Abdur Raoof Khan Vs ITO (ITAT Agra)
Family Savings Explain Demonetisation Deposits: Agra ITAT Deletes ₹9.80 Lakh Addition
The Agra Bench of the Income Tax Appellate Tribunal (ITAT) has deleted a ₹9.80 lakh addition under 115bbe Section 69A, accepting the assessee’s explanation that demonetisation-period deposits included savings belonging to his wife, mother and grandmother.
In Abdur Raoof Khan v. ITO, Ward 4(3)(3), Kasganj, ITA No. 472/Agr/2026, pronounced on 4 November 2026, the Tribunal considered the relatives’ affidavits, which had not been examined by the lower authorities, and the modest amounts attributed to each woman.
The decision concerned Assessment Year 2017-18 and deposits made in old ₹500 and ₹1,000 currency notes.
Background: ₹20.30 Lakh Deposited During Demonetisation
The assessee filed his return on 28 March 2019, declaring total income of ₹5,45,540, following a notice under 142(1).
His case was selected for scrutiny to verify cash deposits. The Assessing Officer identified deposits aggregating to ₹20,30,500 in different bank accounts during the demonetisation period.
The assessee explained that the money came from several sources, including opening cash in hand, recovery of earlier loans and advances, personal savings and savings of family members.
He stated that the female relatives did not maintain bank accounts of their own. Their old currency was therefore deposited into his accounts.
Assessing Officer Accepted Part of the Explanation
The Assessing Officer accepted the opening cash balance of ₹8,50,132 as on 31 March 2016, along with the explanation concerning recovery of loans and advances, after considering cash expenses.
He accepted deposits totalling ₹10,50,500, comprising ₹1,50,500 deposited on 21 November 2016 and ₹9 lakh deposited on 22 December 2016.
However, he treated the remaining ₹9.80 lakh as unexplained money and added it under Section 69A read with Section 115BBE.
The officer also questioned why much of the cash had been deposited in December. He did not accept the explanation that heavy crowds at banks had delayed the deposits.
CIT(A) Rejected Family Savings as Insufficiently Supported
The CIT(A), National Faceless Appeal Centre, upheld the addition.
The assessee had attributed ₹2.40 lakh to his mother, ₹2.20 lakh to his wife and ₹2.50 lakh to his grandmother, aggregating to ₹7.10 lakh.
Affidavits were submitted in support. However, the CIT(A) described them as self-serving documents unsupported by other evidence.
The appellate authority also reasoned that middle-class household savings would normally consist of smaller denomination notes, whereas the amounts here were held in ₹500 and ₹1,000 notes.
It further compared the claimed family savings of ₹7.10 lakh with the assessee’s declared annual income of ₹5,45,540 and found the explanation unconvincing.
Assessee Relied on Relatives’ Affidavits
Before the Tribunal, the assessee argued that the affidavits could not be rejected without examining their contents.
A tabular explanation identified the claimed sources. His mother, stated to be 75 years old, held ₹2.40 lakh as savings or pin money. His wife held ₹2.20 lakh, while his grandmother, stated to be 100 years old, held ₹2.50 lakh.
The explanation reiterated that none of them had an independent bank account.
The assessee also identified ₹1.80 lakh as his personal savings and referred to cash available from business and professional activities.
His representative maintained that the lower authorities had not tested the veracity of the relatives’ statements.
Tribunal Noted Failure to Examine Affidavits
The ITAT found that the explanation concerning the women’s savings was supported by their respective affidavits.
Those affidavits had not been examined by the Assessing Officer. Nor had the CIT(A) obtained a remand report to verify them.
The Tribunal therefore considered the explanation alongside the amounts attributed to each relative, rather than accepting the general assumptions used to reject it.
The absence of verification was significant because the affidavits directly addressed ownership and source of the disputed cash.
Earlier Decision and CBDT Instruction Considered
The assessee relied on Uma Agrawal v. ITO, reported in [2021] 127 taxmann.com 735, concerning household savings deposited during demonetisation.
The Tribunal also considered CBDT Instruction No. 3/2017 dated 21 February 2017, as discussed in that decision.
