The Income Tax Appellate Tribunal, Agra Bench, has deleted an addition of ₹11 lakh made under Section 69A of the Income-tax Act, 1961, in the case of Smt. Mithilesh Gupta v. Income Tax Officer, Ward-1, Morena. The dispute concerned cash deposited in the assessee’s bank account during the demonetisation period and whether the amount could be treated as unexplained money.
The assessee, a 64-year-old individual receiving family pension after the death of her husband, filed her return of income for Assessment Year 2017–18 declaring a total income of ₹3,30,940. She also claimed to earn income from stitching and alteration work undertaken from her residence.
During scrutiny proceedings, the Assessing Officer noticed cash deposits aggregating to ₹13.50 lakh in two bank accounts. While ₹2.50 lakh was accepted as accumulated savings from stitching and alteration activities, the remaining deposit of ₹11 lakh in the Madhya Pradesh Gramin Bank account was treated as unexplained money and added under Section 69A.
The assessee explained that the deposits represented cash accumulated from earlier bank withdrawals, past savings and amounts received following the death of her husband. Year-wise cash-flow statements, bank statements, passbooks and copies of income-tax returns were relied upon to establish the availability of cash.
The Commissioner of Income Tax (Appeals) rejected the explanation. The appellate authority considered it improbable that substantial cash withdrawn over several years would remain unspent at home until demonetisation. It also relied upon the fact that ₹5 lakh and ₹2 lakh were transferred through NEFT immediately after cash deposits of ₹7 lakh and ₹4 lakh respectively.
ITAT’s Findings
The Tribunal observed that the Assessing Officer had not conducted any enquiry regarding the destination or recipients of the NEFT transfers aggregating to ₹7 lakh. Despite this absence of investigation, the Commissioner (Appeals) concluded that the transaction pattern indicated an arrangement for introducing unaccounted cash through the assessee’s bank account.
The ITAT held that, considering the finding that the cash corresponding to the ₹7 lakh NEFT transfers may not have belonged to the assessee, the amount could not simultaneously be assessed as unexplained money in her hands. An addition under Section 69A requires the assessee to be found to be the owner of the money in question.
Regarding the remaining ₹4 lakh, the Tribunal adopted a considerate view having regard to the assessee’s age, family pension, disclosed stitching income and claim of earlier bank withdrawals. It accepted the explanation that the amount was deposited from past withdrawals and accumulated savings.
Accordingly, the ITAT declined to uphold the findings of the Commissioner (Appeals) and deleted the entire addition of ₹11 lakh. The assessee’s grounds concerning the Section 69A addition and principles of natural justice were allowed, and the appeal was decided in her favour.
Legal Principle Emerging from the Decision
The decision highlights that an addition under Section 69A cannot be sustained merely on suspicion regarding the manner in which cash was deposited or subsequently transferred. The Revenue must examine the surrounding transactions and establish that the money belonged to the assessee before treating it as unexplained money in her hands.
Where immediate bank transfers are relied upon as evidence of accommodation entries, an enquiry into the destination, recipient and purpose of those transfers assumes significance. In the absence of such investigation, adverse conclusions regarding ownership of the deposited money may not justify an addition under Section 69A.
The ruling also demonstrates that explanations involving past withdrawals and accumulated savings must be examined in light of the assessee’s age, income profile, family circumstances, documentary evidence and overall conduct rather than being rejected solely on general assumptions about normal human behaviour.
Why Read This Judgment?
This judgment is relevant for advocates, Chartered Accountants, tax consultants, corporate tax teams and taxpayers handling demonetisation-related cash deposit assessments. It provides useful guidance on ownership of money under Section 69A, evidentiary requirements, examination of cash-flow statements and the need for proper investigation before drawing conclusions from subsequent banking transactions.