2024 (3) TMI 1353 - AT - Income Tax

Addition u/s 69A - Treatment of cash deposits during demonetizationas unexplained income - assessee submitted that source for cash deposits is out of opening cash balance in hand which is supported by Income Tax Return filed for last two financial years - HELD THAT - The assessee has filed ITRs for last two financial years and as per ITRs filed by the assessee, the assessee has declared about Rs. 6,00,000/- agricultural income for two assessment years. The assessee has not declared any other income in the return of income filed for last two financial years. Assuming for a moment, the assessee derives agricultural income at Rs. 6,00,000/-, it cannot be said that the assessee has saved entire agricultural income without spending for his day-to-day expenses. Therefore, considering the amount of agricultural income declared by the assessee for last two financial years, we are of the considered view that a reasonable amount can be attributable towards savings, which can be kept in cash balance. Therefore, out of total agricultural income declared by the assessee, we consider a sum of Rs. 2,00,000/- towards expenses of the assessee for two years and balance sum of Rs. 4,00,000/- is available with the assessee in the form of cash in hand which can be considered as source for cash deposits. We direct the AO to allow relief to the extent of Rs. 4,00,000/- towards cash deposits into bank account in addition to relief already given by the ld. CIT(A). For balance cash deposits, the assessee could not adduce any evidence. Therefore, we sustain additions made by the Assessing Officer and sustained by the ld. CIT(A). Decided partly in favour of assessee.

Summary

Issues:
Delay in filing appeal, Source of cash deposits, Assessment of income from money lending business and agricultural activities.

Delay in filing appeal:
The appeal filed by the assessee was directed against the order passed by the Commissioner of Income Tax (Appeals). There was a delay of 14 days in filing the appeal, for which a petition for condonation of delay was filed. The Appellate Tribunal, after considering the reasons for delay, found a reasonable cause for the delay and decided to condone the delay in the interests of justice, admitting the appeal for adjudication.

Source of cash deposits:
The case involved an individual assessee deriving income from salary, money lending business, and agricultural activities. The Assessing Officer noticed significant cash deposits in the assessee's bank account during the demonetization period. The assessee explained the source of cash deposits as a combination of opening cash balance, loan from LIC, and income from salary and agricultural activities. However, the Assessing Officer was not convinced with the explanation and made additions under section 69A of the Income-tax Act. The Commissioner of Income Tax (Appeals) partially allowed relief but confirmed a substantial amount as additions.

Assessment of income from money lending business and agricultural activities:
The assessee argued that the cash deposits were sourced from opening cash balance, income from agricultural activities, and collections from money lending business. The Appellate Tribunal noted that the assessee failed to provide evidence of income from agricultural operations and money lending business. However, considering the agricultural income declared in the previous years, the Tribunal allowed relief of Rs. 4,00,000 towards cash deposits, in addition to the relief granted by the Commissioner of Income Tax (Appeals). The remaining amount of cash deposits was confirmed as additions.

In conclusion, the appeal filed by the assessee was partly allowed, with relief granted towards cash deposits based on the assessment of agricultural income and expenses.