An interesting decision was made by the Income Tax Appellate Tribunal where cash deposits made by housewives during the period of demonetization (9-11-2016 to 31-12-2016) to the extent of rupees two lakhs fifty thousand (2,50,000) was ruled as not liable to Income Tax. This ruling was given by the Agra Tribunal in the case of Smt. Uma Agarwal vs. ITO - [2021] 127 taxmann.com 735 (Agra - Trib.) dated 18th June 2021.
Facts of the above case:
1. The assessee filed its return for the financial year 2016-17 disclosing an income of Rs. 1,30,318/-.
1. The assessee filed its return for the financial year 2016-17 disclosing an income of Rs. 1,30,318/-.
2. It deposited an amount of Rs. 2,11,500/- in a bank account during the period of demonetization.
3. The above amount was not treated as income while filing the return.
4. The above money was saved during earlier years given by various relatives.
5. The case was selected for the purpose of assessment and a notice was sent by the Income Tax department in order to understand the source of the amount deposited.
6. A reply to the notice was given by the assessee citing the fact that she had no business activities and income from interest was her only source of income.
7. The department concluded the assessment passing the order adding Rs. 2,11,500/- (amount of cash deposited) as additional income. It treated it as unexplained money under section 69A* taxing the same under section 115BBE** of the Income Tax Act 1961.
*Income earned, the sources of which are not disclosed
** Tax on unexplained income @ 60%
8. This matter was further taken up to the Commissioner (Appeals) under the Faceless Assessment mechanism where the assessee failed to succeed.
9. Having been unfairly treated, the assessee filed the instant appeal before the Agra Tribunal.
Ruling:
The Agra Tribunal ruled that as per the Instruction No. 03/2017 released by the Income Tax department, the assessing officer cannot mandate a taxpayer (should not be a minor & not earning business income) if the total cash deposit was within the limit of Rs. 2.5 lakhs during the period of demonetization.
Hence, the small amount deposited could be accumulation of savings in the earlier years which as per the above instruction cannot be taxed since it is within the limit of Rs. 2,50,000/-.
It is a peculiar fact that after demonetization, women are left with no other option but to deposit the savings in their bank accounts. The explanation given by the assessee cannot be denied and hence, the said amount cannot be treated as income.
Moreover, it was also held by the Tribunal that this ruling may be used for all other assessment proceedings pending before various authorities arising out of cash deposits made during demonetization keeping in mind the threshold limit of Rs. 2,50,000.
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