ITAT Deletes Rs. 10 Lakh Addition After Finding Cash Deposit Was Properly Explained
ITAT noted that the appeal was delayed only because the earlier order was wrongly sent in the name of a deceased person, so the legal heir didn’t know about it. Once they learned of it, they filed the appeal immediately, so the delay was excused. The assessee had explained that the demonetization-period cash deposit came from a gift by his son, small business savings and had submitted documents to the CIT(A). However, the CIT(A) ignored this evidence without calling for a remand report, which the ITAT said violated natural justice. Considering the assessee’s age and genuine sources, the ITAT canceled the Rs. 10,00,000 addition and allowed the appeal.
The present appeal has been filed by Smt. Gowramma (Appellant) against the Income Tax Officer Ward 4(2)(2) Bengaluru (Respondent) in the Income Tax Appellate Tribunal (ITAT) “SMC” Bench: Bangalore, before Shri Waseem Ahmed (Account Member). The case is related to the assessment year 2017-18 and was decided on November 3, 2025. The assessee challenged an order dated February 19, 2025, passed by CIT(A).
The appeal was filed 73 days late. The reason for the delay was that the tax department had sent the order in the name of a person who had already passed away. Because of this, the legal heir did not know about the order. They came to know about it only when they received the communication in June 2025. As soon as they found out, they filed the appeal.
The Assessing Officer noticed that the assessee had deposited Rs 10,00,000 in his bank account during the demonetization period. The assessee further clarified that the source was from a loan taken from friends, past savings, a gift from his mother-in-law, and a chit fund. But A.O. was not satisfied with the assessee’s answer, so he made an addition of Rs 10,00,000 under section 69A of the Act.
The aggrieved assessee further approached the CIT(A). Before the CIT(A), the assessee submitted additional evidence such as bank withdrawals, computation of income, a gift from a son, and supporting papers under Rule 46A on March 11, 2020, and January 29, 2021. But CIT(A) dismissed the appeal and confirmed the addition.
Unsatisfied by the order of CIT(A), the assessee approached ITAT. The assessee’s representative argued that the assessee had submitted all proofs before the CIT(A), and the application under Rule 46A was also filed. The CIT(A) ignored these materials and rejected the appeal. The assessee has proven where the deposited amount came from. Hence, the addition is not sustainable.
However, the respondent representative supported the CIT(A) order and argued that the assessee did not prove the claim with necessary documents. Therefore, the addition was correct.
After hearing both the parties, ITAT said that the assessee filed evidence before the CIT(A). These documents explain that the money came from a gift of Rs 9,00,000 from the assessee’s son, Rs 65,000 in savings from a vegetable business, and Rs 35,000 from the sale of old gold and other documents as well. The learned CIT(A) should have accepted these proofs or called for a remand report from the Assessing Officer. However, ignoring this evidence was against the rules of natural justice.
ITAT further added that the assessee is a small trader, over 70 years old, and his income is below the basic tax-free limit. In such situations, the entire cash deposit cannot automatically be treated as unexplained money. The evidence clearly shows that the cash was deposited from known and genuine sources. Therefore, we accept that the assessee has properly explained where the money came from. Because of this, the tax addition made under section 69A is not correct and cannot be upheld. The Rs 10,00,000 added by the Assessing Officer and confirmed by the CIT(A) is removed. As a result, the assessee’s appeal is allowed.
Citation: Smt. Gowramma Vs Income Tax Officer Ward 4(2)(2) (ITAT Bangalore); 1465/Bang/2025; 03/11/2025; 2017-18.
