Limited Scrutiny Breach &; Explained Cash Deposits – Addition Deleted

Rashmi Hitesh Anandani Vs ITO (ITAT Pune)

Limited Scrutiny Breach & Explained Cash Deposits – Addition Deleted

The ITAT condoned a minor delay of 13 days in filing the appeal due to genuine reasons including the demise of the assessee’s father and procedural delays. On merits, the case involved addition under section 69 for alleged unexplained cash deposits, including during the demonetization period.

The Tribunal held that the Assessing Officer exceeded jurisdiction by examining total cash deposits despite the case being selected for limited scrutiny only for demonetization deposits. Further, based on cash flow analysis, withdrawals, and opening cash balance, the assessee had sufficient cash in hand to explain the deposits. Since cash balance never turned negative and was supported by bank records, the addition was held unjustified.

Accordingly, the addition of ₹8.22 lakh was deleted and the appeal was allowed.

FULL TEXT OF THE ORDER OF ITAT PUNE

The captioned appeal at the instance of assessee pertaining to A.Y. 2017-18 is directed against the order dated 26.03.2025 framed by Addl/JCIT (A)-2, Ahmedabad arising out of Assessment Order dated 15.12.2019 passed u/s.143(3) of the Income Tax Act, 1961 (in short ‘the Act’).

2. Registry has pointed out that the appeal is barred by limitation as the assessee has filed the appeal before this Tribunal with a delay of 13 days. Assessee has filed condonation application explaining the reasons which led to delay and the relevant portion reads as follows :

C. Reasons for delay in filing an appeal within stipulated timelines:

1. Demise of Appellant’s father:

The appellant’s father was admitted to the hospital in May 2025 due to a serious medical condition, and the appellant was fully engaged in attending to his care during this critical period. As a result, the appellant was unable to focus on the preparation and filing of the appeal.

Unfortunately, on 03/ 06/ 2025, the appellant’s father passed away and the appellant had to attend to various personal, family, and ceremonial obligations. These circumstances further contributed to the delay of 13 days in filing the appeal.

2. Exchange of Files:

The appellant submits that time has passed in process of compiling and collecting details and information as requested by the new tax consultant. Once the same has been complied and collected, appellant submitted the same to the tax consultant. Hence, a delay has crept into filing of the present appeal.

However, in this entire process, precious time to file an appeal was unfortunately lost and a delay of about 13 days has crept into the matter. It is submitted that the delay in filing the appeal is purely unintentional.”

3. Considering the above reasons, I find that the delay is not intentional and therefore placing reliance on the judgments of Hon’ble Apex Court in the case of Collector, Land Acquisition, Anantnag & Anr. Vs. Mst. Katiji & Ors. reported in (1987) 2 SCC 107 and in the case of Inder Singh Vs. State of Madhya Pradesh judgment dated 21.03.2025 (2025 INSC 382) condone the delay of 13 days in filing the appeal before this Tribunal and admit the appeal for adjudication.

4. The assessee has raised as many as ten grounds of appeal and the grievance of the assessee revolves around the addition of Rs.8,22,850/- made by the Assessing Officer for the alleged unexplained cash deposit during the year under consideration including the cash deposit during the demonetization period.

5. Brief facts of the case are that the assessee is an individual and declared income of Rs.3,49,700/- in the e-return for A. Y. 2017-18 furnished on 26.06.2017. Case selected for scrutiny to verify the cash deposit during the demonetization period followed by validly serving statutory notices u/s.143(2) and 142(1) of the Act. Assessee is employed with Seva Vikas Cooperative Bank Limited and she maintains multiple accounts with Seva Vikas Cooperative Bank Limited and during the year under consideration cash of Rs.10,22,850/- has been deposited. Ld. Assessing Officer accepted the source of cash deposit to the extent of Rs.2.00 lakh being from savings of preceding years but for the remaining amount of Rs.8,22,850/- he was not satisfied because necessary details could not be furnished. Income assessed at Rs.11,72,850/-. Aggrieved assessee preferred appeal before ld.CIT(A) but failed to succeed. Now the assessee is in appeal before this Tribunal.

6. Counsel for the assessee submitted that the case of the assessee has been selected for scrutiny and the cash deposited during the demonetization period is only Rs.6,75,500/- and ld. Assessing Officer erred in considering the deposits for the remaining period by making the addition which was beyond his jurisdiction of the Limited Scrutiny. He also referred to a chart providing details of cash withdrawals and cash deposits and has stated that prior to the declaration of demonetization scheme the cash in hand available with the assessee stood at Rs.7,41,500/- which is sufficient to explain the source of cash deposit during the demonetization period. He also made reference to submissions filed before ld.CIT(A) and the other details appearing in the paper book running into 360 pages.

7. On the other hand, ld. DR supported the order of ld.CIT(A).

8. I have heard the rival submissions and perused the record placed before me. I observe that the assessee has deposited cash of Rs.10,22,850/- during the year under consideration in the various bank accounts held with Seva Vikas Cooperative Bank Limited. Admittedly, the case of the assessee has been selected for Limited Scrutiny and ld. Assessing Officer without taking any prior approval for enhancing the scope of Limited Scrutiny was only having the jurisdiction to examine the issue for which Limited Scrutiny has been carried out, i.e. regarding the cash deposited during the demonetization period which in the instant case is Rs.6,75,500/-. However, ld. Assessing Officer has exceeded the jurisdiction and has taken into consideration the total amount of cash deposits during the year. I further observe that the assessee is a salaried employee with Seva Vikas Cooperative Bank Limited and regularly filing the income-tax returns. A chart depicting the withdrawals and deposits from April 2016 to March 2017 is available on record. Assessee has adopted the opening cash in hand at Rs.2.00 lakh which ld. Assessing Officer has also accepted in the assessment order and thereafter the withdrawals and deposits have been mentioned which are duly verifiable from the bank statement filed by the assessee. I note that after making of the alleged cash deposits the cash in hand has never come into negative and sufficient cash is available for making the alleged cash deposits including the cash deposited during the demonetization period. The details indicate that prior to the demonetization period against the cash withdrawal of Rs.7,72,100/- there is cash deposit of Rs.2,27,100/- coupled with the opening cash in hand at Rs.2.00 lakh, the assessee has cash in hand of Rs.7,45,000/- which is sufficient to cover the cash deposit of Rs.6,75,500/- during the demonetization period. Further, the assessee has also withdrawn cash of Rs.2,84,000/-during the demonetization period followed by withdrawal of Rs.5,04,200/- in the post demonetization period. Taking all these factual aspects, I am of the considered view that assessee had sufficient cash in hand to explain the source of cash deposits during the year under consideration including the cash deposited during the demonetization period and therefore the impugned addition u/s.69 of the Act at Rs.8,22,850/- is uncalled for. Finding of ld.CIT(A) is reversed and effective grounds of appeal raised by the assessee on merits are allowed.

9. As regards the legal grounds raised by the assessee, dealing with them would be merely academic in nature as the addition stands deleted.

10. In the result, the appeal of the assessee is allowed.

Order pronounced on this 17th day of April, 2026.