Pramod Basavaraj Vs ITO (ITAT Bangalore)
Demonetization Cash Deposits – Addition U/s 69A Cannot Be Made Merely on Suspicion Without Proper Enquiry: ITAT Bangalore
The ITAT Bangalore held that addition under Section 69A in respect of demonetization cash deposits cannot be sustained when the AO rejects the assessee’s explanation without conducting proper enquiry or verification.
In the present case, the assessee deposited ₹28 lakh in cash during the demonetization period. The assessee explained that the deposits represented return of advances earlier given for purchase of property and construction of a house, particularly advances given to his mother which were returned when the proposed transaction did not materialize. Supporting documents such as balance sheet reflecting advances, cash book, bank statements, confirmation from the mother and property documents were produced.
However, the AO accepted only ₹7 lakh as explained and treated the remaining ₹21 lakh as unexplained money u/s 69A, taxable under Section 115BBE. The CIT(A) further enhanced the addition and treated the entire ₹28 lakh as unexplained, mainly on the ground that the assessee had given inconsistent explanations and that the documents produced were self-serving.
The Tribunal observed that although certain inconsistencies existed in the assessee’s explanation, the AO had rejected the explanation merely on presumptions and suspicion without conducting meaningful verification, such as examining the person who allegedly returned the money.
