2021 (7) TMI 243 - AT - Income Tax

Addition u/s 69A - chit fund investment - assessee had cash deposits into bank account during the demonetization period - as per CIT-A assessee is a state government employee and as per the provisions of the state government conduct rules, state government employees are not permitted to make investment in speculative transaction - HELD THAT - CIT(A) demonstrated in his order that the assessee does not have sufficient money to pay monthly chit installments by way of recording his statement u/s. 131 of the Act and examining the bank statements, further observed that no documentary evidence was filed by the assessee to establish genuineness of the chit fund claim. Further, the CIT(A) observed that being govt. employee, the assessee is not permitted to enter in chit fund. Even before us, the ld. AR of the assessee failed to establish that the amount of ₹ 10,00,000/- received from chit fund and the submissions in the written submissions are general and vogue which are not supported to the case of the assessee. CIT(A) examined the bank statement of the assessee and after observing the monthly expenditure of the assessee and nature of transactions carried out by the assessee, he has rightly sustained the addition made by the AO - No infirmity in the order of the CIT(A) in confirming the addition - Decided against assessee.

Summary

Issues:
Appeal against CIT(A) order confirming addition under section 69A of the Income Tax Act, 1961 for AY 2017-18.

Analysis:
1. The AO observed cash deposits during demonetization period and issued notice under section 142(1) to which the assessee did not comply, leading to treating unexplained cash deposits as income under section 69A.
2. The CIT(A) upheld the addition of ?10,00,000, citing state government conduct rules prohibiting speculative investments and lack of declaration by the assessee, while directing deletion of another addition.
3. Assessee appealed to ITAT, presenting bank statements showing monthly cash withdrawals and son's income for chit fund savings, challenging CIT(A)'s decision.
4. ITAT found CIT(A)'s reasoning valid, noting lack of evidence for chit fund claim, prohibition on govt. employees entering chit funds, and failure to prove the source of ?10,00,000 deposit, ultimately dismissing the appeal.

This case involved the assessment of cash deposits during demonetization, with the AO treating unexplained deposits as income under section 69A. The CIT(A) confirmed an addition of ?10,00,000, emphasizing the prohibition on govt. employees entering speculative transactions and lack of declaration by the assessee. The ITAT upheld CIT(A)'s decision, noting insufficient evidence for the chit fund claim, failure to establish the source of deposit, and prohibition on govt. employees entering chit funds. The appeal was dismissed based on these findings, highlighting the importance of providing concrete evidence and complying with relevant regulations in income tax assessments.