2022 (11) TMI 1523 - AT - Income Tax

Addition u/s.69A - assessee had in the guise of sales deposited her unexplained money in bank account - cash deposits during demonetization period - sales deposited her unaccounted money in his bank account - assessee had received sale proceeds in old denomination currency even after the lapse of the specified time period allowed by the Central Government. HELD THAT - No reason that while for the A.O had observed that the assessee in the guise of sales had deposited her unaccounted money in the bank account, but despite so observing he had while framing the assessment vide his order passed u/s.143(3), dated 30.11.2019 accepted the sales as were disclosed by the assessee in his books of account. Accordingly, the very first basis for treating the amount as the unexplained money of the assessee u/s.69A fails. Adverting to the observation of the AO that the assessee might have received the sales proceeds in the demonetized currency even after the specified time period allowed by the Central Government, the same in my considered view would by no means justify the treating of the amount in question as the assessee s unexplained money u/s.69A. Assuming that the assessee had continued with receiving of the sale proceeds in the form of demonetized currency even after lapse of the specified time period as provided by the Central Government, i.e., 24.11.2016 (for Rs.1000/- denomination notes) and 02.12.2016 (for Rs.500/- denomination notes), even then the same would by no means justify treating of the said amount as the unexplained money of the assessee u/s.69A of the Act. Although, as observed by me hereinabove, the deposit in tranches of the demonetized currency notes by the assessee in her bank account, i.e, after lapse of the specified time period allowed by the Central Government though raises serious doubts, but the same in my considered view would by no means suffice for stamping the same as the assessee s unexplained money u/s.69A - not being able to concur with the view taken by the lower authorities who had failed to come forth with any cogent reason for treating the amount in question as the assessee s unexplained money u/s.69A, thus, set-aside the order of the CIT(Appeals) and vacate the addition made by the AO - Ground of appeal raised by the assessee is allowed. Disallowance of 1/4th of the telephone expenses made by the AO - The assessee had not maintained any log book which would substantiate her claim of having incurred the entire amount of expenses booked under the aforesaid head, wholly and exclusively or the purpose of his business, therefore, no infirmity does emerge from the orders of the lower authorities who had rightly made/sustained the said addition. Accordingly, herein uphold the disallowance made by the AO. Thus, the Ground of appeal raised by the assessee is dismissed in terms of the aforesaid observations.

Summary

Issues:
1. Addition u/s.69A of the Income-tax Act, 1961 for cash deposits during demonetization period
2. Disallowance of telephone expenses without proper documentation

Analysis:

Issue 1: Addition u/s.69A of the Income-tax Act, 1961 for cash deposits during demonetization period:

The case involved the assessee, a dealer of Essar Oil Ltd. trading petroleum products under Swastik Fuels, Bhatapara, whose cash deposits during demonetization were scrutinized. The Assessing Officer (A.O) noted cash deposits of Rs.6,80,42,748/- in the bank account, including demonetized currency after the specified period. The A.O raised concerns about the source of these deposits, especially after the allowed demonetization period. The A.O made additions u/s.69A of the Act, considering unaccounted money or sales proceeds in old currency. The CIT(Appeals) upheld the A.O's decision. However, the Judicial Member analyzed the situation and found discrepancies in the A.O's reasoning. The Judicial Member observed that the A.O failed to reject the books of accounts before recharacterizing sales as unaccounted money. Additionally, the Judicial Member found no justification for treating the deposits as unexplained money under section 69A, ultimately setting aside the addition of Rs.6.86 lacs. The Grounds of appeal No. 1 & 2 were allowed based on these observations.

Issue 2: Disallowance of telephone expenses without proper documentation:

The A.O disallowed 1/4th of the assessee's telephone and mobile expenses of Rs.62,375/- and added Rs.15,593/- due to lack of logbook or supporting evidence for business-related expenditure. The CIT(Appeals) upheld this disallowance. The Judicial Member concurred with the lower authorities, stating that without proper documentation to substantiate the expenses were incurred wholly and exclusively for business purposes, the disallowance was justified. Therefore, the disallowance of Rs.15,593/- was upheld. Ground of appeal No. 3 was dismissed in this regard.

In conclusion, the Judicial Member partly allowed the assessee's appeal, setting aside the addition under section 69A while upholding the disallowance of telephone expenses. The general grounds of appeal were dismissed as not pressed.