2022 (6) TMI 736 - AT - Income Tax

Unexplained cash deposited into the bank account the demonetization period - HELD THAT - As assessee has claimed that he has sold coffee seeds to a concern named M/s. Raj Coffee Curing Works. The purchase invoices given by the above said concern are placed - AO issued a notice under section 133(6) of the Act to the above said concern, but did not receive reply from it before the completion of the assessment. A.R has furnished proof to show that the above said concern has sent a reply to the AO, but it has been sent after the completion of the assessment. CIT(A) also failed to take cognizance of the confirmation given by the above said concern. It was submitted by Ld. AR that the assessee is a non-resident and he did not visit India during the year under consideration. Since he has sold coffee seeds prior to the date of demonetization, he was constrained to deposit the cash into the bank account after announcement of demonetization. Hence the Ld. A.R contended that there is no reason to reject the explanations given by the assessee. Also merit in the submission made by Ld. AR. Since the evidence furnished by the assessee with regard to sale of coffee seeds has been confirmed by the purchaser, there is no reason to suspect the explanation given by the assessee - AO has not brought on record any other material to disbelieve the explanation so given by the assessee. Accordingly, the assessee has explained the sources for making the deposit in bank account - Decided in favour of assessee.

Summary

Issues:
1. Addition of Rs. 15 lakhs as cash deposited during demonetization period.

Analysis:
1. The assessee, a non-resident individual, deposited Rs. 15 lakhs during demonetization, attributing it to the sale proceeds of coffee seeds to M/s. Raj Coffee Curing Works. However, the AO disbelieved the claim due to meager declared agricultural income and sale of agricultural land. The Ld. CIT(A) upheld the addition under section 69 of the Act, leading to the appeal before the Tribunal.

2. The Ld. AR argued that the assessee provided detailed submissions and purchase bills to support the claim, emphasizing the non-resident status of the assessee during the relevant year. The response from M/s. Raj Coffee Curing Works, confirming the purchase of coffee seeds, was submitted post-assessment due to postal delays. Citing the decision in CIT Vs. Smt. P K Noor Jahan, the Ld. AR contended that the explanation should be accepted, as there was no scope for generating undisclosed income as a non-resident.

3. The Ld. DR countered, questioning the logic of the explanation given by the assessee, especially regarding the timeline of retaining coffee seeds post the sale of agricultural land. The application of the decision in the case of P K Noor Jahan was contested, urging the sustenance of the addition due to inadequate source explanation. Referring to the decision in Pavittar Singh Vs. CIT, the Ld. DR argued for upholding the AO's decision.

4. Upon review, the Tribunal noted the confirmation of the sale of coffee seeds by M/s. Raj Coffee Curing Works, supported by purchase invoices. Acknowledging the delay in response to the AO's notice, the Tribunal considered the non-resident status of the assessee and the necessity to deposit cash post-demonetization. Given the lack of additional evidence to discredit the explanation, the Tribunal concluded in favor of the assessee, directing the deletion of the Rs. 15 lakhs addition.

5. In conclusion, the Tribunal allowed the appeal, setting aside the Ld. CIT(A)'s order and instructing the AO to remove the disallowance of Rs. 15 lakhs, emphasizing the substantiated explanation provided by the assessee and the confirmation from the purchasing party.