In a significant judgment offering relief to a taxpayer, the Delhi Bench “SMC” of the Income Tax Appellate Tribunal (ITAT) has allowed the appeal of Ms. Meena Neupane, setting aside an addition of over Rs.24 lakhs made under Section 69A of the Income Tax Act.
Background: Demonetization Deposits Trigger Scrutiny
The case pertained to the Assessment Year 2017-18, during which Ms. Meena Neupane had deposited a total of Rs.24,21,000 in her bank account during the demonetization period. She had filed her return on July 30, 2017, and the case was picked up for scrutiny under CASS (Computer Aided Scrutiny Selection).
Despite multiple notices issued by the Assessing Officer (AO), the assessee allegedly failed to respond adequately. Consequently, the assessment was completed ex parte under Section 144, and an addition of Rs.24,21,000 was made as unexplained income under Section 69A. The total income was assessed at Rs.36,90,410.
Her first appeal was dismissed by the Commissioner of Income Tax (Appeals) on the grounds of a 92-day delay in filing, though there appeared to be a discrepancy in how the delay was assessed.
The Assessee’s Argument
Represented by CA M.R. Sahu, Ms. Neupane personally appeared before the Tribunal. It was argued that:
- The CIT(A)’s dismissal was legally flawed because the appeal was, in fact, filed within the permissible time limit.
- No show-cause notice was issued before rejecting the appeal on technical grounds, violating principles of natural justice.
- The assessee had clear and traceable evidence that the cash deposits made during demonetization were sourced from her own earlier bank withdrawals, not from any unexplained or unaccounted income.
The assessee’s legal counsel pointed to bank statements showing:
- Rs.15,00,000 withdrawn on December 29, 2016
- Rs.9,15,500 withdrawn on March 8, 2016
This totalledRs.24,15,500, which matched the cash deposits made on November 12, 2016 (Rs.24,15,500) and November 15, 2016 (Rs.5,500). This evidence clearly supported the explanation that the deposits were made from past savings withdrawn well before demonetization.
It was also highlighted that the CBDT Instruction No. 20/2015, which encourages tax authorities to give due consideration to such explanations, had been overlooked by the lower authorities.
Tribunal’s Verdict: No Delay, No Unexplained Income
Hon’ble Vice President Shri Mahavir Singh, after reviewing the records and hearing both parties, made several key observations:
- The assesseedid not delay the appeal. The assessment order dated November 7, 2019, was received on January 17, 2020, and the appeal was filed on February 6, 2020 — well within the prescribed time limit.
- The cash deposit explanation was backed by proper evidence, including matching withdrawal and deposit dates, cheque numbers, and bank records.
Based on these findings, the Tribunal set aside the addition of Rs.24,21,000, concluding that there was no unexplained income and the assessee had provided a valid source for the deposits.
Conclusion
This ruling reinforces the importance of maintaining proper financial records and also underscores the duty of appellate authorities to respect procedural fairness. In cases involving cash deposits during the demonetization period, evidence-backed explanations can provide strong grounds for relief.
