2022 (8) TMI 599 - AT - Income Tax

Unexplained cash deposits - Addition u/s 69A - cash deposits during the demonetization period - HELD THAT - The undisputed fact is that flat belonging to the assessee has been sold as per the registered deed dated 14.08.2013. According to the assessee, this flat was sold for Rs.44,70,000, whereas, the sale deed reflected only an amount of Rs.27,00,000. The assessee claims that she has received balance consideration of Rs.17,70,000 in cash. The entire sale consideration which is in the range of Rs.44 lakh for each of the flats, has been offered to tax by the assessee and her mother in their respective income tax returns, which find place in the paper book compilation filed by the assessee. It is also an undisputed fact that the assessee has in her return of income has declared the total sale consideration at Rs.44,70,000/- as being the full sale consideration for sale of property. The return of income filed by the assessee is prior to demonetization period. This demonstrates the bonafides of the assessee in declaring the entire receipts, i.e. both in cheque and cash. In view of the above, it is clear that FMV of flat sold as disclosed in the return of income filed by the assessee. Therefore, cash receipt on sale of flat on 14.08.2013 cannot be brushed aside as untrue. Why the delay in depositing the above cash receipt on account of sale of flat? - In respect of the inordinate delay in depositing the cash into the bank account, the argument of the assessee is that the revenue has not brought anything on record to suggest that the cash was utilised or put to use in any other manner. It is further stated that the assessee was not present in India to spend the money and same was lying with her father. As stated that only on annual visits to India, the assessee used to spend money for her personal purposes. The balance cash remaining with her father was deposited into bank account after demonetization (After assessee specifically came down to India for depositing balance cash which was available with her father). The above submission of the assessee on surrounding circumstances, cannot be stated to be untrue. The sale of flat itself was through assessee s father, the Power of Attorney Holder. The cash was received by the assessee s father and has been in his possession. The assessee being an NRI visits India very rarely and spends money for her personal purposes on such visits. On perusal of the assessee s bank statement, find that there is hardly any cash withdrawal for the period September 2013 (i.e., the period of sale of second flat) upto the date of cash deposits. Therefore, an inference can be drawn that a small portion of cash was utilized out of cash which was in the possession of the assessee s father, whenever she visits India. Revenue has not brought anything on record to suggest that the cash which was received for the sale of flat was utilized or put to use in any other manner. Further, the Revenue has not been able to bring on record that the assessee being an NRI, has any other source of income, not disclosed to the Department. Thus cash deposits are out of sale proceeds received by the assessee from the sale of the property and the same was available for making deposit to the extent of Rs.14,41,000 during the period of demonetization. Therefore, the addition made u/s 69A is hereby deleted. It is ordered accordingly.

Summary

Issues Involved:
1. Whether the cash deposit of Rs. 14.41 lakh can be considered as unexplained under Section 69A of the Income Tax Act.
2. Whether the authorities were justified in rejecting the explanation provided by the assessee regarding the source of the cash deposits.
3. Whether the interest levied under Section 234B and 234D of the Income Tax Act was justified.

Issue-wise Detailed Analysis:

1. Whether the cash deposit of Rs. 14.41 lakh can be considered as unexplained under Section 69A of the Income Tax Act:

The assessee, a Non-Resident Indian (NRI), filed a return of income for the assessment year 2017-2018, declaring a total income of Rs. 2,95,670. During the demonetization period, the assessee deposited Rs. 14,41,500 in her ICICI Bank account. The Assessing Officer (A.O.) questioned the source of these deposits, and the assessee's father, acting as the Power of Attorney holder, provided details. However, the A.O. found the evidence insufficient and added the amount to the taxable income under Section 69A, reasoning that the cash deposits were unexplained and from undisclosed sources.

The CIT(A) upheld the A.O.'s decision, stating that the undervaluation of the property sale consideration led to lower revenue for the stamp duty authority and that maintaining cash for three years was unreasonable. The CIT(A) concluded that the appellant failed to establish the source of the cash deposited during the demonetization period.

2. Whether the authorities were justified in rejecting the explanation provided by the assessee regarding the source of the cash deposits:

The assessee argued that the cash deposits were from the sale of a flat in 2013, which was sold for Rs. 44.70 lakh, with Rs. 27 lakh received through banking channels and Rs. 17.70 lakh in cash. The assessee claimed that the cash was kept by her father in Bengaluru and deposited during the demonetization period. The A.O. and CIT(A) did not accept this explanation, citing the lack of confirmation from the buyer and the improbability of holding cash for three years.

The Tribunal, however, found the assessee's explanation credible. It noted that the sale consideration of Rs. 44.70 lakh was declared in the return of income filed before the demonetization period, demonstrating the assessee's bona fides. The Tribunal also observed that the revenue did not provide evidence to suggest that the cash was used elsewhere or that the assessee had other undisclosed sources of income. Therefore, the Tribunal concluded that the cash deposits were from the sale proceeds of the property and deleted the addition made under Section 69A.

3. Whether the interest levied under Section 234B and 234D of the Income Tax Act was justified:

The Tribunal dismissed the grounds related to the levy of interest under Sections 234B and 234D, stating that these grounds were consequential and did not require specific adjudication.

Conclusion:

The Tribunal allowed the appeal partly, concluding that the cash deposits of Rs. 14.41 lakh were from the sale proceeds of the property and should not be considered unexplained. The addition made under Section 69A was deleted, and the appeal was decided in favor of the assessee.