No addition for cash deposit by housewives during demonetization if less than 2.5 lakhs

AO not allowed to make addition in the hands of the housewives for cash deposit in bank during demonetization if less than 2.5 lakhs

ABCAUS Case Law Citation
ABCAUS 3520 (2021) (07) ITAT

In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre (NFAC) in not appellant’s explanation about cash deposit of approx. Rs. 2 lakhs in bank during demonetization period and confirming the Assessing officer’s order treating the cash deposit as unexplained income u/s 69A read with section 115BBE of the Income Tax Act, 1961 (the Act).

Important case law relied referred:
Kirti vs Oriental Insurance company

Addition for cash deposited by housewives during demonetization 

The assessee was a house wife and her case was that she had collected/ saved the amount from her previous saving out of money given by her husband, son for household expenses, relatives for the purposes of her and family’s future.

The NFAC opined that the assessee did not have any source of income. For the last two assessment years, the appellant declared income of less than Rs. one lakh.

According to the NFAC, it could not be believed that a person having annual income of less than Rs. 1 lakh was able to accumulate Rs. 2 lakh in cash, which was deposited during demonetization period.

Before the Tribunal the assessee contended that the Hon’ble Prime Minister had declared that the revenue will not probe the accounts of individuals, housewives if the deposits made in the bank account were below Rs 2,50, 000/-, during Demonetization Scheme 2016.

The assessee also drawn attention to the CBDT public  notice dated 18th Nov 2016 and SOP/ guidelines for Verification of Cash deposit during demonetization vide Instruction  No.  03/2017 dated 21st of February, 2017.

The said guidelines/SoP provided that 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 2.5 lakh. In case of taxpayers above 70 years of age, the limit is Rs. 5.0 Iakh 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. 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.

Thus, it was contended that on the basis of CBDT instructions which are statutory and binding on the rervenue, AO has no mandate to tax the cash deposit made in the bank account by the housewife if the amount is less than 2.5 lakh, during the Demonetization Scheme of 2016.

The Tribunal observed that women all over the country ,had been accumulating cash that they had saved for themselves from household budgets , by haggling with vegetable  sellers,  tailors,  grocers  and  assorted  traders,  years  of stashing  in  whatever  little  cash gifts  they  received  from  relatives during festival times and years of tucking away the change they found in the pants that they washed every day, however suddenly they were left with no option but to deposit the amount in the denomination of Rs 500 and Rs 1000  notes in the banks on account of Demonetisation Scheme 2016.

The Tribunal further noted that showing their concern to Women (housewife etc.) CBDT had issued the said instruction. Also, as per the Press Release issued for the benefit of the public by the CBDT on 18/11/2016, immediately after the announcement of the Scheme, stated that genuine persons depositing their own household savings in cash into their bank accounts would not be questioned.

The Tribunal opined that in view of the law laid down by the High Court and also by the Supreme Court with respect to binding nature of the instruction issued by the CBDT, the AO was prohibited from making addition in the hands of the housewife if the amount deposited in the bank was less than 2.5 lakhs.

Further with respect to the charge of section 69A, the Tribunal opined that the provision provides that if the assessee offers no explanation about the nature and source of acquisition of money etc or the explanation offered by the assessee, in the opinion of the AO is not satisfactory then the assessing officer “may” deem such money etc as income of the assessee for such financial year.

The Tribunal held that assessee had duly explained the source of deposit being accumulated or saved by her from various activities undertaken by her for and on behalf of family in last many years. Therefore, no additions can be made by lower authority.

The Tribunal further stated that even if the explanation is ignored for the sake of argument, then also it is for the assessing officer to bring on record some cogent evidence to prove that the amount deposited in the bank was undisclosed income arising from the business or from any other activities.  

Thus, the Tribunal held that the cash deposited by the  assessee during the demonetisation cannot be treated as her income. Hence the appeal of the assessee was allowed in her favour.

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