TaxTMI 
TaxTMI 
2026 (6) TMI 466
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....osited out personal saving from salary income. The assessee also claimed that he received salary in cash from his employer for the sum of Rs. 10 lakhs during the year. 3.1 The AO found that documentary evidence for cash salary was for Rs. 9.6 lakh only. Therefore, the AO accepted the cash deposit to the extent of 9.6 lakh from explained sources and remaining amount of Rs. 2.15 lakh was treated as unexplained. Accordingly, assessment order under section 143(3) of the Act was passed as on 28th October 2019 after making addition of Rs. 2.15 lakh to the total income. 4. Being aggrieved the assessee filed a petition under section 264 of the Act dated 01-07-2021 before the Principal Commissioner of Income Tax-1 Bangalore (hereafter the learned PCIT). The assessee in the petition contended that during the year (A.Y. 2017-18) he drawn salary in cash for sum of Rs. 9.6 lakh. Similarly, in the A.Y. 2016-17 and 2015- 16 received salary in cash for sum of Rs. 7.2 lakh and 4.2 lakh. The assessee claimed that he is unmarried and live in joint family-owned house therefore he has very minimal expenses. Hence, he has saving from salary income out which he used to give small interest free adva....
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....g a bank account. The assessee also failed to provide details of household expenses or actual savings from such income. Hence rejected the assessee's claim of past saving. 4.3 The AO also pointed out inconsistency in the assessee's statements. In proceedings u/s 264 of the Act, the assessee admitted giving small loans to farmers out of his salary, whereas in response to notice issued u/s 142(1) of the Act, the same was denied. This contradiction led the AO to doubt the genuineness of the explanation. 4.4 However, the AO accepted that part of the cash deposit could be from current year salary received up to the demonetization period, and accordingly treated Rs. 7,20,000 being salary from April 2016 to December 2016 as explained. The balance amount of Rs. 4,55,000/- was treated as unexplained money u/s 69A of the Act. 5. The aggrieved assessee preferred an appeal before the learned CIT(A). However, the learned CIT(A) confirmed the finding of the AO by observing as under: 6.2 I have carefully examined the assessment order dated 09/03/2023 and the preceding order of the Principal Commissioner dated 01/02/2022 passed under Section 264 of the Act. The Principal Commissi....
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....ng any loan to the farmers. These findings show that the Assessing Officer did consider the various submissions and documents filed by the appellant including during the revision proceedings. 6.6 The Assessing Officer has clearly brought on record that the assessee has received Rs. 7,20,000/- and Rs. 4,20,000/- as salary income for F.Y. 2015-16 and 2014-15 respectively as certified by the employer. However, the Assessing Officer has rightly observed that simply stating that the source of cash deposit is from the savings of previous years cannot substantiate the cash deposits in the absence of any valid documentary evidence. The Assessing Officer has also noted that it is very impractical for a person to keep lakhs of rupees in his house in the form of cash, despite having an active bank account, and that the manner and place where the money has been kept has not been furnished by the appellant. 6.7 The transfer of the case to Faceless Assessment Unit was in accordance with the scheme notified under Section 144B of the Act and does not vitiate the assessment proceedings. The Faceless Assessment scheme is intended to eliminate human interface and bring greater trans....
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....deposit. However, the Assessing Officer has held that the balance amount of Rs. 4,55,000/- remains unexplained as the appellant failed to substantiate the savings from earlier years with documentary evidence. 6.12 I have carefully considered the submissions of the appellant and the findings of the Assessing Officer. The appellant has submitted that he received salary of Rs. 7,20,000/- in FY 2015-16 and Rs. 4,20,000/- in FY 2014-15, predominantly in cash, and that he saved money from such salary over the years. However, mere assertion of having saved money from earlier years is not sufficient to discharge the onus cast upon the assessee under Section 69A. The appellant was required to demonstrate, with credible evidence, that he actually had such savings in cash form and that such cash was accumulated out of explained sources. 6.13 The Assessing Officer has rightly observed that the appellant has not submitted any details of expenditure incurred from salary of previous years and the net amount available for savings. A person earning salary of Rs. 7,20,000/- and Rs. 4,20,000/- in the earlier two years would necessarily have to incur substantial expenditure on basic ....
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....late and keep large amounts of cash at home instead of depositing in the bank over multiple years strains credulity. 6.17 The appellant has relied upon para 4 of the Principal Commissioner's order which noted his submission that salary for earlier years was received in cash. As discussed earlier, the Principal Commissioner merely noted the submission and directed verification, and did not make any finding accepting such salary as valid source for the cash deposits. The burden to prove the source with credible evidence remained on the appellant, which has not been discharged. 6.18 The Assessing Officer has given full credit to the salary received during FY 2016-17 up to the end of demonetization period as source for Rs. 7,20,000/- out of total cash deposit of Rs. 11,75,000/-. This shows that the Assessing Officer has not been unreasonable or prejudiced but has carefully examined each component of the appellant's explanation. The balance amount of Rs. 4,55,000/- has been treated as unexplained only after the appellant failed to substantiate savings from earlier years with credible evidence. 6.19 The appellant has argued that he comes from Marwadi co....
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....ary evidence. It was argued that mere receipt of salary in cash does not automatically prove accumulation of savings. The Ld. DR further submitted that the AO has rightly examined the issue in set aside proceedings and accepted only the portion which was supported by evidence. The balance amount was rightly treated as unexplained u/s 69A, as the assessee could not establish actual cash availability from past savings. Furthermore, the appeal order passed under section 264 of the Act is not appealable. 9. We have heard the rival contentions of both the parties and perused the materials available on record. The issue before us is with regard to addition made u/s 69A of the Act on account of cash deposits during the demonetisation period. At the outset, we note that the assessee is an individual having only salary income and there is no dispute on this factual position. It is also an undisputed fact on record that the assessee has received salary in cash for three consecutive years, namely Rs. 9.6 lakh in the year under consideration Rs. 7.2 lakh in A.Y. 2016-17 and Rs. 4.2 lakh in A.Y. 2015-16. These facts have not been doubted by the Revenue at any stage and even the AO has accept....
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....ned that the cash deposits were made out of salary received in cash over the years and savings therefrom. The fact that the assessee was receiving salary in cash is not disputed. The assessee has also explained that he is unmarried and living in a joint family, resulting in minimal personal expenditure. In such factual background, the possibility of savings out of salary income cannot be brushed aside mechanically. 10.4 The AO has rejected the explanation mainly on the ground that no documentary evidence was produced to show past savings and that it is improbable to keep cash at home. In our view, such reasoning is not sustainable in the given facts. When the source of income itself is accepted which is in cash, and when the assessee has no other source of income, the availability of some savings in cash form is a natural consequence. The law does not mandate that savings must necessarily be kept in bank or must be supported by documentary trail in all circumstances. 10.5 Further, the addition originally made was only Rs. 2.15 lakh, which itself indicates that the AO had substantially accepted the explanation of the assessee. The dispute before us is only with respect to such....