2022 (5) TMI 831 - AT - Income Tax

Cash deposit of during demonetization period - HELD THAT - DR could not controvert that the assessee is an Individual earning income from salary and regularly filing return of income and paying due tax thereon. The ld. DR also could not controvert that the total deposits made by the assessee to his bank account was Rs.2,30,000/- and as per CBDT Instruction No. 1.1 (supra) no further verification is required in a case where an Individual earning income from salary has deposited an amount up to Rs.2,50,000/- during demonetization period. Instruction No. 1.1 to a logical conclusion that when the CBDT Circulars clearly provide, no further clarification and verification is required to be made in the case of an Individual who is earning income from salary filing return of income has deposited during demonetization period. Therefore, addition made by the Assessing Officer and confirmed by the ld. CIT (Appeals) cannot be held as sustainable as the same is clearly against the Instruction issued by the CBDT. Therefore, sale ground of appeal of the assessee is allowed.

Summary

Issues:
1. Addition of cash deposit during demonetization period in the hands of the assessee.

Analysis:
The appeal was filed against the order passed by the Commissioner of Income Tax (Appeals) regarding the addition of Rs.2,30,000/- in the hands of the assessee on account of cash deposit during the demonetization period for the assessment year 2017-18. The main contention was whether the addition made by the Assessing Officer and confirmed by the CIT (Appeals) was valid based on the CBDT Instruction No. 03/2017 dated 21.02.2017. The appellant, an Individual earning income from salary, explained that the cash deposit was from past savings and cash gifts received from friends/relatives during birthdays/festivals.

The appellant argued that as per CBDT Instruction, no further verification is required for cash deposits up to Rs.2,50,000/- in the case of individuals not having business income. The appellant relied on various judgments, including ITAT Delhi and other tribunal decisions, to support the contention that the explanation of the source of cash deposits should not be disregarded without evidence to the contrary. The appellant emphasized that the CBDT Instructions are binding on income tax authorities, and hence, the cash deposited should not be taxed.

The ITAT member analyzed the CBDT Instruction and various tribunal decisions, such as the cases of Smt. Uma Agrawal and Priya Ranjan Saha, to conclude that no further verification is required for an individual earning income from salary who deposited Rs.2,30,000/- during demonetization. The member held that the addition made by the Assessing Officer and confirmed by the CIT (Appeals) was not sustainable as it was against the CBDT Instruction. Therefore, the ground of appeal of the assessee was allowed, and the appeal stood allowed in favor of the assessee.

In summary, the judgment focused on the applicability of CBDT Instructions regarding cash deposits during demonetization for individuals earning income from salary. The decision emphasized that no further verification is necessary for cash deposits up to a certain limit as per the Instructions, and the addition made by the Assessing Officer was deemed unsustainable based on the CBDT guidelines and supporting tribunal decisions.