It accepted ₹7.10 lakh attributable to the three women, noting that the individual amounts fell within the limits considered in the instruction.
The Tribunal also declined to take an adverse view of the ₹1.80 lakh personal savings, describing the amount as not too unreasonable.
Entire Addition Deleted
The Tribunal’s operative order deleted the full ₹9.80 lakh addition and allowed the assessee’s appeal.
His separate legal objections concerning the timing of the Section 142(1) notice became academic and were left open.
The ruling rests on the specific family-savings explanation, supporting affidavits and the authorities’ failure to examine them. It does not establish that every demonetisation deposit described as household savings must automatically be accepted.
Cases Discussed
- Uma Agrawal Vs ITO-1(3), Gwalior — [2021] 127 taxmann.com 735 (ITAT Agra Bench). Cited by the assessee and relied upon by the Tribunal regarding demonetisation deposits and CBDT Instruction No. 3/2017. A verified TaxGuru judgment URL was not established.
FULL TEXT OF THE ORDER OF ITAT AGRA
This appeal is directed against the impugned order dated – 02.03.2026 passed in appeal No. NFAC/2016-17/10028735 by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as the “CIT(A)] u/s. 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) for the A.Y. 2017-18, wherein ld. CIT(A) has dismissed assessee’s appeal.
2. Brief facts of the case: The AO noted that the assessee did not file his return of income on or before the due date. An information of cash transactions 2016 was received by the AO and a notice u/s. 142(1) of the Act was issued to the assessee. In compliance, the assessee e-filed his return of income on 28.03.2019 declaring total income of Rs.5,45,540/-. The case was selected for scrutiny under CASS to verify the cash deposits made during the year under consideration. The AO noted that the assessee had deposited a sum of Rs.20,30,500/- during the demonetization period into his different bank accounts in old currency of denomination of Rs.500/- and Rs.1000/-. The AO noted the details of the said deposits date wise in para no. 3 of the assessment order. The assessee explained before the AO that the source of cash deposit was out of preceding year’s cash in hand of Rs.8,50,132/-, cash of Rs.3,00,000/- recovered from preceding year’s loans and some of the cash from family members of the assessee. The AO noted that a sum of Rs.1,50,500/- were deposited by the assessee on 21.11.2016 and rest in the month of December, which is after one and half months of declaration of demonetization. The AO did not accept the plea of the assessee that the cash could not be deposited earlier due to huge rush in the banks. However, the AO gave credit of the closing balance of Rs.8,50,132/- available with the assessee on 31.03.2016 and the plea of receipt back of loan and advances and the expenses incurred in cash during 01.04.2016 to 08.11.2016 and accordingly accepted the cash deposits of Rs.1,50,500/- and Rs.9,00,000/- deposited on 21.11.2016 and 22.12.2016 respectively. The balance cash of Rs.9,80,000/- was treated as unexplained and added by the AO u/s. 69A r.w.s. 115BBE of the Act.
2.1 Aggrieved with the said order, the assessee filed an appeal before the learned CIT(A), who agreeing with the AO, dismissed the appeal of the assesee. The relevant extract of the order of the learned CIT(A) in para nos. 6.0 to 7 are reproduced as under:
“6.0 The appellant submission has been examined. The appellant is a salaried individual employed with Islamic Council of Productive Education during the F.Y. 2016-17. The appellant has claimed that the cash deposited was from cash in hand and past savings of family members. On perusal of the assessment order, it is seen that the Assessing Officer has accepted the appellant plea regarding opening cash balance and addition of remaining cash has been made. The appellant has stated that Rs. 2,40,000/- belongs to her mother past saving. Similarly, the appellant has claimed that Rs. 2,20,000/- & 2,50,000/- is past saving of her wife and grand mother respectively. The appellant has stated that her family female member do not have bank accounts and therefore, the cash was deposited into his account. The appellant submitted affidavit in support of his claim. The affidavit furnished by the appellant is a self serving documents and no other evidence has been furnished in this regard.
