2022 (4) TMI 158 - AT - Income Tax

Addition u/s. 69A - case of the assessee was selected for limited scrutiny under CASS to examine the issue of cash deposit during the year - whether the assessee was having the explained cash which was deposited in his bank account? - HELD THAT - Authorities below have not commented anything adverse on the evidences filed by the assessee regarding availability of cash and correctness of the cash flow statement. No material is brought on record rebutting the contention of the assessee. Therefore, the finding of the authorities below is purely based upon surmises, which is not permissible under law. AO ought to have given a clear finding regarding availability of cash in the specified bank notes, which were banned by the order of the Government. It was stated before the authorities below that the demonetization of currency was declared by the Reserve Bank of India on 8.11.2016. After demonetization there was huge crowed to deposit old currency and withdrew new currency by public. As per the assessee it was not safe in view of the banks being over crowded during that period. This plea of the assessee was rejected stating that on earlier occasion the assessee had withdrawn bigger amount of money from the bank account. We find merit into the contention of the assessee that there were big lines and the banks were over crowded. Therefore, it was open to the assessee for the safety of the money to deposit in piece meals till the period as allowed by the Competent Authority. Therefore, the basis of making addition, in my view, is unjustified and deserves to be deleted. Assessing Officer is hereby directed to delete the addition. Grounds of appeal taken by the assessee are allowed.

Summary

Issues:
1. Validity of assessment order passed by Assessing Officer.
2. Addition made under section 69A of the Income-tax Act, 1961.
3. Justification of the addition by the Assessing Authority.

Analysis:

Issue 1: Validity of assessment order
The appeal was against the order of the learned CIT(Appeals) pertaining to the assessment year 2017-18. The appellant raised grounds challenging the assessment order as being bad in law, against natural justice, and the provisions of the Income Tax Act. The only effective ground was related to the addition of ?4,00,000 made under section 69A of the Act.

Issue 2: Addition made under section 69A
The Assessing Officer made the addition of ?4,00,000 under section 69A based on cash deposits during demonetization. The appellant contended that the cash was deposited in two lots due to security reasons. The Assessing Authority did not accept this explanation and made the addition. The CIT(Appeals) upheld the addition, leading to the appeal before the Tribunal.

Issue 3: Justification of the addition
The appellant's counsel argued that the addition was made without proper verification and erred in not considering the cash flow statement provided. The Tribunal observed that the Assessing Officer did not establish the availability of cash with the appellant before demonetization. The Tribunal noted that if the appellant had cash before demonetization and chose to deposit it multiple times, it was permissible. The Tribunal found the addition unjustified as it was based on surmises and not supported by evidence. The Tribunal directed the Assessing Officer to delete the addition, concluding that the appellant's grounds of appeal were valid and allowed the appeal.

In conclusion, the Tribunal allowed the appellant's appeal, directing the Assessing Officer to delete the addition of ?4,00,000 made under section 69A of the Income-tax Act, 1961.