No addition for cash deposit during demonetization if less than 2.5 lakhs
Facts and issue of the Case
The aforesaid appeal has been filed by the assessee against the impugned order dated 26.03.2021, passed by the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre [hereinafter referred to as CIT (Appeals)] / NFAC for assessment year 2017–18.
The Appellant is a qualified professional (ICWA). The main source of income of the appellant is a salary income and the appellant is regularly filing ITR. For the concerned assessment year, the appellant had filed the ITR declaring a gross total income of Rs. 5,13,458/-. In the year under consideration the appellant has also deposited a cash in his bank account amounting to Rs.2,30,000/- (Two Lakhs Thirty Thousand only) during demonetization period which was from his past savings and out of the cash gifts received on the occasion of birthdays/ festivals from his friends / relatives.
The case of the appellant was selected for limited scrutiny through CASS to ‘verify the Large Value cash deposits during demonetization period as compared to returned income’. During the assessment proceedings, the appellant explained the source of cash deposit but the Ld. AO without correctly appreciating the factual and legal issue of the case made an addition of Rs. 2,30,000/- on account of cash deposit as unexplained cash deposits u/s 69 of The Income Tax Act, 1961 (hereinafter referred to as Act).
Further, the Hon’ble CIT (Appeals) had also upheld the addition made by Ld. A.O. without considering the contention of the appellant that the case of the appellant should not be scrutinized as the cash deposit is only Rs. 2,30,000/- which is less than Rs.2,50,000/- as per the instruction of CBDT. It is, therefore, requested to your good-self kindly quash the order passed by Ld. AO u/s 144 of the Income Tax Act, 1961.
Further the ld. AR drew the attention towards Instruction No. 03 of 2013 dated 21.02.2017 Annexure guideline No. 1.1 and submitted that as per Instruction issued by Government of India, Ministry of Finance, Department of Revenue, Central Board of Direct Taxes, in the case of an Individual, no further verification is required to be made if total cash deposit is up to Rs.2,50,000/-. Therefore, in the case of present assessee who is an Individual earning income only from salary then addition made by the Assessing Officer and confirmed by the ld. CIT (Appeals) cannot be held as sustainable and valid in law.
Replying to the above the ld. Sr. DR strongly supported the assessment as well as the first appellate order. However, he 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.
Observation of the court
Therefore, in view of foregoing discussion court held 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 amount of Rs.2,30,000/- 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, sole ground of appeal of the assessee is allowed.
The court allowed the appeal of the assessee.Aniket-Agarwal-Vs-Income-Tax-Office-ITAT-Delhi