ITAT Mumbai Deletes ₹1.81 Lakh Addition on Demonetisation Cash Deposits

The “H (SMC)” Bench of the Income Tax Appellate Tribunal, Mumbai, delivered its order on 25 February 2026 in the case of Aryan Nazim Jivani, legal heir of Nazim Noordin Jivani, for Assessment Year 2017–18. The appeal concerned addition made under Section 68 of the Income-tax Act on account of cash deposits during the demonetisation period.

Addition Based on Alleged Acceptance of Old Currency

The reassessment was initiated after the Assessing Officer noted cash deposits of over ₹60 lakh during financial year 2016–17. After examining cash sales of the assessee’s proprietary concern and cash in hand records, the AO accepted that ₹8.73 lakh was available as cash balance on 8 November 2016, the date of demonetisation. A bank certificate confirmed that only ₹5.26 lakh was deposited in Specified Bank Notes (SBN), while the rest was in new currency. The AO accepted most deposits but treated ₹1.81 lakh deposited on 15 November and 7 December 2016 as unexplained, alleging that old currency should not have been retained after demonetisation. The CIT(A) upheld this view and confirmed the addition under Section 68 read with Section 115BBE.

Tribunal Holds Deposits Were Explained and Within Permitted Period

The ITAT observed that the authorities themselves accepted the existence of sufficient cash in hand as on the demonetisation date. Since the government had permitted deposit of old currency notes up to 31 December 2016, depositing the same in multiple instalments could not be treated as suspicious. The Tribunal also noted that the Assessing Officer produced no evidence to show that the assessee accepted SBN after demonetisation. Once the availability of cash was established, the subsequent deposits were adequately explained.

Accordingly, the ITAT deleted the addition of ₹1.81 lakh and allowed the assessee’s appeal.