2022 (3) TMI 1500 - AT - Income Tax

Unexplained deposits in bank account - mismatch of denominations - amount was withdrawn with the denomination of notes 500 X 3000 WHILE when deposited the denominations were 500 X 1600 and 1000 X 700 - HELD THAT - The amount as not lying with the assessee for the unreasonable period after withdrawal and also there was a reason out of legal compulsion to deposit the demonetizes currency notes in the bank. Had there been no such legal requirement, assessee may not have deposited the amount back and may have used it for the purpose for which it was allowed to be withdrawn by its bankers in KCC Limit account. Since before demonetization, there was no reason to deposit back the currency notes so there could have been no prudent reasoning for the assessee to have kept the same currency notes of the denominations as received from bank. Ld. F.A.A. has appreciated the facts and circumstances while giving a finding and appreciable reasons for change in the denominations of the holding but restricted relief to Rs. 3,50,000/-. The Bench is of the considered view that when the onus casted on the assessee is considered to be plausible then it has to be accepted on the whole unless there are legal and factual grounds to disbelieve the explanation in part. The aforesaid discussion of the facts and circumstances, leaves no doubt in the mind of the Bench that assessee had successfully discharged its onus of explaining that the deposit of Rs. 15,00,000/- in the bank account were his own funds, as withdrawn form the same bank account and no considerable reason has been cited by the Ld. F.A.A. to have partly allowed the appeal, while reducing the addition from Rs. 7,00,000/to Rs. 3,50,000/-, and same needs interference in this appeal - AO is directed to delete the complete addition of Rs. 7,00,000/- made u/s 69A - Appeal of the assessee stands allowed.

Summary

Issues:
1. Addition under section 69A of the IT Act, 1961 based on mismatch of denominations during cash deposit.
2. Confirmation of the addition by the CIT(A) despite no doubt on the source of cash deposit.
3. Allegations of conjecture and surmises in the decision of the CIT(A).
4. Discrepancy in the decision of the CIT(A) regarding the allowance for past savings and denomination mixing.

Analysis:

Issue 1:
The assessee appealed against the addition under section 69A of the IT Act, 1961, due to a mismatch of denominations during cash deposit. The AO invoked Section 69A based on this discrepancy, adding Rs. 7,00,000 to the income. The CIT(A) partly allowed the appeal, reducing the addition to Rs. 3,50,000, considering past savings and the mixing of note denominations.

Issue 2:
The CIT(A) confirmed the addition under section 69A despite no doubt on the source of cash deposit. The appellant argued that the change in denomination should not lead to income generation and invoked RBI circulars to support the claim. The Ld. AR contended that the source of income was not in question, and the partial allowance by the CIT(A) was unwarranted.

Issue 3:
The appellant raised concerns about conjecture and surmises in the CIT(A)'s decision, alleging ignorance of submitted evidence and arbitrary conclusions. The CIT(A) allowed a partial deduction based on the mixing of notes and past savings, leading to a reduction in the addition. The appellant sought the deletion of the remaining addition.

Issue 4:
The CIT(A) decision faced scrutiny for discrepancies in allowing deductions for past savings and denomination mixing. The appellant argued that the CIT(A) based its decision on conjecture and surmises, leading to an arbitrary conclusion. The Tribunal considered the interconnected grounds raised by the appellant and found merit in the arguments presented.

In the final judgment, the Tribunal allowed the appeal, directing the deletion of the complete addition of Rs. 7,00,000 made under section 69A of the IT Act. The Tribunal found that the appellant had successfully explained the source of the deposited funds, leading to the decision to overturn the CIT(A)'s confirmation of the addition.