2026 (1) TMI 879 - AT - Income Tax

Unexplained cash deposits during demonetization: 50% of deposits treated as assessable where source not satisfactorily proven

Unexplained cash deposits during the demonetization period were addressed: where the assessee failed to satisfactorily explain nature and source of cash, ... Addition u/s 69A - unexplained money - cash deposited by the Appellant burden of proof - assessee failed to discharge the onus of satisfactorily explaining the nature and source of cash deposit during the demonetization period HELD THAT:- Neither the entire addition made by the Ld.AO nor the contention of the assessee that he had sufficient cash available with him, can be accepted outright. So far as various judicial precedents relied on by the Ld.AR are concerned, the applicability thereof would depend upon the peculiar facts of each case which in our considered view, are distinguishable in the present case in hand, specifically when the cash is deposited during the demonetization period. Thus, we are of the considered view that the amount of 50% of the total cash deposited during the demonetization period can reasonably be estimated as available to the assessee for making the cash deposits during the demonetization period. Appeal raised by the assessee are accordingly partly allowed. Issues: Whether the addition of Rs.27,00,000 made under Section 69A of the Income-tax Act, 1961 in respect of cash deposits during the demonetisation period was justified.Analysis: Evidence shows cash deposits during the demonetisation period and the assessee asserted the source as earlier bank withdrawals recorded in audited books and cash book. The Assessing Officer doubted the explanation due to a departure from the assessee's normal pattern of immediate cash utilization and absence of denomination reconciliation; no adverse material disproving bank withdrawals was produced by the Revenue. The cash-availability statement demonstrates substantial monthly withdrawals and closing balances, making neither party's position wholly acceptable. Considering the factual matrix and the need for a reasonable estimate given the anomaly in pattern and lack of detailed denomination reconciliation, a partial adjustment was deemed appropriate.Conclusion: The addition under Section 69A is sustained in part and restricted to Rs.13,50,000 (50% of Rs.27,00,000); the appeal is partly allowed, which is partly in favour of the assessee.