2023 (5) TMI 478 - AT - Income Tax

Addition u/s 69A - being the amount of cash deposited in Bank Account - assessee being into the business of beauty parlor and tuition work deposited demonetization currency notes - HELD THAT - Assessee has offered income under section 44AD at 8% on cash receipts. It is the case of the assessee that she was having sufficient income year on year basis and drew the attention of the Bench towards cash book opening balance, bank statement, cash book pertaining to the subsequent years. The assessee has duly explained the cash in hand having been collected from her beauty parlor business and tuition work. All these evidences were there before the AO as well as the CIT(A) but they have brushed aside the same without examining the same and proceeded to make the addition. Since the cash deposit of demonetization currency by the assessee is duly explained the addition made by the AO and confirmed by the CIT(A) is not sustainable. Identical issue was decided in case of DCIT vs. Anuya Jayant Mhaiskar 2022 (8) TMI 438 - ITAT MUMBAI and Nemchand Vasanji Chheda 2021 (7) TMI 1412 - ITAT MUMBAI wherein it is held that when sufficient unutilized funds in the books are available with the assessee no addition can be made. So the closing balance or cash in hand with the assessee is certainly disclosed income and opening balance cannot be considered as undisclosed income. Moreover, the assessee has been regularly filing return of income and has duly shown her income in the preceding as well as succeeding years earned in cash.Appeal filed by the assessee is allowed.

Issues:
1. Addition made under section 69A of the Income Tax Act, 1961 for cash deposited in Bank Account during demonetization.
2. Treatment of cash deposits during demonetization as unexplained money.
3. Failure to consider evidence provided by the appellant regarding the source of cash deposits.
4. Allegation of not furnishing supporting documentary evidence.
5. Failure to consider the nature of the appellant's business activities in relation to cash transactions.
6. Allegation of not disclosing cash in the Income Tax Return.
7. Calculation of average monthly income without considering opening cash balance.
8. Failure to consider cash balance in the books of accounts without rejecting them under section 145(3) of the Act.

Analysis:
1. The appellant contested the addition made under section 69A of the Income Tax Act, 1961, for cash deposited in the Bank Account during demonetization. The appellant argued that the addition was made without considering the facts and circumstances of the case and requested the deletion of the additions. The appellant provided evidence to prove the source and nature of the cash deposits, including bank statements, trading accounts, and income computations. The appellant also highlighted that the cash deposits were reflected in the balance sheet, challenging the basis of the addition.

2. The appellant challenged the treatment of cash deposits during demonetization as unexplained money. The appellant contended that the transactions were legitimate and explained, emphasizing the cash flow from business activities like a beauty parlor and tuition services. The appellant provided detailed evidence of cash income earned during different assessment years, demonstrating a consistent pattern of cash transactions and maintaining sufficient funds in bank accounts.

3. The appellant raised concerns about the failure to consider the evidence provided regarding the source of cash deposits. The appellant argued that despite submitting supporting documents such as bank statements, income and expenditure accounts, and cash book records, the authorities disregarded the evidence. The appellant emphasized the importance of examining the evidence presented before making any additions.

4. The appellant disputed the allegation of not furnishing supporting documentary evidence. The appellant clarified that relevant documents, including bank statements, financial statements, and income computations, were submitted to substantiate the cash deposits. The appellant emphasized the need for a thorough review of the documentation before concluding on the legitimacy of the transactions.

5. The appellant highlighted the nature of their business activities, involving a beauty parlor and tuition services, where income was primarily earned in cash. The appellant argued that the cash deposits were in line with the business operations and should not be treated as unexplained money. The appellant urged the authorities to consider the specific characteristics of the business while evaluating the cash transactions.

6. The appellant refuted the allegation of not disclosing cash in the Income Tax Return. The appellant maintained that cash income was duly disclosed in the books of accounts, even though it might not have been explicitly mentioned in the Income Tax Return. The appellant emphasized the importance of considering the overall financial records to assess the income accurately.

7. The appellant contested the calculation of average monthly income without considering the opening cash balance. The appellant argued that the authorities overlooked the cash balance reflected in the financial statements, leading to an inaccurate assessment of the appellant's income. The appellant requested a reevaluation of the income calculation methodology to include all relevant financial data.

8. The appellant raised concerns about the failure to consider the cash balance in the books of accounts without rejecting them under section 145(3) of the Act. The appellant argued that the cash balance was properly maintained and recorded in the books of accounts, indicating transparency in financial reporting. The appellant urged the authorities to acknowledge the accuracy of the financial records and refrain from making arbitrary additions based on assumptions.

In conclusion, the Tribunal allowed the appeal filed by the appellant, emphasizing that the additions made by the Assessing Officer and confirmed by the Commissioner were not sustainable in law. The Tribunal highlighted the appellant's consistent disclosure of income, legitimate business activities, and the availability of unutilized funds to justify the deletion of the additions. The Tribunal referred to similar cases where closing balances were considered disclosed income, reinforcing the decision to overturn the additions in this case.

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