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2024 (10) TMI 1637 - AT - Income TaxUnexplained money u/s.69A - unexplained cash deposits - claim of the assessee that the cash deposits in his bank accounts were sourced out of the cash withdrawals made during the demonetization period - HELD THAT - As it is a matter of fact borne from record that the assessee had during the pre-demonetisation period in September 2016 i.e. immediately prior to announcement of the demonetisation policy by the government therein made cash withdrawals from his bank account the availability of which with him to source the cash deposits in SBNs during the demonetization period had not been disproved/dislodged by the department therefore we are unable to persuade ourselves to subscribe to the aforesaid observation based on which the A.O had inter alia rejected the assessee s explanation as regards the source of subject cash deposits in his bank accounts. We are of a firm conviction that as the A.O had failed to place on record any material which would prove to the hilt that the amount of cash withdrawals of Rs.78.80 lacs (out of cash withdrawals of Rs.98.80 lacs) made by the assessee during the pre-demonetisation period i.e. in September 2016 was thereafter invested/utilized by the assessee somewhere else and thus was not available with him to source the cash deposits in SBNs in his bank accounts during the demonetization period therefore there could have been no justification on his part to have held the cash deposits as the assessee s unexplained money u/s. 69A of the Act. Accordingly we herein vacate the addition made/sustained by the lower authorities. Appeal of the assessee is allowed
ISSUES PRESENTED and CONSIDERED
The core legal issues considered in this judgment are:
ISSUE-WISE DETAILED ANALYSIS 1. Addition of Rs.62,00,000/- as Unexplained Money under Section 69A Relevant Legal Framework and Precedents: Section 69A of the Income-tax Act, 1961, provides that where a taxpayer is found to be the owner of any money, bullion, jewellery, or other valuable articles, and such items are not recorded in the books of account, and the taxpayer offers no explanation or the explanation offered is not satisfactory, the value of such items may be deemed to be the taxpayer's income for that year. Court's Interpretation and Reasoning: The Tribunal examined whether the cash deposits of Rs.62,00,000/- made during the demonetization period were unexplained and thus taxable under Section 69A. The Tribunal scrutinized the explanation provided by the assessee regarding the source of these deposits. Key Evidence and Findings: The assessee claimed that the cash deposits were sourced from cash withdrawals amounting to Rs.98.80 lacs made during the pre-demonetization period. The assessee provided evidence of loan repayments from M/s. Rajgharia Industrial Equipment Pvt. Ltd., which were credited to his bank account, and subsequent cash withdrawals. Application of Law to Facts: The Tribunal found that the availability of cash in hand amounting to Rs.78.80 lacs (after accounting for pre-demonetization deposits) was not disproved by the Revenue. Therefore, the Tribunal held that the cash deposits during the demonetization period were adequately explained. Treatment of Competing Arguments: The Tribunal addressed the Revenue's arguments regarding the timing and manner of cash deposits, the nature of the bank accounts used, and discrepancies in reported cash balances. The Tribunal found these arguments insufficient to discredit the assessee's explanation. Conclusions: The Tribunal concluded that the addition of Rs.62,00,000/- as unexplained money under Section 69A was not justified, as the assessee had provided a plausible explanation for the source of the deposits. 2. Validity of Assessment under Section 143(3) While the Tribunal focused primarily on the issue of unexplained money under Section 69A, the validity of the assessment under Section 143(3) was inherently linked to the findings on the primary issue. Since the Tribunal found the addition under Section 69A to be unjustified, the assessment's validity was not directly challenged in this decision. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning: "We are of a firm conviction that as the availability of cash in hand of Rs.78.80 lacs (supra) [Rs.98.80 lacs (-) Rs.20 lacs] with the assessee had not been dislodged by the department, therefore, there could have been no justification for rejecting his claim that the cash deposits of Rs.62 lacs (supra) in SBNs made in his bank accounts during the demonetisation period were sourced out of the aforesaid cash in hand available with him." Core Principles Established: The Tribunal emphasized the importance of a plausible explanation for cash deposits and the necessity for the Revenue to disprove such explanations with substantive evidence. Final Determinations on Each Issue: The Tribunal vacated the addition of Rs.62,00,000/- under Section 69A, allowing the assessee's appeal and effectively ruling that the assessment was not justified in treating the deposits as unexplained income.
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