2021 (9) TMI 459 - AT - Income Tax

Unexplained money u/s 69A - No source of cash deposit in bank given - whether the sum was duly recorded in the books of accounts or not ? - HELD THAT - In the instant case, the assessee explained that the entire sum representing the deposits was duly accounted in the books of accounts and the books of accounts were produced before the AO, but no defect was found by the AO - source of the deposit of ₹ 74,90,000/- duly explained by the assessee as sales and accounted in the books of accounts. AO made the addition u/s 69A. As per section 69A, it is deemed to be income of the assessee as unexplained money when the AO found money, bullion, jewellery or other valuable article and the assessee offers no explanation to the satisfaction of the AO. In the instant case, the source of cash deposited by the assessee in the bank account was duly explained by the assessee and the same was duly accounted in the books of accounts. Thus, there is no case for making addition u/s 69A In the instant case there is no doubt that the assessee has recorded the sales in the books of accounts and the deposits were made out of the cash balances available in the cash book. The assessee produced the books of accounts and no defects were found by the AO. Therefore the case of Karthik constructions 2018 (3) TMI 39 - ITAT MUMBAI squarely applies to the case of the assessee and hence appeal of the revenue is dismissed.

Summary

Issues:
Revenue's appeal against CIT(A)'s order on cash deposits during demonetization period and subsequent addition u/s 69A of the Act.

Analysis:
1. The assessee, engaged in retail trading, filed revised income return for A.Y. 2017-18, showing cash deposits during demonetization period. AO accepted part of explanation but added remaining amount u/s 69A as unexplained money.

2. CIT(A) found cash balance in books irrelevant to earlier year sales, accepted staggered deposits explanation, and noted cash balance matched deposits. Held AO's addition unsustainable, citing ITAT Mumbai's Karthik Constructions case.

3. Revenue appealed to Tribunal, arguing against CIT(A)'s deletion of u/s 69A addition.

4. Tribunal heard both sides. AO added remaining cash deposits as unexplained due to profit decrease and cash balance discrepancy. However, Tribunal agreed with CIT(A) that deposits were duly recorded in books, hence no u/s 69A addition.

5. Tribunal referred to Karthik Constructions case, emphasizing the importance of recording transactions in books. As assessee accounted for all deposits, no grounds for u/s 69A addition were found. Revenue's appeal was dismissed.

6. Assessee's cross objections were also dismissed as revenue's appeal was rejected.

In conclusion, the Tribunal upheld CIT(A)'s decision, dismissing revenue's appeal and assessee's cross objections, emphasizing the significance of maintaining proper records in tax matters.