ITAT upholds Addition on Failure to Explain Source of Cash Deposit in Bank Account During Demonetization

ITAT upholds Addition on Failure to Explain Source of Cash Deposit in Bank Account During Demonetization

On 1 February 2021, the Income Tax Appellate Tribunal (ITAT), Delhi Bench, in the case of Leela Devi (Appellant/ Assessee) v. ITO (Respondent) upheld that the addition on the ground that the assessee failed to explain the source of a cash deposit in her bank account during the demonetization period

The ITAT upheld the order of the Commissioner of Income Tax (Appeals) [CIT(A)] of the addition and it held that the assessee failed to explain the source of a cash deposit in her bank account during the demonetization period.

The ITAT Judicial Member Bhavnesh Saini noted that when the matrimonial dispute was not settled till August 2019, there was no reason for the assessee to keep the cash at home.

The facts of the case are that Leela Devi (Assessee) filed the return of income declaring total income. She alleged to have income from house property and income from other sources.

The assessee has made a cash deposit of Rs. 15 lakh with HDFC Bank during the demonetization period. It was submitted by her that cash deposited during the demonetization period includes lifetime savings and part of cash withdrawal from the bank account in earlier years for personal security and other household expenditure. It was further stated by the assessee that her withdrawal during Financial Year 2014-15 was Rs. 14,50,000/-.

The reply of the assessee was not found tenable,and hence the cash deposit of Rs. 15 lakh in the bank account was treated as income from undisclosed sources. It was added to the income of the assessee under Section 69A of the Act read with Section 115BBE of the Act.

The assessee challenged the addition before the Commissioner of Income Tax (Appeals) [CIT(A)]. It was submitted before the CIT(A) that there was a matrimonial dispute between the assessee's son and the daughter-in-law after marriage which was performed in June 2012.

It was further alleged that the matrimonial dispute was not settled till the demonetization Rs. 15 lakh was lying at the house that deposited in the bank account. The source of the cash deposited was explained as above.

It was further explained that the matrimonial dispute was settled vide statement for a total sum of Rs. 23 lakh out of which Rs. 7 lakh was paid to the daughter-in-law and balance amount of Rs. 16 lakh was paid to daughter-in-law in two installments.

The assessee gave the above explanation for depositing cash from different sources. The CIT(A) rejected the explanation given by the assessee and dismissed the appeal of the assessee.

An appeal was filed before the ITAT challenging the order of the CIT(A) of the addition of Rs. 15 lakh on account of unexplained cash deposit in bank account under Section 69A of the IT Act.

The ITAT stated that the assessee deposited the cash of Rs. 15 lakh in three installments in her bank account in November 2016, which would lead to an irresistible conclusion that she was keeping unaccounted cash of Rs. 15 lakh with her at the time of demonetization period.

It was further observed by the ITAT that the assessee realized that such currency cannot be used anywhere, then only she deposited it in her bank account. Hence, the return of income was filed belatedly after the expiry of the period provided under Section 139(1) of the Income Tax Act (IT Act) for filing the return of income within the period of limitation.