6.1 The appellant deposited aggregate cash to the tune of Rs. 20,30,500/- during demonetization period into his different bank M bank accounts into old currency of denominations of Rs. 500/- and Rs, 1,000 Out of this, Rs. 1,50,500/- were deposited on 21.11.2016 and Rs. 9,00,000/- were deposited on 22.12.2016 in his bank account no. 4786000400001273 maintained at PNB, Dasauli, Kurshi Road, Lucknow, Rs. 47,000/- and Rs. 33,000/- were deposited on 27.12.2016 and 30.12.2016 respectively into his account no. 915010049623127 maintained at Axis Bank, Laxmiganj, Kasganj and Rs. 8,00,000/- were deposited on 23.12.2016 into his account no. 727020110000006 maintained at Bank of India, Kasganj.
6.2 The appellant has claimed that an amount of Rs. 7,10,000/- was saved by the female member of his family in old currency of denominations of Rs. 500/- and Rs. 1,000/-. The money saving practice of the middle class families shows that the money is normally saved into small currency notes, however all the currency notes saved by the family of the appellant is denominations of Rs. 500/- and Rs. 1,000/-. Further, the appellant is the only earning member in his family and the total income declared by him is Rs. 5,45,540/-. The saving of an amount of Rs. 7,10,000/- from the annual income of Rs. 5,45,540/- does not justify the claim of the appellant.
6.3 In view of the above, the claim of the appellant is not found sustainable on the facts available on records. Therefore, the plea taken by the appellant in the grounds of appeal is hereby dismissed.
7.0 In result, the appeal of the appellant is dismissed.”
3. Aggrieved with the said order, the assessee is in appeal before us on the following grounds of the appeal:
“01. Because the notice u/s.142(1) dt. 12.03.2018 issued is beyond the period as laid down by the CBDT vide Instruction No. 225/363/2017-18.ITA.II dt. 15.11,2017, the entire proceedings are void ab-inito, bad in law be quashed.
02. Because as per the CBDT instructions No. 225/363/2017- 18.ITA.II dt. 15.11.2017, all cases when substantial cash has been deposited in bank during demonetization period falling under OCM, the notices u/s.142 ought to have been issued before 31.12.2017 and assessment to be completed by March 31, 2018, both the periods being violated failure to follow the CBDT instruction has resulted into entire assessment being without jurisdiction, the same be quashed.
03. Because the AO has erred on facts and in law in making an addition of Rs.9,80,000/- under section 69A of the Act in respect of cash deposited in bank overlooking the explanation and the affidavits filed by the assessee, the CIT(A) has erred on facts and in law in upholding the addition, the order passed by the CIT(A) is bad in law, the addition made be deleted.
04. Because the amount of cash of Rs.9,80,000/- deposited in bank treated as unexplained under section 69A of the Act is without any basis, there is no subjective evaluation furnished by the assessee overlooking the practical difficulties, the explanation filed by the assessee having not been found to be false or untrue, there was no reason for the AO to disbelieve the same, and at the same time, the CIT(A) has erred in not appreciating the same, thereby upholding the addition, the addition made be deleted.
05. Because in view of the plethora of evidences including the affidavits of the lady members to whom the cash belongs, there was no justification for the authorities below to overlook the explanation and upheld the addition of Rs.9,80,000/- under Section 69A of the Act, the addition made be deleted.”
4. At the time hearing, the learned AR submitted that during the course of assessment proceedings, the AO had fixed the case for hearing on 16.11.2019, wherein the assessee had sought adjournment for filing the details. Further, it was submitted that the assesee had filed the explanation to the AO vide letter dated 14.12.2019 and placed the screen shot of submitting the details before the AO placed at page No. 30 to 31 of the paper book. The learned AR further submitted that the assessee had filed a tabular chart explaining the source of cash along with the affidavits of his mother, wife and grand-mother to explain that the respective amounts as stated in the table were received by them and it was deposited in assessee’s bank account because the above persons did not have any bank account of their own. In this regard, the learned AR submitted that the AO without examining the veracity of the statements made in the respective affidavits, which were not controverted by the AO, made addition to the total income of the assessee. The Ld. AR relied upon the decision of this Bench in the case of Uma Agrawal vs. ITO- 1(3) Gwalior [2021] 127 taxmann.com 735 to submit that in this case the Tribunal held that as per Instruction No. 3/2017, dated 21-2-2017 of the CBDT wherein, the individual assessee and the house wife having no business income would not be questioned if the bank deposits during the demonetisation were found to be less than Rs. 2,50,000/-. In view of this order the Ld. AR submitted that all the three ladies in their respective affidavits have stated that they did not have their own bank account and therefore the money was deposited in the bank accounts of the assessee and since the amount deposited by each one of them was less than Rs. 2,50,000/- the addition made by the AO was not justified. In view of these facts, the learned AR submitted that the addition made by the AO was not justified and the same may be deleted.
