Navneet Garg Vs ITO (ITAT Delhi)
Demonetisation Cash Deposit Explained in Part — Capital Improvement Partly Allowed by Estimation
In this appeal, ITAT examined two issues: (1) addition of ₹46.75 lakh u/s 68 r.w.s.115BBE on account of cash deposits during demonetisation, & (2) disallowance of indexed cost of improvement of ₹1.09 crore while computing capital gains.
For the cash deposits, Assessee proved through Bank of Baroda statements (pages 22–31) that ₹11 lakh withdrawn between 07.04.2016 & 09.06.2016 remained unspent & was re-deposited immediately after demonetisation. Since neither AO nor CIT(A) recorded any finding that this cash was utilised elsewhere, ITAT accepted the explanation & deleted this ₹11 lakh. For the remaining ₹35.75 lakh, Assessee relied on withdrawals made during AYs 2013–2016. However, the cash-flow statements did not establish continuous retention of cash for such long periods. ITAT therefore remanded this portion to AO for fresh verification.
On the capital-improvement issue, Assessee claimed land-filling & boundary-wall expenditure of ₹1.53 crore backed only by a valuer’s report. CIT(A) rejected the claim entirely due to absence of bills, vouchers, contractor details or TDS, allowing only the purchase-deed supported cost of ₹43.88 lakh. Before ITAT, Assessee produced an indexation chart & confirmations from buyers stating that boundary walls existed. Considering that some expenditure was undeniably incurred but not fully evidenced, ITAT applied a fair estimate. It restricted the allowable improvement cost to 50% of ₹1.09 crore (after excluding acquisition cost already accepted), fixing it at ₹55 lakh & directed AO to allow indexation accordingly.
