2023 (3) TMI 905 - AT - Income Tax

Addition u/s 69A - cash deposit during the period of demonetization in the bank account maintained by the assessee - declaration made under Pradhan Mantri Garib Kalyan Yojna Scheme 2016 PMGKY - as submitted once advance tax was duly paid on the sum deposited in the bank account the said sum could not be taxed as income u/s 69A - HELD THAT - We fail to understand how the amount declared under the PMGKY Scheme 2016 becomes taxable u/s 69A of the Act as done by the Assessing Officer. Section 69A shows that this section is attracted when some unexplained money for which the assessee is found to be the owner and such money is not recorded in the books of accounts if any maintained by the assessee for any source of income for which the assessee does not offer any explanation or the explanation of the assessee is not satisfactory in the opinion of the AO. The facts explained clearly show that it is the assessee who came forward with the explanation that the amount deposited in the bank account on which advance taxes have been paid in November 2016 and subsequently the same was offered under PMGKY Scheme 2016 cannot become assessable u/s 69A of the Act. Considering the scope of the Scheme in light of the Explanatory Notes there is no reference to the Certificate issued by designated PCIT but definitely there is a reference to valid declaration made under the Scheme. Assessee has made a valid declaration under the PMGKY Scheme 2016 and has duly paid taxes/penalty and has also deposited requisite amount under the PMGKY Scheme 2016. By no stretch of imagination provisions of section 69A can be applied on the aforementioned facts. Therefore the entire addition made by the AO and confirmed by the ld. CIT(A) do not hold any water and deserve to be deleted. Direct the Assessing Officer to delete the impugned addition made u/s 69A of the Act in respect of cash deposit in the bank account. Decided in favour of assessee.

Summary

Issues Involved:
1. Addition of Rs. 4.50 crores under Section 69A of the Income Tax Act, 1961.
2. Validity of the declaration under the Pradhan Mantri Garib Kalyan Yojna Scheme, 2016 (PMGKY).
3. Applicability of Section 69A to the declared income.
4. Compliance with the PMGKY Scheme requirements.
5. Legality of the orders framed under Sections 154 and 263 of the Income Tax Act.

Detailed Analysis:

1. Addition of Rs. 4.50 crores under Section 69A of the Income Tax Act, 1961:
The primary issue was whether the addition of Rs. 4.50 crores under Section 69A was justified. The Assessing Officer (AO) added this amount as income from other sources, arguing that the cash deposits during the demonetization period were unexplained and not satisfactorily accounted for. This addition was upheld by the CIT(A).

2. Validity of the declaration under the Pradhan Mantri Garib Kalyan Yojna Scheme, 2016 (PMGKY):
The assessee claimed that the cash deposits were declared under the PMGKY Scheme, 2016, and taxes were duly paid. The AO, however, rejected this declaration, citing the absence of a certificate from the Principal Commissioner of Income Tax (PCIT), Central, Gurgaon. The Tribunal noted that the declaration was made, and taxes, surcharge, and penalties were paid within the stipulated time, fulfilling the scheme's requirements.

3. Applicability of Section 69A to the declared income:
The Tribunal emphasized that Section 69A applies when unexplained money is found, and the assessee fails to provide a satisfactory explanation. In this case, the assessee had provided a detailed explanation, supported by documentary evidence, that the cash deposits were from current year income, and advance taxes were paid. The Tribunal found that the AO's application of Section 69A was incorrect as the income was declared under the PMGKY Scheme and taxes were paid.

4. Compliance with the PMGKY Scheme requirements:
The Tribunal reviewed the compliance with the PMGKY Scheme, noting that the assessee had made the declaration, paid the required taxes, and deposited the requisite amount in the PMGKY Deposit Scheme. The Tribunal found that the assessee had met all the mandatory conditions, including filing the declaration before the deadline and paying the taxes and penalties.

5. Legality of the orders framed under Sections 154 and 263 of the Income Tax Act:
Given the Tribunal's finding that Section 69A was not applicable, the orders framed under Sections 154 (rectification of mistakes) and 263 (revision of orders prejudicial to revenue) were deemed invalid. The Tribunal directed the AO to delete the addition made under Section 69A and declared the orders under Sections 154 and 263 as bad in law.

Conclusion:
The Tribunal concluded that the addition of Rs. 4.50 crores under Section 69A was unjustified as the assessee had provided a satisfactory explanation and complied with the PMGKY Scheme. The Tribunal directed the deletion of the addition and invalidated the orders under Sections 154 and 263. All appeals by the assessee were allowed.