Cash Deposits Made From Assessee's Parents Accumulated Savings And Income From Agricultural Activities; ITAT Deletes Addition

The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has deleted the addition made by the department as the cash deposits made from the assessee's parents accumulated savings and income from agricultural activities.

The bench of Suchitra Kamble (Judicial Member) and Makarand V. Mahadeokar (Accountant Member) has observed that when the assessee provides a plausible explanation supported by affidavits, it is the duty of the revenue to conduct proper verification before making any adverse conclusion. Neither the AO nor the CIT (A) conducted any verification of the affidavits or the claims made by the assessee.

The assessee filed his return of income, declaring his total taxable income. The case was selected for limited scrutiny through CASS as, during the period of demonetization, the assessee made substantial cash deposits in his bank account amounting to Rs. 9,04,000. Out of the total amount, the AO treated Rs. 4,28,000 as unexplained money and added it to the income of the assessee under Section 69A of the Income Tax Act.

The provision under Section 69A basically deals with unexplained money, etc., to be considered in the exercise of aggregation of income under Chapter VI of the Act. Section 69A lays down that if, in any financial year, the assessee is found to be the owner of any money, bullion, jewelry, or another valuable article, and such money, etc., is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the said money, etc., or the explanation offered by him is not satisfactory in the opinion of the Assessing Officer, the money may be deemed to be the income of the assessee for the financial year.

The assessee contended that the cash deposits were from the accumulated savings and agricultural income of his parents. In support of the contention, the assessee filed affidavits from his father and mother before the AO. However, the AO was not satisfied with the explanation and proceeded with the addition.

The CIT (A) upheld the order of the AO without giving due consideration to the affidavits and the explanation provided by the assessee. The CIT(A) did not appreciate the fact that the affidavits submitted were from credible sources, being the parents of the assessee, and did not investigate into the matter to ascertain the veracity of the claims.

The tribunal noted that the AO did not conduct any independent verification or inquiry into the claims made in the affidavits. The AO has simply dismissed the affidavits without assigning any cogent reasons. The CIT (A), too, has upheld the AO's order without addressing the merits of the affidavits or the explanation provided by the assessee.

The tribunal found that the addition made under Section 69A is not sustainable. The AO and CIT (A) have failed to discharge their duty of conducting a thorough and fair investigation into the source of the cash deposits. The affidavits provided by the assessee's parents should have been subjected to verification, and the explanation provided should have been considered in a judicious manner.

The tribunal set aside the order of the CIT (A) and directed the AO to delete the addition of Rs. 4,28,000 made under Section 69A of the Income Tax Act.

Counsel For Appellant: Jigar Adhyaru

Counsel For Respondent: N.J. Vyas

Case Title: Vivek Prahladbhai Patel Versus ITO

Case No.: ITA No. 370/Ahd/2024

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