ITAT Upholds Claim on Demonetization:
Shri Girishkumar Jamnadas Bhalodiya vs. Revenue [Income Tax Appeal No. 914 of 2024]
Background of the Case
The appellant, Shri Girishkumar Jamnadas Bhalodiya filed his ITR declaring a total income of Rs. 6,58,380. During scrutiny, the AO noted cash deposits of Rs. 21.98 lakhs in the appellant bank account during demonetization. The appellant explained that the funds originated from past savings, Provident Fund (PF) withdrawals (Rs. 7.9 lakhs), and cash reserves for house construction and medical emergencies. While the AO accepted Rs. 4 lakhs as explained, the remaining Rs. 17.98 lakhs was treated as unexplained and added to income under Section 69A. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the addition, prompting the appellant to appeal before the ITAT Rajkot.
Arguments by the Appellant
The appellant contended that he had maintained consistent cash balances, supported by cash books, bank statements, and past income tax returns. Appellant emphasized that the PF withdrawals were intended for house construction but were redeposited due to unforeseen circumstances. As a salaried employee with no other income sources, the AO failed to identify specific discrepancies in his documentation. The appellant relied on the ITAT Delhi’s decision in Om Parkash Nahar (2022), where similar cash deposits were accepted as explained.
Respondent’s Response
The respondent, defended the addition, arguing that a teacher earning Rs. 48,000 to 49,000 per month could not plausibly accumulate such large cash reserves. It stressed that PF withdrawals were meant for specific purposes and should not have been redeposited. The Revenue also highlighted the lack of full reconciliation between withdrawals and deposits, asserting that the appellant explanation lacked credibility.
Court Findings and Decision
The ITAT Rajkot partially ruled in favor of the appellant, and held that the the AO had not pointed out specific flaws in the documents but rejected the explanation on general grounds. The Tribunal held that the appellant cash holdings were plausible given his income history and withdrawals. However, due to minor gaps in reconciling personal expenditures, it restricted the disallowance to 5% of the disputed amount (Rs. 89,900). The Tribunal also directed that the amount be taxed at normal rates, excluding Section 115BBE’s punitive provisions.
ITAT Upholds Claim on Demonetization
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