2023 (10) TMI 976 - AT - Income Tax

Addition u/s 69A - Unexplained cash - assessee had sufficient accumulated cash in hand which was deposited during demonetization period to her bank account - HELD THAT - Merely, because the assessee was holding big amount of cash in her hand, the accumulation of cash from declared income, cash rental and salary income cannot be disbelieved unless the AO establishes that the assessee had used the amount of the income accrued to her during earlier period, for some other purposes and there was no cash in hand at the time when the cash by deposited to her bank account. It is pertinent to mention that in the cash flow the assessee has also shown household expenses for her livelihood even in a situation when she is living with her family. Accordingly, have no hesitation to hold that the AO was not correct in making addition u/s. 69A and CIT(A) was also not justified in upholding the addition to the extent of Rs. 9 lakh ignoring the entire facts and circumstances, cash flow statement and income shown and returned by the assessee during immediately preceding seven years and for present AY 2017-18. Assessee appeal allowed.

Summary

Issues Involved:
The appeal challenges the order of CIT(A)/NFAC, New Delhi for A.Y. 2017-18, involving addition under section 69A of the Income Tax Act, 1961 without proper justification.

Summary:
1. The assessee, a senior citizen lady, filed her return of income for scrutiny which led to an addition of Rs. 12,07,000 under section 69A by the Assessing Officer. The counsel argued that the addition was arbitrary, as the assessee provided substantial evidence including cash ledger, reply to AO, and previous income tax returns showing consistency in declared income over the years.

2. The counsel contended that the Assessing Officer erred in stating that the assessee did not file the ITR for the relevant year, as evidence proved otherwise. The cash ledger and other documents submitted by the assessee indicated a clear trail of income and expenses, refuting the AO's basis for the addition under section 69A.

3. The counsel strongly opposed the partial allowance of the appeal by CIT(A) and argued that section 69A was inapplicable as the assessee had recorded the amount in her books and filed her return. The cash ledger presented by the assessee demonstrated a consistent accumulation of cash from various sources, supporting the legitimacy of the deposited amount.

4. Citing relevant case laws, the counsel emphasized that the Assessing Officer's rejection of the cash flow statement without concrete evidence was unjustified. The counsel highlighted that the time gap between withdrawals and deposits should not warrant an addition under section 69A, as established by legal precedents.

5. The Senior DR supported the lower authorities' orders, stating the assessee failed to explain the source of cash deposits. However, upon careful consideration, the Judicial Member noted the substantial income declared by the assessee in previous years and the current year, indicating a consistent pattern of income generation.

6. The Judicial Member found that the assessee had sufficient accumulated cash in hand, which was deposited during demonetization, and concluded that the addition under section 69A was unwarranted. The AO and CIT(A) were deemed incorrect in upholding the addition, considering the evidence provided by the assessee.

7. Consequently, the sole grievance of the assessee was upheld, directing the Assessing Officer to delete the addition of Rs. 9 lakh as confirmed by CIT(A). The appeal of the assessee was allowed, with the order pronounced on 19.10.2023.