2023 (11) TMI 1265 - AT - Income Tax

Unexplained money u/s 69A - cash deposited into bank account during demonetisation period - Applicability of Section 115BBE special rate of taxation - assessee claimed the cash was withdrawn from his bank account for purchasing agricultural land which did not materialize. HELD THAT - Assessee is residing in Channapatna a small down. The reason stated for withdrawal of huge cash was to purchase agricultural land near Channapatna and since the purchase did not materialize cash withdrawn was redeposited during the demonetization period. Out of the cash withdrawn of Rs. 32 lakhs a sum of Rs. 10 lakhs was redeposited on 26.07.2016. Therefore a sum of Rs. 21 lakhs was available for deposit during the demonetization period. The AO disbelieved the source of cash deposit by holding that cash withdrawn in instalment by assessee was to cater to some other requirement / obligation. This statement of the AO is without any evidence and is merely based on conjectures and surmises. A bold allegation without any proof cannot be basis for any allegation. There is nothing in law which prohibits holding of cash in hand. Source for cash deposits is out of available cash balance as on 08.11.2016. As per the statement above it is clear that a sum of Rs. 32 lakhs was withdrawn on 17.06.2016 23.06.2016 11.07.2016 and 28.07.2016 from the State Bank of India Channapatna Branch. The same was not utilized and the cash was lying with the assessee. AO has not proved that cash withdrawn by assessee has not been utilized for some other purpose. In other words the assessee cannot be expected to prove the negative that he had not utilized the cash withdrawal for some other purpose. It was the actual cash in hand lying with the assessee which was subsequently deposited in bank account. As explained above the source of cash deposit is out of cash in hand available with the assessee which was withdrawn from the bank. The cash withdrawn from bank remained unutilized and was deposited in the bank again. AO has not brought on record any material to show the utilization of cash withdrawn was for purpose other than the amount deposited in the bank account. Thus source of cash deposit is adequately explained and there are enough cash withdrawals to cover the same. Hence the addition under section 69A is hereby deleted. Assessee appeal allowed.

Summary

Issues Involved:

1. Confirmation of the order passed by the Assessing Officer.
2. Addition of Rs. 21,00,000/- as unexplained money u/s 69A of the Act.
3. Reflection of cash deposits in the cash book and their explanation.
4. Alleged double addition of business receipts.
5. Applicability of Section 115BBE of the I.T. Act.
6. Liability to pay interest u/s 234B and 234C of the I.T. Act.

Summary:

Issue 1: Confirmation of the order passed by the Assessing Officer

The learned Commissioner of Income-Tax (Appeals) confirmed the Assessing Officer's order, which was challenged by the assessee on grounds of being erroneous and bad in law.

Issue 2: Addition of Rs. 21,00,000/- as unexplained money u/s 69A of the Act

The Assessing Officer added Rs. 21,00,000/- deposited during the demonetization period as unexplained money u/s 69A, despite the assessee's explanation that the cash was withdrawn from his bank account for purchasing agricultural land. The AO was not convinced by the explanation and applied the special rate of taxation as per Section 115BBE of the Act. The CIT(A) upheld this addition, stating that the appellant failed to provide satisfactory evidence for keeping such a large cash balance.

Issue 3: Reflection of cash deposits in the cash book and their explanation

The assessee argued that the cash deposits were duly reflected in the cash book and adequately explained. The AO and CIT(A) did not accept this explanation, citing a lack of evidence and logical reasoning for holding such a large amount of cash.

Issue 4: Alleged double addition of business receipts

The assessee contended that the addition of cash deposits resulted in double addition as these were part of business receipts already considered for computing taxable income. This argument was not accepted by the authorities.

Issue 5: Applicability of Section 115BBE of the I.T. Act

The CIT(A) confirmed the applicability of Section 115BBE for taxing the unexplained cash deposits at a higher rate. The assessee argued that this section was not applicable to their case, but the authorities did not agree.

Issue 6: Liability to pay interest u/s 234B and 234C of the I.T. Act

The assessee denied the liability to pay interest u/s 234B and 234C, arguing that it was wrongly levied. However, this contention was also dismissed by the authorities.

Tribunal's Decision:

The Tribunal held that the source of cash deposits was adequately explained by the assessee, who had withdrawn Rs. 32 lakhs from the bank, out of which Rs. 21 lakhs were available for deposit during the demonetization period. The AO's statement that the cash was used for other purposes was based on conjectures and surmises without any evidence. The Tribunal noted that there is no prohibition in law against holding cash in hand and that the AO failed to prove that the cash was utilized for other purposes. Consequently, the addition u/s 69A was deleted, and the appeal filed by the assessee was allowed.