Salama Mahmadsalim Dafedar Vs ITO (ITAT Panaji)
Mother-in-Law’s Gold Had a Name, Anonymous Cash Sales Did Not: ITAT Grants Partial Relief from Demonetisation Addition u/s 69A
Cash Deposit During Demonetisation
The assessee was an individual engaged in the business of jewellery making & sale of gold. She filed her return of income for AY 2017-18 on 16.12.2017, declaring a total income of ₹4,93,850.
The return was initially processed u/s 143(1). Subsequently, the case was selected for scrutiny & notices u/ss 143(2) & 142(1) were issued, calling upon the assessee to furnish particulars of the cash deposited during the demonetisation period & explain the corresponding sources.
The AO noticed that the assessee had deposited ₹32,00,000 in cash on 10.11.2016 in her bank account maintained with Syndicate Bank.
AO Accepts Part of the Explanation
During assessment proceedings, the assessee explained that the deposited cash was sourced from the opening cash balance, proceeds from the sale of gold & maturity proceeds of a Pigmy deposit.
After examining the explanation, the AO accepted the availability of cash to the extent of ₹12,84,310, consisting of:
₹4,66,275 representing the opening cash balance; ₹6,51,200 representing proceeds from the sale of gold; & ₹1,66,835 representing withdrawal of Pigmy deposit maturity proceeds.
The remaining amount of ₹19,15,690, being the difference between the total cash deposit of ₹32 lakh & the accepted sources of ₹12,84,310, was treated as unexplained money u/s 69A.
Accordingly, vide assessment order dated 27.11.2019 passed u/s 143(3), the AO determined the assessee’s total income at ₹24,09,540, as against the returned income of ₹4,93,850.
Partial Relief Granted by CIT(A)
Aggrieved, the assessee carried the matter in appeal before the Addl./JCIT(A)-9, Mumbai.
During appellate proceedings, the assessee furnished explanations & supporting material concerning the sources of the cash deposited. A remand report was also obtained from the AO.
After considering the submissions & the remand report, the CIT(A) granted relief of ₹7,94,600 out of the total addition of ₹19,15,690. However, the balance addition of ₹11,21,090 continued to be treated as unexplained cash deposit u/s 69A.
The assessee therefore approached the Tribunal, seeking deletion of the remaining addition.
Gold Sold by Mother-in-Law
Before the ITAT, the assessee specifically contended that gold worth ₹9,51,200 had been sold by her mother-in-law, Mrs. Dilshad Dafedar, & not by the assessee herself.
It was submitted that the opening cash balance of ₹4,66,275 shown by the assessee did not include the sale proceeds arising from the gold sold by her mother-in-law. Consequently, the assessee argued that the authorities below had incorrectly denied credit for ₹2,84,000, forming part of the mother-in-law’s gold sale proceeds.
The assessee relied upon confirmations furnished in support of the transaction. It was therefore contended that once the sale of gold by the mother-in-law was established through supporting confirmations, the related cash could not be treated as unexplained merely because it was deposited in the assessee’s bank account.
Anonymous Cash Memos Also Relied Upon
The assessee further claimed credit in respect of certain sales of gold supported by cash memos.
However, those cash memos did not contain the names or identifying particulars of the customers. No confirmations from the alleged purchasers were produced before the AO, the CIT(A) or even before the Tribunal.
The assessee nevertheless argued that such cash sales were connected with her jewellery business & should also be recognised as an explained source of the demonetisation-period deposit.
ITAT Accepts Mother-in-Law’s Gold Sale
On examination of the record, the Tribunal found merit in the assessee’s argument concerning the gold sold by her mother-in-law.
It was an admitted factual position that Mrs. Dilshad Dafedar had sold gold worth ₹9,51,200. Confirmations supporting the transaction had also been filed. Despite this evidence, the CIT(A) had sustained a disallowance of ₹2,84,000 relating to such sale proceeds.
The Tribunal held that denial of credit to this extent was not justified. It therefore directed deletion of ₹2,84,000 & granted the assessee further relief for that amount, over & above the relief of ₹7,94,600 already allowed by the CIT(A).
Thus, the aggregate relief secured by the assessee against the original addition came to ₹10,78,600.
Relief Denied for Unnamed Cash Sales
The Tribunal, however, was not persuaded by the assessee’s claim based on cash memos that did not disclose the customers’ names.
The absence of purchaser details was compounded by the fact that no confirmations or other corroborative evidence had been furnished at any stage. The assessee therefore failed to establish that the money allegedly received under those cash memos represented genuine business sales & formed the source of the cash deposited.
Accordingly, the assessee’s remaining grounds seeking deletion of ₹8,37,090 were rejected. The appeal was consequently partly allowed.
Author’s Comments
The decision draws a practical distinction between a cash explanation supported by an identifiable source & confirmation and one resting solely upon anonymous internal vouchers.
The Tribunal accepted the mother-in-law’s gold sale because the seller was identified, the transaction was confirmed & the evidence established a plausible source. In contrast, cash memos carrying no customer particulars could not, by themselves, discharge the burden associated with a cash deposit u/s 69A.
