2023 (5) TMI 1373 - AT - Income Tax

Cash deposit made during the demonetization period - Addition u/s 69A r.w.s.115 BBE - HELD THAT - CIT(A) despite recording the submission of the assessee that he has filed copy of agreement, bank account, AS-26 details has not examined the business activities nor any remand report was called from assessing officer. Perusal of bank accounts of the assessee clearly shows that the cash amount deposited by the assessee prior to the demonetization period was immediately transferred to the accounts of Interactive Financial Trading Services Pvt. Ltd. and Flight Raja Travels Pvt. Ltd. through RTGS/NEFT. Thus, these entries in the bank statement clearly shows that the assessee was in the business activities associated with Interactive Financial Trading Services Pvt. Ltd. and Flight Raja Travels Pvt. Ltd. Further noted that the cash deposits in the bank accounts are not abnormal comparatively to the transaction in earlier period. CIT(A) confirmed the addition without seeking remand report from assessing officer or investigating the facts independently. Thus addition made by assessing officer and sustained by CIT(A) is not justified. Ground No. 1 of the appeal is allowed

Issues:
- Delay in filing the appeal
- Addition of unexplained cash deposits during demonetization period
- Application of Section 69A r.w.s.115 BBE of the Income Tax Act
- Compliance with notices and submission of evidence
- Justification of addition by Assessing Officer
- Adequacy of evidence provided by the assessee
- Adjudication of grounds of appeal

Analysis:

1. Delay in Filing the Appeal:
The appeal was filed with a delay of 230 days, and the assessee sought condonation of the delay. The delay was attributed to the representative's absence and subsequent communication delay. The AR argued that the delay was unintentional, and the revenue would not suffer prejudice by allowing the appeal. The Tribunal, considering the circumstances, condoned the delay.

2. Addition of Unexplained Cash Deposits:
The Assessing Officer added Rs. 13,74,000 as unexplained cash deposits during demonetization. The assessee contended that the deposits were part of business transactions with specific companies and were promptly transferred to their accounts. The CIT(A) upheld the addition due to lack of compliance and insufficient evidence. However, the Tribunal found that the deposits were business-related and allowed the appeal, noting the immediate transfer of funds.

3. Application of Section 69A r.w.s.115 BBE:
The Assessing Officer applied Section 69A r.w.s.115 BBE to tax the unexplained cash deposits. The assessee argued that the deposits were legitimate business proceeds, supported by agreements, bank statements, and other evidence. The Tribunal observed that the deposits were consistent with business activities and overturned the addition made under this section.

4. Compliance with Notices and Submission of Evidence:
The Assessing Officer noted non-compliance by the assessee in responding to notices and providing detailed information. The CIT(A) emphasized the assessee's failure to substantiate claims with sufficient evidence. The Tribunal, however, found the provided evidence satisfactory to establish the business nature of the deposits.

5. Justification of Addition by Assessing Officer:
The Assessing Officer's addition was based on the lack of information regarding the cash deposits. Despite the assessee's submissions, the CIT(A) upheld the addition due to insufficient proof. The Tribunal disagreed, considering the evidence provided by the assessee and the nature of the transactions.

6. Adequacy of Evidence Provided by the Assessee:
The assessee submitted agreements, bank statements, and other documents to support the business nature of the cash deposits. The Tribunal found this evidence convincing and sufficient to demonstrate the legitimate origin of the deposited funds.

7. Adjudication of Grounds of Appeal:
The Tribunal allowed the appeal based on the finding that the cash deposits were part of legitimate business transactions. As a result, all other grounds of appeal were considered consequential and did not require specific adjudication.

In conclusion, the Tribunal allowed the appeal, overturning the addition of unexplained cash deposits made by the Assessing Officer and upheld by the CIT(A). The decision was based on the business nature of the deposits supported by the evidence provided by the assessee.

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