2022 (12) TMI 1505 - AT - Income Tax

Addition u/s 69A in respect of cash deposited in bank accounts during demonetization period - Assessee argued that provisions of this section cannot be invoked in case where concerned money is already recorded in the books of account - HELD THAT - On a perusal of the cash books for the year under consideration, it stands revealed beyond doubt that both the cash deposits each in mentioned bank accounts on 29.11.2016 were made from his books of accounts, thus no justification in dubbing of the cash deposits in question as unexplained money of the assessee u/s.69A of the Act by the lower authorities. Also we cannot remain oblivion of the fact that as the aforesaid claim of the Ld. AR not only militates against the observations of the lower authorities, but also there is nothing discernible from the record which would reveal that the authenticity of the cash book of the assessee for the year under consideration had been looked into by the lower authorities, therefore, it would be unfair to summarily accept the same without subjecting the same to necessary verification - the matter in all fairness requires to be revisited by the A.O. A.O is herein directed to re-adjudicate the issue after duly taking cognizance of the explanation of the assessee as regards the source of the cash deposits in the bank accounts in question. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues Involved:
1. Legitimacy of the addition of Rs. 20,00,000/- under Section 69A of the Income-tax Act, 1961.
2. Justification for treating the cash deposits during the demonetization period as unexplained money.
3. Applicability of Section 115BBE(1) tax rate of 60% instead of 30% on the alleged unexplained money.

Detailed Analysis:

1. Legitimacy of the addition of Rs. 20,00,000/- under Section 69A of the Income-tax Act, 1961:

The assessee filed an appeal challenging the addition of Rs. 20,00,000/- made by the Assessing Officer (A.O) under Section 69A of the Income-tax Act, 1961. The A.O observed that the assessee deposited Rs. 10,00,000/- each in two bank accounts during the demonetization period. The assessee claimed the source as agricultural income. However, the A.O noted that the agricultural income was not declared in the assessee's return, and the agricultural land was owned by the assessee's HUF, making the claim an afterthought. Consequently, the A.O treated the amount as unexplained money under Section 69A.

2. Justification for treating the cash deposits during the demonetization period as unexplained money:

The assessee argued before the CIT(Appeals) that the cash deposits were recorded in the books of account, which were produced for verification. The CIT(Appeals) upheld the A.O's decision, citing a lack of supporting material for the assessee's claim. The assessee contended that the lower authorities erred in their observation, asserting that the cash deposits were sourced from the books of account and not from agricultural income. The Tribunal found substance in the assessee's claim, noting that the books of account for the relevant and preceding years were produced before the A.O. The Tribunal observed that the cash deposits were reflected in the cash book and directed the A.O to re-adjudicate the issue after verifying the explanation and documentary evidence provided by the assessee.

3. Applicability of Section 115BBE(1) tax rate of 60% instead of 30% on the alleged unexplained money:

The assessee also challenged the applicability of the 60% tax rate under Section 115BBE(1), arguing that the transactions occurred before the amendment's effective date (15.12.2016) and should be taxed at the earlier rate of 30%. The Tribunal did not provide a specific ruling on this issue but directed the A.O to re-examine the matter in light of the assessee's explanations and documentary evidence.

Conclusion:

The Tribunal found merit in the assessee's contention that the cash deposits were sourced from the books of account and not from agricultural income. It directed the A.O to re-adjudicate the issue after verifying the explanation and documentary evidence provided by the assessee. The appeal was allowed for statistical purposes, and the A.O was instructed to afford a reasonable opportunity of being heard to the assessee during the set-aside proceedings.