The ruling is particularly relevant to demonetisation assessments: cash transactions are not automatically unexplained merely because they occurred before demonetisation, but the assessee must establish a credible link between the transaction & the deposit. After all, gold may be sold for cash, but evidence cannot remain faceless.
FULL TEXT OF THE JUDGMENT/ORDER OF ITAT PANAJI BENCH
This appeal filed by the assessee is directed against the order dated 12.12.2025 passed by Ld. Addl./JCIT(A)-9, Mumbai [‘Ld. CIT(A)’] for the assessment year 2017-18.
2. The appellant has raised the following grounds of appeal :-
“1. On the facts and circumstances of the case and in law the learned CIT(A) erred in confirming the order of A.O. u/s 143(3) of the Income Tax Act 1961 relating to an addition of Rs.11,21,090/- as unexplained cash deposits u/s 69A of the Act.
2. The learned CIT(A) erred in not appreciating that the entire money represents proceeds of inheritance which is not taxable in the hands of the appellant.
3. The learned CIT(A) erred in confirming the addition made of Rs.2,84,000/- as unexplained investment.
4. The addition of Rs.8,37,090/- as unexplained investment is not justified in law.
5. The Appellant craves leave to add, alter, amend or modify any of the grounds of appeal.”
3. Facts of the case, in brief, are that the assessee is an individual engaged in the business of jewellery making & gold sale and furnished her return of income on 16.12.2017 by declaring income of Rs.4,93,850/-. The return was processed u/s 143(1) of the IT Act and subsequently the case was selected for scrutiny and notices u/s 143(2) and 142(1) respectively were issued to the assessee, wherein details of cash deposited and sources of cash deposited during demonetization period was sought. The Assessing Officer found that the assessee has deposited cash amount of Rs.32,00,000/- on 10.11.2016 in her bank account maintained with Syndicate Bank. After considering the reply and submissions of the assessee, the Assessing Officer accepted the contention of the assessee regarding sources of above cash deposit to the extent of Rs.12,84,310/- only (opening cash balance of Rs.4,66,275 + sale of gold of Rs.6,51,200 + PIGMY deposit maturity withdrawal of Rs.1,66,835) and added the remaining amount of Rs.19,15,690/- (Rs.32,00,000 – Rs.12,84,310) to the income of the assessee, being unexplained cash deposited in bank account during demonetization. Accordingly, the Assessing Officer vide order dated 27.11.2019 completed the assessment proceedings u/s 143(3) of the IT Act by determining the income of the assessee at Rs.24,09,540/- as against the income of Rs.4,93,850/- returned by the assessee. The above assessed income includes addition of Rs.19,15,690/- being unexplained cash deposits u/s 69A of the IT Act.
4. Being aggrieved with the above assessment order, the assessee preferred an appeal before Ld. CIT(A). After considering the reply & submissions of the assessee Ld. CIT(A) partly allowed the appeal & restricted the addition of Rs.19,15,690/- to Rs.11,21,090/-.
5. It is the above order against which the assessee is in appeal before this Tribunal.
6. In the instant appeal, the assessee is challenging the action of Ld. CIT(A) wherein addition of Rs.11,21,090/- was sustained by him, out of total addition of Rs.19,15,690/- made by the Assessing Officer u/s 69A of the IT Act on the basis of cash deposited during demonetization period, which could not be explained during 143(3) proceedings. However, after considering the reply & remand report sent by the Assessing Officer a relief of Rs.7,94,600/- only was allowed by Ld. CIT(A). In this regard, we find that it is the claim of the assessee that the gold of Rs.9,52,100/- was sold by Mrs. Dilshad Dafedar mother-in-law of the assessee and not by the assessee Mrs. Salma Moamad Salim Dafedar. It is also the claim of the assessee that the opening cash balance of Rs.4,66,275/- held by the assessee does not include any sale proceeds of gold of Rs.9,51200/- sold by the mother-in-law of the assessee. It was therefore claimed that it is wrong on the part of the Assessing Officer as well as on the part of Ld. CIT(A) to not allow the credit of Rs.2,84,000/- of gold sold by the mother-in-law of the assessee. It was also the claim that the value of gold sold by the assessee through cash memos which does not contain the names of the customers should have been allowed.
7. Considering the totality of the facts of the case, we find some force in the argument of Ld. counsel of the assessee that admittedly the mother-in-law Mrs. Dilshad Dafedar sold gold of Rs.9,51,200/- for which the confirmations were filed, however, out of which disallowance of Rs.2,84,000/- was confirmed by Ld. CIT(A) which according to us is not justified & needs to be deleted. Accordingly, we deem it appropriate to allow further relief of Rs.2,84,000/- to the assessee. Consequently the assessee is entitled to get further relief of Rs.2,84,000/- apart from the relief of Rs.7,94,600/- already allowed by Ld. CIT(A). We are not satisfied with the other grounds/ arguments of the assessee regarding allowance of cash memos containing no names of customers, since no confirmations were furnished either before the Assessing Officer or before Ld. CIT(A) & not even before us, accordingly the same are dismissed.
8. In the result, the appeal filed by the assessee is partly allowed.
Order pronounced on this 03rd day of September, 2026.
