2022 (7) TMI 1559 - AT - Income Tax

Addition u/s 69A r.w.s. 115BBE - demonetized currency deposits - appellant did not bring any material on record to establish that the amount was out of his business receipts - HELD THAT - We find that as per extant provisions, the assessee was permitted to accept demonetized currency till 24.11.2016 and the only reason to suspect the source of the same is the fact that the same was deposited on 29.11.2016. The adjudication of lower authorities overlooks the fact that the assessee deposited as much as Rs.49.12 Lacs out of which only an amount of Rs.0.46 Lacs is suspected to be unexplained income of the assessee. It could also be seen that the demonetized currency could be deposited till 31.12.2016. Therefore, we do not concur with the stand of CIT(A). By deleting the impugned addition, we allow the grounds raised by the assessee.

Summary

Issues:
Addition of Rs.46,000/- u/s. 69A based on unexplained income.

Analysis:
The appeal pertains to the addition of Rs.46,000/- made by the Assessing Officer under section 69A of the Income Tax Act, which was sustained by the Commissioner of Income Tax (Appeals) [CIT(A)]. The appellant contended that the addition was unjustified as the amount was from business receipts and the source was explained through submitted documents. The CIT(A) upheld the addition based on lack of material to prove the source of the cash deposit. The appellant argued that the rejection was based on conjecture without concrete evidence of undisclosed sources.

The Tribunal noted that the assessee, a resident firm engaged as a distributor of prepaid cards, deposited Rs.49.12 Lacs in a bank account, with Rs.46,000/- deposited on 29.11.2016 in demonetized currency. The appellant claimed that these deposits were from business receipts and permissible under government notifications until 31.12.2016. However, the lower authorities added the amount to the income as unexplained, taxable at a higher rate under section 115BBE.

Upon examination, the Tribunal found that the appellant was allowed to accept demonetized currency until 24.11.2016 and could deposit it until 31.12.2016. The suspicion on the source of the deposit was solely due to the timing of the transaction. Considering that a significant amount was deposited, only a small portion was questioned. Therefore, the Tribunal disagreed with the CIT(A)'s decision, concluding that the addition of Rs.46,000/- as unexplained income was unwarranted. Consequently, the Tribunal allowed the grounds raised by the appellant and deleted the impugned addition.

The Tribunal's decision was in favor of the appellant, allowing the appeal and pronouncing the order on 21st July 2022.