 50,000/-. This conclusion is partly in favour of the assessee.