Cash Deposit during Demonetization from Undisputed Source: ITAT Deletes Addition

Sheo Chand Yadav Vs ITO (ITAT Delhi)

Introduction: The Income Tax Appellate Tribunal (ITAT) in Delhi recently gave a verdict in the case of Sheo Chand Yadav vs ITO. The primary focus was on the cash deposits made in the bank accounts of the assessee during the demonetization period. The tribunal ultimately ruled in favor of the assessee, thereby deleting the income tax addition that was initially imposed.

Background of the Case: Sheo Chand Yadav, a retired Defence Service official, and his spouse, Mrs. Manju Yadav, a retired teacher, ran a news agency distributing newspapers through vendors at Bhiwadi. Both are regular income tax assesses. The Assessing Officer (AO) had earlier added an amount of Rs. 20,94,855 as unexplained money under Section 69A of the Income Tax Act, relating to cash deposits during the demonetization period. This addition was later confirmed by the CIT(A).

The Assessee’s Argument: Sheo Chand Yadav contended that the cash deposits originated from their newspaper distribution business. The money was received from sub-vendors and deposited in their joint bank account. Due to the ongoing festive season, the cash could not be deposited in full immediately and was deposited in tranches for safety reasons.

Analysis of ITAT’s Ruling: The ITAT scrutinized the entire bank statement, income tax returns, and other relevant documents. They concluded that the source of the cash deposit in the bank account had been undisputedly proved to be legitimate. Therefore, the ITAT directed that the income tax addition made by the AO should be deleted.

The Importance of Providing Sufficient Evidence: One crucial takeaway from this case is the significance of providing comprehensive evidence to support one’s claims. The assessee was able to produce bank statements, confirmations from vendors, and sale registers, which helped sway the ITAT’s opinion in their favor.

Conclusion: The case of Sheo Chand Yadav vs ITO is a pivotal judgment that stresses the importance of thorough documentation and proof to support one’s financial transactions, especially during a sensitive period like demonetization. It also sets a precedent for similar cases where the source of cash deposits is legitimate but has been flagged by tax authorities for review. In this case, the ITAT acted judiciously, relying on concrete evidence to make its final decision, thereby deleting the income tax addition initially levied on the assessee.

FULL TEXT OF THE ORDER OF ITAT DELHI

The present appeal has been filed by the assessee against the order National Faceless Appeal Centre (NFAC), Delhi dated 15.06.2022 passed by the AO u/s 143(3) of the Income Tax Act, 1961.

2. The Assessee Sh. Sheo chand Yadav, a retired Defence Service Official and Mrs. Manju Yadav spouse of Mr. S.C Yadav is a retired teacher and both are regular income tax assesses. Both had been running Venture News Agency, distribution of newspaper through vendors at Bhiwadi. The assessee has duly filed his Income tax return for A.Y 2017-18 declaring gross total income of Rs. 15,13,080/- having income from three sources viz. Rental income, Pension income and interest income. The case was selected for scrutiny for the said Assessment Year under CASS and assessment was completed u/s 143(3) of the I.T Act, 1961 on 21.12.2019 at an assessed income of Rs. 36,07,935/- by making an addition of Rs. 20,94,855/- as unexplained money u/s 69A of the Income Tax Act, 1961 in the hands of assessee. The addition has been made on account of cash deposits found in the account of the assessee pertaining to specified bank notes during the period of demonetization. The ld. CIT(A) confirmed the addition made by the Assessing Officer.

3. Aggrieved, the assessee filed appeal before us.

4. Heard the arguments of both the parties and perused the material available on record.

5. Sheo Chand Yadav has a joint bank Account in Corporation Bank with his Spouse Smt. Manju Yadav. Cash received from hawkers was credited in this joint account. The assessee had received cash from the sub-vendors because of ongoing festive season, the cash could not be deposited in full. The cash in hand goes on increasing which was deposited in bank on later stages in tranches because of safety reason. Regular deposit of cash has been verified from the statement of bank account of previous Financial Year 2015-16 as well. The assessee has also submitted the details of all the sub-vendors along with their addresses and contact numbers. This detail was also furnished online while replying to the compliance notice of cash transaction in 2016. During the assessment proceedings, the AO had asked to furnish the cash summary which was duly submitted but the AO had not considered the facts of the case that the cash was available in the books of accounts out of the sale made before demonetization period.

6. We find that the total amount deposited was Rs. 20,94,855/- and the month-wise details are as follows:

7. Mrs. Manju Yadav spouse of assessee has duly disclosed the income of newspaper agency in her Income tax return for the Financial Year 2016-17. The copy of return of Mrs. Manju Yadav was perused. The entire bank statement showing the cash deposit has been examined. It reflected the regular deposit of cash received from newspaper vendors throughout the year. The confirmations of the vendors are on record. The fact that the assessee is involved in the newspaper agency was also on record. The daily sale of newspapers of Economic Times, Navbharat Times, Times of India and sale of other newspapers at bus stand and other vends has been examined. Daily credit receipt and sale register has been perused.

8. After going through the entire fact on record, we have no vacillation to hold that the source of the cash deposited in the bank account has been undisputedly proved. Hence, the addition made by the AO is hereby directed to be deleted.

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

Order Pronounced in the Open Court on 11/08/2023.