ITAT Bangalore Deletes ₹9,40,000 Addition Under Section 69A: Cash Flow Statement Upheld in Demonetisation Cash Deposit Case
Overview of the Case
The Income Tax Appellate Tribunal, Bangalore Bench, rendered a significant ruling in CSV Renraj (HUF) Vs ITO, wherein it deleted an addition of ₹9,40,000 made under Section 69A of the Income-tax Act, 1961. The dispute arose in connection with cash deposits made during the demonetisation period, pertaining to Assessment Year 2017-18. The Tribunal not only condoned a delay of 28 days in filing the appeal but also adjudicated the matter on merits in favour of the assessee, holding that the explanation furnished — supported by a cash flow statement and banking records — was plausible and sufficient to discharge the burden of proof.
Background and Procedural History
The assessee, a Hindu Undivided Family (HUF), was engaged in small-scale lending activities primarily catering to agriculturists and petty traders operating in the informal economy. During the relevant previous year corresponding to Assessment Year 2017-18, cash deposits were made into various bank accounts of the assessee. These deposits coincided with the demonetisation period, which drew the attention of the Assessing Officer during scrutiny proceedings.
The Assessing Officer (AO) treated the aforesaid cash deposits as unexplained money under Section 69A of the Income-tax Act, 1961, on the primary ground that the assessee had failed to furnish adequate supporting documentation — including books of accounts, loan registers, and written confirmations from borrowers — to substantiate the stated sources of the deposits.
The Commissioner of Income Tax (Appeals), NFAC, by its order dated 30.11.2025, confirmed the addition made by the AO. Aggrieved by this outcome, the assessee filed an appeal before the ITAT Bangalore, which was accompanied by a petition for condonation of delay.
Condonation of Delay: 28-Day Delay Condoned
Assessee's Explanation for Delay
Before proceeding to the merits, the Tribunal was required to address the preliminary issue of delay. The appeal had been filed 28 days beyond the prescribed limitation period. The assessee explained that the delay arose because the appellate order had been communicated electronically through the Income Tax portal, and it was not immediately noticed. The assessee had operated under a genuine belief that such orders would also be served through physical/postal mode, as was the prevailing practice in earlier years. It was specifically contended that the delay was neither wilful nor deliberate and stemmed entirely from a bona fide misunderstanding about how orders were being communicated in the new digital environment.