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2023 (11) TMI 1182 - AT - Income TaxUnexplained money u/s 69A - cash deposited in bank account - Assessee had not filed its return of income for the said year - HELD THAT - So far, the A.O.'s observation that the assessee firm's explanation, regarding the source of cash deposits in its bank account did not inspire much confidence as they were made during the demonetization period; we are afraid that the same cannot be accepted. On the contrary, the conduct of the assessee firm in depositing whatever cash that was available as Opening Cash In Hand C.I.H in its books of account during the demonetization period could be the only prudent approach that the assessee firm could have adopted. Also, as the A.O had neither established that the C.I.H of Rs. 52.47 lac (supra) that was available with the assessee firm on 01.04.2016 was thereafter utilized by it for making any other investment or was exhausted towards incurring any expenditure, therefore, find no justification on his part in summarily rejecting the assessee s explanation that the cash deposits of Rs. 33 lacs (supra) made in its bank account during the year were sourced out of the same. Accordingly, explanation of the assessee firm as regards the source of the cash deposits in its bank account maintained with Federal Bank, Bilaspur merits acceptance. Thus vacate the addition made by the AO u/s 69A of the Act. The Ground of appeal no. 1 of the assessee firm is allowed.
Issues Involved:
1. Addition of Rs. 33,00,000/- as unexplained money under section 69A of the Income-tax Act, 1961. Summary of Judgment: Issue 1: Addition of Rs. 33,00,000/- as unexplained money under section 69A of the Income-tax Act, 1961: The assessee firm appealed against the order of the Commissioner of Income-Tax (Appeals) confirming the addition of Rs. 33,00,000/- made by the Assessing Officer (A.O.) under section 69A of the Income-tax Act, 1961, as unexplained money. The A.O. noted that the assessee had made cash deposits of Rs. 33,00,000/- in its bank account during the year under consideration but had not filed its return of income. Despite multiple notices, the assessee failed to provide a satisfactory explanation for the source of these deposits. The assessee claimed that the cash deposits were sourced from the opening cash-in-hand (C.I.H) of Rs. 52.47 lacs available in its books on 01.04.2016, which was generated from the sale of agricultural land in the preceding year. The A.O. rejected this explanation due to the significant time gap between the availability of cash and its deposit during the demonetization period, thus treating the cash deposits as unexplained money under section 69A. The CIT(A) upheld the A.O.'s decision, noting the assessee's non-compliance with notices and failure to provide supporting evidence for its claims. The CIT(A) concluded that the assessee's explanation lacked credibility, especially given the deposits were made during the demonetization period. Upon appeal, the Tribunal considered the balance sheet of the assessee firm, which showed an opening C.I.H of Rs. 52.47 lacs on 01.04.2016. The Tribunal found that the A.O. did not dispute the availability of this cash and noted that the assessee's return for the preceding year, reflecting this C.I.H, was filed before the A.O.'s inquiry. The Tribunal reasoned that the assessee's explanation was credible and that the deposits during the demonetization period were a prudent action. The Tribunal concluded that there was no justification for rejecting the assessee's explanation and vacated the addition of Rs. 33,00,000/- made by the A.O. under section 69A. Conclusion: The Tribunal allowed the appeal, setting aside the order of the CIT(A) and vacating the addition of Rs. 33,00,000/- made by the A.O. under section 69A of the Income-tax Act, 1961. The ground of appeal No. 2 was dismissed as not pressed. The order was pronounced in open court on 20th September 2023.
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