Cash deposits during demonetization treated as unexplained income due to lack of credible source; assessment upheld against assessee

Whether cash deposits during demonetization were unexplained income: tribunal accepted that bank advances are made for specific purposes and noted the assessee had a bank loan earmarked for cold-storage, and also made a separate deposit of Rs.9 lakhs before demonetization; on the facts the tribunal held the Rs.8 lakhs deposited during demonetization could not be shown to have come from prior cash withdrawals nor adequately explained as cash-in-hand, the legal basis being absence of credible source and proof; result: deposit treated as unexplained and assessment decided against the assessee.

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1. ISSUES PRESENTED AND CONSIDERED

(i) Whether the delay in filing the appeal before the Tribunal was liable to be condoned on the basis of the assessee's application and averments.

(ii) Whether the addition of Rs. 8.00 lakhs as unexplained cash deposits made during the demonetization period was sustainable when the assessee claimed the source to be past cash withdrawal, but failed to substantiate cash availability and utilization.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (i): Condonation of delay

Interpretation and reasoning: The Tribunal considered the assessee's separate application seeking condonation and the averments stated therein. On that basis, it found the explanation sufficient to condone the delay.

Conclusion: The delay of 39 days in filing the appeal was condoned and the appeal was admitted for adjudication on merits.

Issue (ii): Sustainability of addition for unexplained cash deposits during demonetization

Interpretation and reasoning: The assessee explained that cash deposits aggregating to about Rs. 8.16 lakhs in November 2016 were made out of earlier cash withdrawal of Rs. 15 lakhs in March 2016. The Tribunal examined the surrounding facts noted by the authorities: (a) the cash withdrawal of Rs. 15 lakhs was made shortly after receipt of a bank loan of Rs. 20 lakhs, indicating the loan was taken for a stated specific purpose and suggesting contemporaneous need for funds; (b) the assessee had also made substantial cash deposits (about Rs. 9 lakhs) even before the demonetization period, weakening the claim that the later November 2016 deposit necessarily represented preserved cash from the March 2016 withdrawal; and (c) the assessee did not furnish justification or supporting material to establish availability of cash-in-hand for the relevant period.

The Tribunal also noted that the appellate authority had afforded a further opportunity to substantiate the source through specified details (including income evidence and a date-wise cash flow/cash account), but the assessee did not comply and did not respond with the required documents. In the absence of substantiation of the cash trail and cash retention, the Tribunal found no basis to accept the explanation that the deposits were from past withdrawals.

Conclusion: The Tribunal upheld the confirmation of the Rs. 8.00 lakhs addition as unexplained cash deposits, finding that the assessee failed to justify the cash-in-hand and failed to substantiate the claimed source despite opportunity. The appeal was dismissed.

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