2022 (6) TMI 800 - AT - Income Tax

Unexplained cash deposits - Specified Bank Notes (SBNs) deposited into assessee s savings bank account with Andhra Bank during the demonetization period as unexplained money u/s.69A - HELD THAT - As ld.counsel then took us through the cash book balance as on 17.11.2016, wherein cash balance is Rs.60,83,257/- and out of this cash, these cash was deposited on various dates and he correlated these entries with the deposits i.e., 36.73 lakhs.- assessee also clarified that in assessee s case deposits was to the tune of Rs.35.53 lakhs and Rs.1.20 lakhs was in the name of assessee s son. But, however he explained the entire cash is out of cash generated out of rental income and other incomes. When a specific query was raised by the Bench, as regards to noting made by AO as well as CIT(A) that the closing cash as on 31.03.2006 is nil as per ITR, as explained that in ITR the assessee is declaring business cash in hand and not the cash in hand kept in individual capacity and earned out of rental income. He explained that the assessee is maintaining personal accounts in his individual capacity and business account in his proprietorship capacity for business purposes in which, the cash in hand is nil . When these facts were confronted to ld. Senior DR, she could not reply anything about the cash balance available in the cash book and the rental income earned by the assessee month-wise and tenant-wise and rent earned in cash. The complete paper-book was confronted to ld. Senior DR but she could not controvert the above fact situation. After going through the facts in entirety, we noted that the source of cash is rental income from where the assessee has generated cash to which was deposited in the bank accounts as mentioned above. Hence, we treat the cash as explained and allow the appeal of the assessee on this issue.

Summary

Issues:
Appeal against addition made on cash deposit during demonetization period as unexplained money under section 69A of the Income Tax Act.

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) confirming the addition made by the Assessing Officer (AO) on cash deposits during the demonetization period. The AO noted cash deposits of Rs.36.73 lakhs in the assessee's bank account, representing Specified Bank Notes (SBNs), and treated it as unexplained money under section 69A of the Act.

2. The assessee provided evidence of rental income generated from properties to explain the cash deposits. The assessee submitted various documents, including statements of income, rental income details, balance sheets, and cash book extracts. The rental income declared for the assessment year 2017-18 after deductions was Rs.34,13,298. The assessee's cash in hand as per balance sheets indicated a sufficient source for the deposited cash during demonetization.

3. The counsel for the assessee argued that the cash deposits were from rental income and other legitimate sources. The counsel highlighted that the cash in hand as per balance sheets corroborated the cash deposits made during the demonetization period. The counsel clarified that the business cash in hand declared in the Income Tax Return (ITR) did not reflect the individual cash in hand earned from rental income.

4. During the proceedings, the Bench raised queries regarding the closing cash balance as per the ITR and the rental income earned by the assessee. The counsel explained the distinction between business cash in hand and personal cash in hand. The Revenue representative could not counter the explanation provided by the assessee's counsel regarding the source of the cash deposits.

5. Upon review of the facts and evidence presented, the Tribunal concluded that the source of the cash deposits was legitimate, originating from rental income. The Tribunal accepted the explanation provided by the assessee and allowed the appeal, overturning the addition made by the AO and confirmed by the CIT(A).

6. Consequently, the appeal filed by the assessee was allowed, and the Tribunal pronounced the order in favor of the assessee on 15th June 2022 at Chennai.