2022 (8) TMI 1072 - AT - Income Tax

Addition u/s 69A - Cash deposits in the bank account - HELD THAT - Assessee has explained the source of cash deposits made by him during the demonetization period hence, we set aside the order of the CIT(A) and allow the grounds of appeal of the assessee.

Summary

Issues Involved:

1. Ex-parte order passed by CIT(A) without affording reasonable opportunity.
2. Unexplained source of cash deposit of Rs. 12,50,000 during the demonetization period.

Issue-wise Detailed Analysis:

1. Ex-parte Order Passed by CIT(A):

The assessee argued that the ex-parte order passed by the CIT(A) was wrong and bad in law as it was done hastily without giving a reasonable opportunity to present the case. The assessee, a non-resident living in Thailand, claimed he could not file submissions due to technical glitches in the new income tax website and the COVID-19 lockdown, which suspended international flights and limited access to information about the appeal's hearing dates. The Tribunal acknowledged these circumstances, emphasizing that the assessee was prevented by sufficient reasons from complying with the notices from CIT(A). Thus, the Tribunal allowed Ground No. 1 of the appeal, recognizing the procedural lapse and lack of fair opportunity.

2. Unexplained Source of Cash Deposit:

The core issue was whether the cash deposit of Rs. 12,50,000 made by the assessee in his bank account during the demonetization period remained unexplained and should be added to his income under Section 69A of the I.T. Act, 1961. The assessee claimed that the cash was withdrawn earlier for his son's marriage expenses, which were to be held on 07-01-2017, and the remaining cash was deposited following the demonetization announcement on 08-11-2016.

The Assessing Officer (AO) rejected this explanation, citing insufficient evidence such as the absence of proof for the opening cash balance, lack of rationale for further withdrawals when substantial cash was already available, and no evidence of the marriage or the return of cash by individuals who withdrew it on behalf of the assessee. The CIT(A) upheld the AO's findings, noting the huge cash deposit immediately following demonetization and the lack of plausible explanation for the source of the cash.

However, the Tribunal found that the assessee had provided sufficient documentation, including bank statements, cash books, and affidavits from individuals involved in the cash withdrawals. The Tribunal observed that the AO failed to consider these documents adequately and incorrectly applied Section 69A. The Tribunal noted that the assessee had explained the source of the cash deposit, which was out of earlier withdrawals for anticipated marriage expenses. The Tribunal concluded that the addition of Rs. 12,50,000 as unexplained money was unjustified and should be deleted.

Conclusion:

The Tribunal allowed the appeal, setting aside the CIT(A)'s order and deleting the addition of Rs. 12,50,000 to the assessee's income. The Tribunal emphasized the importance of fair opportunity and proper consideration of evidence in tax assessments.