ITAT Upholds Addition On Account Of Unexplained Cash Deposit Made During Demonetisation

The Chennai Bench of the Income Tax Appellate Tribunal (ITAT), while rejecting the plea of the assessee for cash received in marriage, upheld the addition on account of an unexplained cash deposit made during demonetisation.

The bench of Mahavir Singh (Vice President) and Manoj Kumar Aggarwal (Accountant Member) has observed that there is no direct evidence available from the assessee to substantiate his claim, but going through the customary system in Indian society, no economic transaction can be divorced from the underlying social and cultural factors.

The appellant/assessee is a non-resident individual employed in the USA and living outside India since 2004. The assessee stated that he had not had any source of income in India since 2004. The assessee, being a non-resident and having no source of income in India, as claimed, did not file any return of income for earlier assessment years.

For the assessment year 2017–18, the assessee filed his return of income, admitting a total income of Rs. 96,100. The assessee’s case was selected for scrutiny under CASS, and a notice was issued. The AO noticed that during the financial year 2016–17 relevant to the assessment year 2017–18, the assessee made a cash deposit to the tune of Rs. 2,00,000 in his Account.

The AO issued a show cause notice calling for explanations for cash deposits in two bank accounts. The AO proposed to complete the assessment by adding Rs. 1.07 crore. The assessee explained that the cash deposit of Rs. 7 lakhs was cash given to his mother during his visits to India, which was deposited, and the balance of Rs. 1 crore was a gift received during the marriage.

The assessee claimed before the AO that the gift of Rs. 1 crore received in connection with his marriage celebrated on December 7, 2015, was deposited in his bank accounts. The assessee claimed exemption on gifts received during marriage under the proviso to Section 56(1)(vii)(c).

The AO noted that the assessee has not furnished any material evidence to substantiate that he received a gift of Rs. 1 crore during his wedding in December, 2015. The assessee has not produced any material evidence other than the wedding invitation card to prove the genuineness of his claim. The AO made an addition of Rs. 1,00,00,000, which was a cash deposit in the assessee’s bank accounts, as unexplained money as per the provisions of Section 69A.

The ITAT noted that cash was deposited by the Assessee during the demonetisation period, whereas the Assessee claims that it received cash on the occasion of a marriage held on December 17, 2015, which clearly stipulates that there is no direct evidence to substantiate the claim.

The ITAT held that, based on the customary system in Indian Society, it can be estimated that the assessee might not have received a cash gift of Rs. 1 crore; however, CIT(A) has already allowed relief of Rs. 30 lakhs, which can be enhanced to Rs. 50 lakhs; accordingly, the addition of the remaining 50 Lakhs as an unexplained cash deposit under Section 69A is sustained.

Case Title: Shri Karthick Natarajan Versus DCIT

Case No.: ITA No.: 382/CHNY/2023

Date: 11/07/2023

Counsel For Appellant: T. Vasudevan

Counsel For Respondent: D. Hema Bhupal

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