2022 (6) TMI 897 - AT - Income Tax

Undisclosed income u/s. 69A r.w.s 115BBE - deposits made post demonetization period - transaction/bank deposits made by the assessee, one pre-demonetization period deposits, which AO treated as income from profession of the assessee and 50% of such deposits treated as income from profession - HELD THAT - We are of the view that this dual action of the ld. AO in making said addition on the same issue is not justified and as such we hold that the total cash deposit in bank account i.e. Rs. 27,22,500/- ( which includes the deposits during post demonetization period totalling Rs. 13,00,000/-) to be treated as gross receipts from profession and 50% of such deposits be treated as income from profession during the assessment year in question. Accordingly, ground no. 2 raised by the assessee is partly allowed. We find that since the cash deposit pre-demonetization has been accepted as Business/Profession receipt by Ld. AO, the remaining deposit of Rs. 13,00,000/- post demonetization should also be treated as Business Income as no adverse finding is given by Ld. AO in this regard except the allegation of cash deposit post demonetization and therefore, provisions of section 69A r.w.s 115BBE of the Act will not apply on the said deposits. Thus, ground no. 3 is allowed

Issues:
1. Condonation of delay in filing the appeal.
2. Addition of income by the Assessing Officer.
3. Treatment of cash deposits pre and post demonetization.
4. Application of provisions of section 69A r.w.s 115BBE of the Income-tax Act, 1961.

Condonation of Delay:
The appeal was filed 39 days beyond the stipulated time. The assessee sought condonation of the delay, supported by an affidavit. The tribunal, after reviewing the affidavit and relevant material, found merit in the request and condoned the delay in the interest of justice, allowing the appeal for adjudication.

Addition of Income by AO:
The Assessing Officer (AO) initiated proceedings due to the assessee's failure to furnish the return of income despite notices. The AO assessed the income at Rs. 20,67,821, including cash deposits and credits. The AO treated a portion as income from the profession, undisclosed income from cash deposits post-demonetization, and undisclosed bank interest. The CIT(A) upheld the additions. The tribunal noted the AO's differing treatment of bank deposits and held that the total cash deposit should be considered gross receipts from the profession, with 50% treated as income from the profession. The tribunal partially allowed the appeal on this ground.

Treatment of Cash Deposits Pre and Post Demonetization:
The AO treated pre-demonetization cash deposits as professional income and post-demonetization deposits as undisclosed income. The tribunal found the AO's dual action unjustified, ruling that all cash deposits should be considered gross receipts from the profession. The tribunal allowed the appeal on this ground, partially overturning the CIT(A)'s decision.

Application of Section 69A r.w.s 115BBE:
Regarding the applicability of section 69A r.w.s 115BBE, the tribunal held that since pre-demonetization deposits were accepted as business/profession receipts, post-demonetization deposits should also be treated as business income. As no adverse findings were made by the AO on post-demonetization deposits, the provisions of section 69A r.w.s 115BBE did not apply. The tribunal allowed this ground of appeal, leading to the partial allowance of the overall appeal.

In conclusion, the tribunal partially allowed the appeal, addressing issues related to the delay in filing, addition of income by the AO, treatment of cash deposits pre and post demonetization, and the application of provisions under section 69A r.w.s 115BBE of the Income-tax Act, 1961. The tribunal's decision provided clarity on the treatment of various income sources and upheld the principles of justice and equity in assessing the appellant's tax liability.

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