Unexplained Cash Deposit During Demonetisation Led to Addition in Income: ITAT Restores Matter to AO [Read Order]

Demonetisation-Era Deposit Under Scrutiny: ITAT Orders Fresh Assessment

A cash deposit made during the demonetisation period has once again become a point of contention between a taxpayer and the Income Tax Department. The Income Tax Appellate Tribunal (ITAT) has recently restored the case to the Assessing Officer (AO) for fresh consideration, providing a new opportunity for the taxpayer to present their case.

Background: The Unexplained Deposit

The core of the issue revolves around a cash deposit made during the demonetisation drive, a period when the government invalidated certain high-value currency notes in an effort to curb black money. The Income Tax Department flagged the deposit as unexplained, leading to its addition to the taxpayer’s declared income.

Previous Assessments and the CIT(A) Order

Initially, the Assessing Officer (AO) treated the deposit as unexplained income and added it to the taxpayer’s assessed income. This decision was subsequently upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the CIT(A) order was passed ex-parte, meaning it was made without the taxpayer’s participation. This reportedly occurred due to non-compliance with multiple notices issued by the department, a claim that is now under renewed scrutiny.

ITAT Intervention: A Second Chance for Explanation

The ITAT, after reviewing the case, has decided to give the taxpayer another chance to explain the source and nature of the cash deposit. The Tribunal has emphasized the importance of providing a fair opportunity to the taxpayer to present their evidence and arguments. The case has therefore been remanded back to the Assessing Officer for a fresh assessment.

This development highlights the ongoing scrutiny of transactions made during the demonetisation period and underscores the importance of maintaining proper records and responding promptly to notices from the Income Tax Department. The restored case means that the taxpayer now has a critical window to justify the deposit and potentially avoid further tax implications. The AO is now tasked with carefully reviewing any new evidence presented. The original amount in question remains undisclosed.

This case serves as a reminder that even years after demonetisation, transactions made during that period can still come under the taxman’s lens. Compliance and transparency are key to navigating potential challenges.