Assessees cannot accept demonetized bank notes as deposits lack legal tender status under Section 69A

The ITAT Bangalore ruled on additions under Section 69A regarding post-demonetization cash deposits. The tribunal held that assessees should not have accepted specified bank notes (SBNs) after demonetization as they were no longer legal tender. Following CBDT Instruction 21/02/2017, the tribunal emphasized examining whether deposits align with historical transaction patterns. The assessee must establish genuineness of deposits and provide PAN/address details of depositors for loan repayments. The AO was directed to verify all evidence and consider claims per law. The appeal was partly allowed for statistical purposes.

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Issues:
1. Treatment of cash deposit as unexplained income under section 69A of the Income Tax Act.
2. Adequacy of evidence provided by the assessee to substantiate the source of cash deposits.
3. Consideration of submissions by the assessing officer and the Commissioner of Income Tax (Appeals).
4. Application of relevant instructions issued by the Central Board of Direct Taxes in assessing cases involving cash deposits during the demonetization period.

Issue 1: Treatment of Cash Deposit as Unexplained Income:
The appellant's case revolved around the contention that the cash deposited in the account was inherited from the father and, therefore, exempt under section 56 of the Income Tax Act. However, the Assessing Officer (AO) considered it unexplained income under section 69A due to lack of documentary evidence regarding the source of the cash withdrawn from the father's account. The Commissioner of Income Tax (Appeals) upheld the AO's decision, emphasizing the failure to prove sole inheritance, nominee status, or the existence of a will. Consequently, the additions made by the AO were confirmed.

Issue 2: Adequacy of Evidence Provided by the Assessee:
The appellant failed to provide conclusive evidence to substantiate the claim that the cash deposited was inherited from the father. Despite submitting various documents, such as cash book, income statement, and death certificate, the appellant could not establish the trail of cash withdrawn by the father and deposited into the account. The absence of critical evidence led to the AO treating the cash deposit as unexplained money under section 69A.

Issue 3: Consideration of Submissions by Authorities:
The appellant raised concerns regarding the time given by the AO and the alleged non-consideration of submissions. However, the Tribunal reviewed the contentions and noted the necessity for the cash book and confirmations from depositors to be filed and verified by the AO. The Tribunal emphasized the importance of providing all relevant details as per applicable instructions and directed the AO to verify the evidence submitted by the appellant.

Issue 4: Application of Relevant Instructions by CBDT:
The Tribunal referred to various instructions issued by the Central Board of Direct Taxes concerning investigations into cases involving cash deposits during the demonetization period. Emphasis was placed on the need to analyze cash deposits, sales, and historical transactions to identify unaccounted money. The Tribunal directed the appellant to establish the genuineness of the deposits and furnish details of depositors for verification.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, directing the AO to verify all details and evidence provided by the appellant in accordance with the applicable instructions. The appellant was granted a physical hearing to justify the claim, emphasizing the burden on the assessee to substantiate the source of cash deposits during the demonetization period.

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