2019 (3) TMI 1855 - AT - Income Tax

Addition u/s 69A - addition has been made on account of disbelieving the cash-in-hand recorded in books of accounts - genuine sources of income OR not? - HELD THAT - The deeming fiction u/s 69A can be invoked where in any financial year assessee is found to be the owner of any money bullion jewellery or other valuable articles and such money bullion jewellery or valuable articles is not recorded in the books of accounts and the source is not explained by the assessee. Here in this case there is no dispute with regard to the fact that the assessee has been filing the income tax return along with the balance sheets wherein source of income and cash has been disclosed and recorded. Hence in such a situation it is unfathomable as how provision of 69A can be invoked. The sole reason for disbelieving the assessee s explanation is that firstly no prudent person after withdrawing the cash will keep at home; and secondly if there was an OD account having negative balance on which interest is being charged then there was no need to keep such huge cash in hand at home. Such reasoning dehors any contrary material on record that the cash disclosed in the books of accounts has been invested somewhere else then on mere surmise assessee s explanation cannot be discarded. If assessees have genuine sources of income which are received through banking channels out of which cash has been withdrawn and have been disclosed in the income tax return and in the balance sheet as cash-in-hand then I am unable to apprehend how the provision of section 69A is applicable. Because the section can only be invoked where in any financial year the assessee is found to be the owner of any money etc. which has not been recorded in the books of accounts and assessee offers no explanation. Here in these cases Assessee s cash in hand duly stands recorded and source has been explained from the income deposited in the bank account and withdrawal then in my opinion deeming provision of section 69A cannot be invoked. The reasoning given by the AO and Ld. CIT (A) is vague and based on surmise as to what a prudent person should have done. Once assessee has explained that being of senior citizen they have maintained such liquidity of cash out of their own disclosed income with them for certain contingencies then without any material to controvert such an explanation addition cannot be sustained. Simply because after the period of demonetization that is 08.11.2016 certain amount of cash has been deposited in the bank account it does not mean that the cash-in-hand as on 31.3.2015 and 31.03.2016 duly shown in the balance sheet and disclosed to the department in the respective income tax return filed much earlier is unexplained. - Decided in favour of assessee.

Summary

Issues: Challenge to addition made under section 69A for cash deposits in bank account.

Analysis:
1. The appeals were filed against orders passed by Ld. CIT(Appeals) for the assessment year 2015-16. The issues in both appeals were common, so they were heard together. The assesses, senior citizens, challenged additions of cash deposits made under section 69A.

2. The assesses were asked to provide details of cash deposits, wealth tax returns, and reasons for cash withdrawals and deposits. They explained the need for cash due to medical treatments. The Assessing Officer (AO) questioned the rationale of keeping large cash amounts at home instead of in the bank, especially when having credit cards and overdraft accounts.

3. The AO alleged that the assesses manipulated cash-in-hand to justify cash deposits during demonetization. The Ld. CIT(A) upheld the additions, noting the failure to explain the large cash amounts and substantial interest paid on overdraft accounts.

4. The ITAT found that the additions were based on disbelief of cash-in-hand recorded in the books, invoking section 69A. However, since the assesses consistently disclosed cash in their balance sheets and returns, the provision was inapplicable.

5. The balance sheets showed significant cash-in-hand over the years. The ITAT emphasized that section 69A applies only when unexplained money is found, not when cash is duly recorded and explained.

6. The assesses provided various documents to support their cash positions, which were not refuted. The ITAT concluded that the additions lacked substance and were based on assumptions rather than evidence.

7. Despite post-demonetization cash deposits, the ITAT held that the disclosed cash-in-hand from previous years remained explained and legitimate. Thus, the additions were directed to be deleted.

8. Consequently, both appeals of the assesses were allowed, and the additions made under section 69A were set aside.

This detailed analysis highlights the legal journey of the case, addressing the issues raised by the assesses regarding the additions under section 69A and the subsequent decisions made by the authorities and the ITAT.