No addition for cash deposit in bank up to Rs. 2.50 lakhs. ITAT deleted addition

ITAT deleted addition for cash deposits in bank during demonetization period following CBDT Instruction that no addition to be made up to Rs. 2.50 lakhs

ABCAUS Case Law Citation:
ABCAUS 3800 (2023) (09) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming addition made by the Assessing Officer (AO) on account of cash deposited in the bank account of assessee during demonetization period.

Before the ITAT, the assessee contended that as per CBDT Instruction No. 3/2017 the tax authorities were directed not to undertake any investigation or action in the cases of individuals where the cash deposits are less than Rs.2,50,000/-. Therefore, the appeal of assessee be allowed and AO may kindly be directed to delete the addition.

CBDT vide Instruction No. 3/2017 in para 1.1 of the guidelines has stated as under:

Cash out of earlier income or savings

In case of an individual (other than minors) not having any business income, no further verification is required to be made if total cash deposit is up to Rs. 2.5 lakh. In case of taxpayers above 70 years of age, the limit is Rs. 5.0 lakh per person. The source of such amount can be either household savings/savings from past income or amounts claimed to have been received from any of the sources mentioned in Paras 2 to 6 below. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. The basis for verification can be income earned during past years and its source, filing of ROI and income shown therein, cash withdrawals made from accounts etc.

The Income Tax Department could not controvert that there is CBDT Instruction (supra) directing the tax authorities not to investigate and take action in the cases where cash deposits are less than Rs.2,50,000/- during demonetization period.

In view of above, the ITAT observed that the cash deposits by the individual assessee, in the present case, was less than the prescribed limit as per the CBDT Instruction No. 3/2017 para 1.1 of guide line.

Accordingly, the Tribunal allowed the the sole grievance of assessee and AO was directed to delete the addition.

Download Full Judgment Click Here >>

• Penalty u/s 270A deleted as assessee filed revised computation during scrutiny
• Penalty u/s 271B for unfilled column 40 in Tax Audit Report Form 3CD deleted by ITAT
• Merely ex-parte rectifying computation without amending assessment order not make it nullity- ITAT
• Once assessee discharges primary onus, it shifts to AO to bring evidence to contrary – ITAT
• Cost Inflation Index for FY/Tax Year 2026-27 notified by CBDT. See Up-to-date Table of CII