2022 (11) TMI 235 - AT - Income Tax

Unexplained money u/s. 69A - amount deposited in bank account of the assessee during the demonetization period - HELD THAT - As amount has been deposited before 8th November, 2016 and an amount has been deposited during the demonetization period. We have examined the cash withdrawal which are to the tune - The assessee has shown in his return of income an amount of Rs. 3,00,000/- as gifts from friends and relatives u/s.10(23)(c) as shown in column B-15 in ITR-V which has been duly accepted by the revenue authorities. Further the assessee has relied on the CBDT Instruction No. 3/2017 dated 21.02.2007 wherein it was instructed that no further verification for the cash deposit up to Rs. 2,50,000/- is required to be made. Assessee has also filed bank statements of the father, mother and wife wherein absolutely no cash deposits have been made. As pleaded that the amount lying with the parents of smaller amounts has also been deposited in the bank account of the assessee. Even discarding this pleading, since the withdrawals and the amounts declared u/s.10(23)(c) in the returned income adequately proves the sources of cash deposits, no addition in this case is warranted - Appeal of the assessee is allowed.

Issues:
1. Addition made by AO during demonetization period.
2. Application of Section 69A for unexplained money.
3. Confirmation of order by CIT(A) without adequate opportunity.
4. Source of income of family members.
5. Compliance with tax laws regarding agricultural income.
6. Appeal against order under Section 250 of the Income Tax Act.

Analysis:
1. Addition made by AO during demonetization period:
The appeal was filed against the order of the CIT(A) confirming the addition of Rs. 10,40,500 made by the AO. The assessee argued that the deposits were cumulative family savings used for emergencies, especially during the demonetization period. The bank statements showed a normal pattern of deposits and withdrawals, with withdrawals exceeding re-deposits before demonetization. The ITAT found that the withdrawals and declared gifts adequately explained the sources of cash deposits, leading to the allowance of the appeal.

2. Application of Section 69A for unexplained money:
The AO treated the deposits as unexplained money under Section 69A. However, the ITAT noted that the assessee, having salary income and no business income, was not required to maintain specific books of accounts. The assessee provided explanations for the sources of the deposited amounts, complying with the requirements of Section 69A. Therefore, the ITAT found no basis for invoking Section 69A in this case.

3. Confirmation of order by CIT(A) without adequate opportunity:
The assessee contended that the CIT(A) confirmed the order without providing adequate opportunity. However, the ITAT, after examining the facts and submissions, found that the withdrawals, declared gifts, and bank statements of family members sufficiently explained the cash deposits. Consequently, the ITAT allowed the appeal against the CIT(A)'s order.

4. Source of income of family members:
The assessee's family members, including the father and mother, had specific sources of income such as agriculture and rental earnings. The ITAT considered the relevant tax laws exempting certain incomes from filing returns, like agricultural income under Section 10(1). The sources of income of family members were crucial in explaining the cash deposits made by the assessee during demonetization.

5. Compliance with tax laws regarding agricultural income:
The ITAT analyzed the provisions of Section 139(1) and Section 10(1) of the Income Tax Act to determine the tax implications of agricultural income earned by family members. The exemptions provided under these sections were crucial in establishing the legitimacy of the sources of income and justifying the cash deposits made during the demonetization period.

6. Appeal against order under Section 250 of the Income Tax Act:
The appeal challenged the order passed under Section 250 of the Income Tax Act. The ITAT, after thorough examination of the facts, bank statements, and explanations provided by the assessee, concluded that the addition made by the AO during demonetization was not justified. The appeal was allowed, setting aside the order confirming the addition of unexplained money.

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