Demonetisation redeposit from earlier withdrawals is not unexplained money (ITAT Ahmedabad SMC)

Order: ITA No. 755/Ahd/2025 (ITAT Ahmedabad SMC), Assessment Year 2017-18, against the CIT(A) NFAC order dated 27.03.2024, pronounced 06.11.2025.

Facts

The ground challenged a Rs.17,63,000 addition under section 69A for cash deposits in bank accounts during the demonetisation period.
The assessee's case was that the deposits were fully explainable: Rs.10,00,000 from earlier cash withdrawals of June-July 2016, and Rs.7,63,000 from accumulated savings and disclosed income of earlier years, with regular returns showing tuition, rent and interest income and bank statements reflecting the withdrawals — and no finding that the withdrawn cash was used elsewhere.
Reliance was placed on coordinate-bench decisions holding redeposits traceable to earlier withdrawals, absent alternate utilisation, cannot be unexplained, and on CBDT Instruction No. 3/2017 directing reasonable verification of such claims.

Issue

Whether cash redeposited during demonetisation, traced to undisputed earlier withdrawals and past savings, can be added as unexplained money under section 69A.

Holding

The Tribunal found Rs.10,00,000 of withdrawals before demonetisation undisputed, with no material that the cash was used for any other purpose, so the explanation that later deposits came from those withdrawals could not be brushed aside without contrary material.
Where deposits come from earlier withdrawals with no evidence of alternate use, they cannot be treated as unexplained; unless the Assessing Officer demonstrates the withdrawn cash was used elsewhere, redeposit cannot give rise to a section 69A addition.
The Instruction's reasonable-verification approach supported acceptance of the remaining Rs.7,63,000 from accumulated household savings and disclosed income of preceding years, given regular filing and the absence of contrary material.
The Rs.17,63,000 addition was directed to be deleted, the appeal allowed, and the order pronounced on 06.11.2025.

Why a client would care

A demonetisation-period deposit is defended by tracing it backwards — dated withdrawal entries, no alternate use shown by the Assessing Officer, past savings on record — not by explaining the deposit day alone.

Questions clients ask

Q1. Cash redeposited after demonetisation was added under section 69A although it came from earlier withdrawals. What was the result?

The Rs.17,63,000 addition was directed to be deleted and the appeal allowed.

Q2. What must the Assessing Officer show before such an addition?

That the withdrawn cash was used for some other purpose; without that, a redeposit cannot be treated as unexplained.

Q3. How was the remaining Rs.7,63,000 explained?

By accumulated household savings and disclosed income of earlier years, accepted under the Instruction’s reasonable-verification approach, with regular filing and no contrary material.

Disclaimer

This note summarises a Tribunal order for general information. It is not professional advice and does not predict the outcome of any other case. Tax and company-law positions depend on facts and dates; take a written opinion before you act. Harun Raaj & Associates is a Chartered Accountants firm in Visakhapatnam.

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