Income Tax update – Withdrawal of 2000 denomination and deposit and/exchange notes until September 30,2023 (Part 2)
Recent Judicial precedents on 2016 demonetisation for cash depositor

A. Withdrawal of cash and deposited back during demonetisation

In case of M. Natarajan facts was that assessee made cash deposits of Rs.48.59 Lac to its saving a/c during demonetization period to which Assessee explained that the source of cash deposits was out of sale proceeds of ancestral property which was kept in joint account of the assessee and his sister-in-law and subsequently withdrawn on Jan 29, 2013. Assessing officer added cash deposits to Income.

Chennai ITAT upholds addition as assessee failed to prove the reasonable nexus between the cash withdrawal in the year 2013 received in form of gift from sister-in-law and cash deposit during demonetisation period. Assessee failed to provide a reasonable explanation that the cash received in the form of gift from sister-in-law remained unutilized for more than 3 years and subsequently deposited during the demonetization period.

B. Declared higher sales to cover up cash deposits made into bank account

In case of Asokan Meena facts were Assessee’s conduct in filing the return of income under Section 44AD during AY 2017-18 as against regular return in earlier years. Revenue held that the Assessee has declared higher sales to cover up cash deposits made into bank accounts and made an addition of Rs.24.66 Lakhs as unexplained money.

Chennai ITAT restricts addition made under Section 69A to an estimated profit of 30% of cash deposits made by the Assessee and observes that the Revenue made additions towards cash deposits into bank account during demonetization period only on the ground that the Assessee has declared more cash sales for the AY 2017-18 when compared to previous AY 2016-17.

C. Cash deposit explained from accounts & customer’s statements

In case of Jet Freight Logistics Limited facts were that the assessee was engaged in the business of freight forwarding and deposited a sum of Rs.2.48 Cr. Assessing officer added cash deposits to Income.

Mumbai ITAT deleted the addition on the ground that assessee explained that part of deposits is out of cash withdrawals made by the Assessee of Rs.62.49 Lacs and the rest is cash received from various customers of Rs.1.86 Cr. To substantiate the same Assessee filed all the details including name, address, PAN of customers, cash book, bank statements for the whole year and
3 of the customers appeared before the Revenue confirming the payment.

D. Past trend of regular deposits

In the case of Lateef Abdul Mohd. facts was that addition of Rs.30 Lacs under Section 69A, attributable to cash deposits during the demonetisation period.

Hyderabad ITAT deleted addition on the ground that cash sales in every month to be substantial and observes that it was not a case where the Assessee made substantial cash deposits only in the demonetisation period.