5. On the other hand, the learned Sr. DR supported the orders of the authorities below.
6. We have heard both the parties and perused the material on record. As noted above, the cash of Rs.20,30,500/- was deposited in different bank accounts of the assessee during the demonetization period in the old currency of denomination of Rs.500/- and Rs.1000/-. The AO accepted the source of cash deposit to the extent of Rs. 10,50,500/- but did not accept the balance amount of Rs. 9,80,000/- being the cash on account of savings of his wife (Rs. 2.20 lacs), mother (2.40 lacs) and grand-mother (Rs. 2.50 lacs) and deposited in the different bank accounts of the assessee on the ground that they did not have their own bank accounts. In this regard, the relevant tabular chart filed by the assessee explaining the source of his wife, mother and grandmother before the learned CIT(A) is reproduced as under:
| S. No. | Amount | Source | Justification |
|---|---|---|---|
| 1 | 2,40,000.00 | Mother’s saving/pin money | Mother’s is 75-year-old and having no bank account, hence, deposited in assessee’s bank account |
| 2 | 2.20,000.00 | Pin Money of Wife | She has not maintained any bank account, hence, deposited in assessee’s bank account |
| 3 | 2,50,000.00 | Grand Mother’s saving | She is 100 years old; grandmother is widow and mother of the assessee is only child to take care her and no bank account, hence, deposited in assessee’s bank account |
| 4 | 1,80,000.00 | Personal saving of Assessee | Assessee has deposited this saving into bank |
| 5 | 11,40,000.00 | Cash in hand of business & profession | As on 31.03.2016 the assessee has maintained Cash in hand to the tune of Rs.8,50,132 as per the audited balance sheet and rest amount received during the year under consideration from the business. |
| TOTAL | 20,30,500.00 | ||
6.1 The same is also supported by respective affidavits filed by the mother, grand-mother and the wife of the assessee. The AO did not accept the same and the learned CIT(A) agreeing with the finding of the AO, observed that the money saving practice of the middle-class families shows that the money is normally saved into small currency notes, but the said saving of such relatives was only in the currency of Rs.500/- and Rs.1000/-. The learned CIT(A) also noted that the assessee was only earning member of the family and the total income declared by him was Rs.5,45,540/- and thus, the saving of an amount of Rs.7,10,000/- from annual income of Rs.5,45,540/-, does not justify the claim of the assessee. The AO has accepted the opening cash balance of Rs.8,50,132/- and receipt back of loan and advances, out of which the AO accepted the cash deposit of Rs.1,50,000/- and Rs.9,00,000/-. Regarding the balance cash of Rs. 7,10,000/- necessary affidavits were filed by the assessee, which were not examined either by the AO or by the learned CIT(A) by way of calling remand report. Therefore, considering the explanation of the assessee that the source of cash deposit was on account of cash available with his wife, mother and grand-mother which was within the limits of the cash deposits by the ladies as per Instruction No. 3/2017, dated 21-2-2017 and relying upon the order of this Bench in the case of Uma Agrawal vs. ITO- 1(3) (supra), the cash deposit to the extent of Rs. 7,10,000/- is accepted. Similarly, no adverse view is taken in respect of the balance amount of Rs. 1,80,000/- being not too unreasonable. Accordingly, the addition of Rs. 9,80,000/- is deleted. Grounds nos. 3, 4 and 5 are allowed. In view of ground no. 3,4 and 5 being allowed, ground no. 1 and 2 of the appeal becomes academic and are left open in this case.
7. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 04/11/2026.
