2023 (2) TMI 524 - AT - Income Tax

Undisclosed investment u/s.69 being cash deposit during demonetization period - HELD THAT - As in light of the cash withdrawals of Rs.15.25 lac a/w. cash in hand that would have been available with the assessee, a salaried person both out of his savings and current years income, it can safely be held that an amount of Rs.3 lac (out of cash withdrawals of Rs.6,25,000/- made by the assessee on 30.08.2014) and Rs.50,000/- (out of cash in hand available with him from his savings account and current years income) could safely be held to have been available with him for making the cash deposits by him during the year under consideration in his aforesaid bank account with Canara Bank - we scale down the addition made/sustained by the lower authorities to an amount of Rs.13,50,000/- Rs.17 lac (-) Rs.3.50 lac . - Appeal of the assessee is partly allowed.

Summary

Issues:
1. Sustainability of addition of Rs.17,00,000/- as undisclosed investment u/s.69 during demonetization period.
2. Application of sec. 115BBE by CIT(A).
3. Withdrawal of additional ground of appeal by the assessee.

Analysis:
1. The controversy in the appeal revolves around the addition of Rs.17 lac deposited during demonetization. The AO observed cash deposits in the assessee's bank account during the demonetization period. The assessee claimed the deposits were sourced from salary income and other sources. The AO questioned the basis of the amount in the balance sheet and asked for explanations. The assessee provided details of capital working and loans advanced in previous years. The AO added the entire amount u/s.69 as no satisfactory explanation was provided.

2. The assessee's appeal to the CIT(A) was unsuccessful. The assessee then appealed to the ITAT. The ITAT considered the source of the cash deposits. The assessee claimed the deposits were from earlier withdrawals. The ITAT found the explanation partly acceptable. It noted the withdrawals made by the assessee in 2014 and analyzed the cash in hand available. The ITAT concluded that a portion of the deposits could be sourced from the withdrawals, reducing the addition to Rs.13,50,000/-.

3. The ITAT observed that while it was implausible for the assessee to withdraw a substantial amount and redeposit it after two years, it also found no evidence of utilization or investment of the withdrawn amount. The ITAT analyzed the balance sheets submitted and found them unreliable. Considering the cash withdrawals and available cash in hand, the ITAT reduced the addition to Rs.13,50,000/-. The appeal was partly allowed based on these observations.