ITAT Panaji Grants Partial Relief in Demonetisation Cash Deposit Case: Identified Gold Sale Credited, Unnamed Cash Memos Dismissed Under Section 69A
Case Background and Overview
Case Name: Salama Mahmadsalim Dafedar Vs ITO (ITAT Panaji)
Assessment Year: 2017-18
Relevant Provision: Section 69A of the Income Tax Act, 1961
This ruling by the Income Tax Appellate Tribunal, Panaji Bench, addresses a recurring issue in demonetisation-era assessments — the treatment of cash deposits made in November 2016 and the evidentiary standard required to establish their source. The Tribunal drew a clear line between cash explanations backed by an identifiable party and confirmation, versus those supported merely by anonymous internal documents with no purchaser details.
Facts of the Case
The assessee was an individual running a jewellery-making and gold-sale business. She filed her return of income for Assessment Year 2017-18 on 16.12.2017, declaring a total income of ₹4,93,850.
The return was initially processed under Section 143(1) of the Income Tax Act, 1961. The case was thereafter selected for scrutiny and notices were issued under Section 143(2) and Section 142(1), requiring the assessee to furnish details of cash deposited during the demonetisation period and the sources thereof.
Cash Deposit Under Examination
The Assessing Officer (AO) observed that the assessee had deposited ₹32,00,000 in cash on 10.11.2016 in her bank account with Syndicate Bank. During the course of assessment proceedings, the assessee put forth explanations attributing the deposit to:
- Opening cash balance available with her
- Proceeds received from the sale of gold
- Maturity proceeds withdrawn from a Pigmy deposit
AO's Assessment and Addition Under Section 69A
After evaluating the assessee's explanations, the AO accepted sources of cash only to the extent of ₹12,84,310, broken down as follows:
| Source | Amount (₹) |
|---|---|
| Opening cash balance | 4,66,275 |
| Gold sale proceeds | 6,51,200 |
| Pigmy deposit maturity withdrawal | 1,66,835 |
| Total Accepted | 12,84,310 |
The remaining ₹19,15,690 — representing the difference between the total deposit of ₹32,00,000 and the accepted sources of ₹12,84,310 — was treated as unexplained money under Section 69A of the Income Tax Act, 1961.
Accordingly, vide assessment order dated 27.11.2019 passed under Section 143(3), the AO determined the assessee's total income at ₹24,09,540 as against the returned income of ₹4,93,850. The assessed income included an addition of ₹19,15,690 as unexplained cash deposits under Section 69A.
First Appellate Proceedings Before CIT(A)
Being aggrieved by the assessment order, the assessee filed an appeal before the Addl./JCIT(A)-9, Mumbai. During appellate proceedings, the assessee submitted additional explanations along with supporting documents regarding the origin of the deposited cash. A remand report was also obtained from the AO.
After examining the submissions and the remand report, the CIT(A) granted partial relief of ₹7,94,600 out of the total addition of ₹19,15,690. However, the remaining balance of ₹11,21,090 continued to be upheld as unexplained cash deposit under Section 69A.
The assessee, dissatisfied with the continued sustenance of ₹11,21,090, approached the Income Tax Appellate Tribunal seeking deletion of the remaining addition.