2023 (3) TMI 1314 - AT - Income Tax

Unexplained money u/s 69A r.w.s. 115BBE - during demonetization period, the assessee made a cash deposit - HELD THAT - On careful perusal of bank statement, find that cash was clearly available from self-withdrawal with the assessee, therefore, the assessee has clearly explained the deposit in part. So far as remaining sum find that the assessee also made cash withdrawal of Rs. 60,000/- on 21/10/2016. Now only a small amount of Rs. 30,000/-is left, considering the smallness of amount that the assessee was having regular withdrawal in his bank account and Rs. 30,000/- is not a big amount which can be doubted on the basis of facts and circumstances of the case and financial transactions of the assessee. Therefore no justification in treating Rs. 6.00 lacs as unexplained cash credit. In the result, the grounds taken by the assessee are allowed.

Summary

Issues involved:
The issues involved in this case are the addition of unexplained money under section 69A r.w.s. 115BBE, taxing the addition at the rate of 77.25% u/s 115BBE, and the retroactive application of Section 115BBE.

Addition of Unexplained Money u/s 69A r.w.s. 115BBE:
The assessee, an individual, declared NIL income for A.Y. 2017-18 and was selected for scrutiny due to cash deposits during demonetization. The Assessing Officer noted cash deposits of Rs. 9.90 lacs and Rs. 6.00 lacs, questioning the source of the latter. The assessee claimed the deposits were from savings and withdrawals, providing a cash flow statement. The Assessing Officer, unsatisfied with the explanation, treated the Rs. 6.00 lacs as undisclosed income under Section 115BBE.

Taxing Addition at 77.25% u/s 115BBE:
The Assessing Officer applied a tax rate of 77.25% under Section 115BBE instead of the normal rate, deeming the cash deposit unexplained. The assessee argued that the frequency of transactions and cash availability justified that the addition was not sustainable. The CIT(A) upheld the addition, but the Tribunal found that the assessee adequately explained the source of the deposit, leading to the allowance of the appeal.

Retroactive Application of Section 115BBE:
The Assessing Officer retroactively applied the amended Section 115BBE, taxing the income at 77.25% instead of the previous rate of 35.54%. The assessee contended that the cash deposit was from legitimate sources, including gratuity and provident fund withdrawals. The Tribunal found that the assessee's explanations and cash flow statements supported the legitimacy of the deposits, leading to the allowance of the appeal.