The Chennai ITAT has dismissed an appeal made by an Assessee, upholding an addition made on account of unexplained cash deposit under Section 69A during the demonetization period. The ITAT found that there was no corroborative evidence to prove the source of the cash deposit, and the Assessee failed to establish a reasonable nexus between the cash withdrawal in 2013 and the cash deposit during the demonetization period.
During assessment proceedings, the Revenue discovered that the Assessee had made cash deposits of Rs. 48.59 Lac to its Axis Bank saving account during the demonetization period. The Assessee explained that the source of the cash deposits was from the sale proceeds of an ancestral property, which was kept in a joint account of the Assessee and his sister-in-law, and subsequently withdrawn on 29.01.2013. The Revenue rejected this explanation and made an addition under Section 69A on account of unexplained cash deposit.
The CIT(A) dismissed the Assessee’s appeal, holding that the Assessee failed to substantiate the cash deposits of Rs. 48.59 Lac in the bank account. The Assessee then referred to the bank statement of his sister-in-law along with a gift deed and contended that the source of the cash deposit pertained to the sale of ancestral property, which was withdrawn in 2013 and gifted to him by his sister-in-law.
The ITAT, however, found a gap of more than three years between the cash withdrawal in 2013 by the Assessee’s sister and the cash deposit made by the Assessee during the demonetization period. The ITAT observed that such a huge gap between the withdrawal and deposit of cash casts an onus on the Assessee to give an explanation with necessary evidence. The ITAT found inconsistency in the Assessee’s arguments regarding the source of cash deposits, and the Assessee failed to file any corroborative evidence to explain why the money received towards the sale of property was kept in his sister-in-law’s bank account, when he had a right and interest in the property.
The ITAT also rejected the Assessee’s contention that the money received from his sister-in-law was kept for the treatment of his brother, as no evidence was placed on record to prove that the money was spent for treatment and how much balance was available with the Assessee.
In conclusion, the ITAT held that there was no infirmity in the CIT(A) order and dismissed the Assessee’s appeal. This judgment was in favour of the Revenue and pertained to the Assessment year 2017-18.
In conclusion, the judgement by the Chennai ITAT in M. Natarajan v. ITO highlights the importance of providing corroborative evidence to prove the source of cash deposits during demonetisation period. The Assessee failed to prove the reasonable nexus between the cash withdrawal in the year 2013 received in form of gift from sister-in-law and cash deposit during demonetisation period, and also failed to provide reasonable explanation that the cash received in form of gift from sister-in-law remained utilized for more than 3 years and subsequently deposited during demonetization period. Therefore, it is crucial for taxpayers to maintain proper documentation and evidence to support their claims in order to avoid additions under Section 69A on account of unexplained cash deposits.
As a suggestion, taxpayers should maintain proper records and documentation of their financial transactions and ensure that they can provide corroborative evidence to support their claims during assessment proceedings. Additionally, seeking professional advice from tax experts and accounting professionals can help taxpayers in complying with the tax laws and regulations, and avoiding any potential disputes with the tax authorities.
