Case at a Glance
The assessee deposited Rs. 20,30,500 in old Rs. 500 and Rs. 1,000 notes during demonetisation. The Assessing Officer accepted Rs. 10,50,500 but added Rs. 9,80,000 as unexplained money under Section 69A read with Section 115BBE, rejecting the explanation that part of the cash was the savings of his mother, wife and grandmother, who had no bank accounts. The CIT(A) called the affidavits self-serving. The ITAT held that the affidavits “were not examined” by either authority, accepted Rs. 7,10,000 relying on Uma Agrawal v. ITO, took no adverse view of the balance, and deleted the entire Rs. 9,80,000 addition.
The assessee filed a belated return on 28.03.2019 declaring income of Rs. 5,45,540. During demonetisation he deposited Rs. 20,30,500 in specified bank notes across several accounts. He explained the source as opening cash in hand, recovery of loans and advances, his own savings, and the cash savings of his mother (Rs. 2,40,000), wife (Rs. 2,20,000) and grandmother (Rs. 2,50,000), who had no bank accounts of their own, supporting the claim with their affidavits.
The Assessing Officer accepted Rs. 10,50,500, including the opening cash balance of Rs. 8,50,132, but added the remaining Rs. 9,80,000 under Section 69A read with Section 115BBE. The CIT(A) dismissed the appeal, finding the affidavits self-serving and the family savings implausible given the declared income. Before the Tribunal, the assessee relied on Uma Agrawal v. ITO-1(3), Gwalior, [2021] 127 taxmann.com 735, and CBDT Instruction No. 3/2017 dated 21.02.2017 on deposits by housewives and non-business individuals below Rs. 2,50,000.
The Key Question Before the Court
Can the Revenue treat cash deposited during demonetisation as unexplained money under Section 69A when the assessee files affidavits from family members explaining the source and the authorities do not examine or rebut them?
Unexamined Affidavits Cannot Simply Be Brushed Aside
The Tribunal noted that the assessee had filed the necessary affidavits of his mother, wife and grandmother, and that these “were not examined” by the Assessing Officer or the CIT(A), not even through a remand report. In the absence of any rebuttal, and following Uma Agrawal v. ITO, it held that “the cash deposit to the extent of Rs. 7,10,000/- is accepted.”
As to the remaining amount attributed to the assessee’s own savings, the Tribunal took “no adverse view in respect of the balance amount of Rs. 1,80,000/- being not too unreasonable,” and concluded: “Accordingly, the addition of Rs. 9,80,000/- is deleted.” Grounds 3, 4 and 5 were allowed, and grounds 1 and 2, on notice timing and compliance with CBDT instructions, were left open as academic.
What the Court Actually Held
- Affidavits of family members explaining the source of demonetisation-period deposits cannot be rejected without examination or rebuttal.
- Rs. 7,10,000 attributed to the savings of the assessee’s mother, wife and grandmother was accepted, following Uma Agrawal v. ITO.
- No adverse view was taken of Rs. 1,80,000 claimed as the assessee’s own savings.
- The addition of Rs. 9,80,000 under Section 69A read with Section 115BBE was deleted and the appeal allowed.
Why This Judgment Matters
- Many demonetisation-era additions turn on family members’ household savings; this order shows the weight of unrebutted affidavits.
- It reinforces the principle that tax authorities must test evidence rather than dismiss it as self-serving.
- It applies the line of rulings, including Uma Agrawal, that protect modest household savings of homemakers.
What Should Advocates Take Away From the Judgment?
For Taxpayers
- File affidavits from family members whose savings were deposited, with details of amounts.
- Show how the amounts relate to household income and the period over which they were saved.
- If the AO or CIT(A) ignores the affidavits, raise that specifically in appeal.
For Counsel
- Cite Uma Agrawal v. ITO-1(3), Gwalior and CBDT Instruction No. 3/2017 for deposits by homemakers below Rs. 2.5 lakh.
- Press the point that unexamined affidavits stand unrebutted.
- Seek a remand report where the lower authorities did not verify the evidence.
Key Takeaways
- Family savings explained by affidavits were accepted.
- The AO and CIT(A) had not examined the affidavits.
- The entire Rs. 9.80 lakh addition under Section 69A was deleted.
- Grounds on notice timing and CBDT instructions were left open.
Frequently Asked Questions
What is Section 69A of the Income-tax Act?
It allows the Assessing Officer to treat money, bullion or valuables found with the assessee as income when the assessee offers no satisfactory explanation of their source; Section 115BBE then applies a high rate of tax.
Why did the ITAT accept the family members’ savings?
Because their affidavits were on record and neither the Assessing Officer nor the CIT(A) examined or rebutted them, and the Tribunal followed Uma Agrawal v. ITO.
Is there a set limit for homemakers’ deposits?
The assessee relied on CBDT Instruction No. 3/2017 regarding deposits below Rs. 2,50,000 by housewives and non-business individuals; the Tribunal decided the case on the affidavits and left the instruction ground open.
Conclusion
The ITAT Agra has reminded the Revenue that affidavits are evidence: if they explain the source of demonetisation deposits and go unchallenged, an addition built on bare disbelief cannot stand.
Practical takeaway: In demonetisation cases, document each family member’s contribution with affidavits and press for their examination; unrebutted evidence can carry the day.
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