2024 (4) TMI 351 - AT - Income Tax

Addition u/s 69A - Addition of cash deposits made by the assessee during the demonetization period - observation of the A.O. based on the statement of the assessee recorded u/s. 131 as regards the availability of cash in hand - HELD THAT - We are unable to persuade myself to subscribe to the view taken by the A.O. who had restricted the availability of cash in hand with the assessee (out of his accumulated savings) at Rs. 1 lac. As stated by the assessee in his reply he had started working way back in F.Y.2001-02 and had thereafter been regularly filing his return of income from A.Y. 2002-03 onwards. Thus it can safely be concluded that cash-in-hand of Rs. 2 lac sourced out of the accumulated savings of the assessee garnered over the preceding years, i.e A.Y 2002-03 to A.Y 2013-14 would have been available with him for funding the cash deposits in his bank accounts during the subject year. Accordingly, based on the methodology adopted by the A.O. for determining the availability of cash in hand (liquidity) with the assessee during the year under consideration, the same as per our aforesaid deliberations can safely be estimated at Rs. 6,58,443/- Rs. 4,58,443/- ( ) Rs. 2 lac thus, in terms of my aforesaid observations, scale down the addition sustained by the CIT(Appeals) to an amount of Rs. 8,41,557/- Rs. 15 lacs (-) Rs. 6,58,443/- and modify the order of the CIT(Appeals) accordingly. Appeal of the assessee is partly allowed

Summary

Issues Involved:

1. Legality of the order u/s 250 and assessment order u/s 143(3).
2. Addition of Rs. 10,51,950/- u/s 69A for unexplained cash deposits.
3. Charging of interest u/s 234B and 234C.
4. Initiation of penalty proceedings u/s 271AAC.

Summary of Judgment:

Issue 1: Legality of the Orders
- The assessee contended that the orders dated 18/12/2023 u/s 250 and 02/02/2019 u/s 143(3) were "illegal and void-ab-initio." However, the Tribunal did not find merit in this ground and upheld the legality of the orders.

Issue 2: Addition u/s 69A for Unexplained Cash Deposits
- The assessee deposited Rs. 15 lacs during the demonetization period, which the A.O. scrutinized. The A.O. found discrepancies in the cash deposits compared to the assessee's historical cash trends and added Rs. 10,51,950/- as unexplained money u/s 69A.
- The CIT(Appeals) upheld this addition, noting the assessee's failure to provide evidence for cash availability beyond Rs. 4,48,050/-. The CIT(Appeals) dismissed the appeal, emphasizing the lack of credible justification for the cash deposits.
- The Tribunal, upon review, partially disagreed with the A.O.'s methodology. It recalculated the cash availability considering gross income and legitimate expenses, determining a revised cash availability of Rs. 6,58,443/-. Consequently, the addition was scaled down to Rs. 8,41,557/-.

Issue 3: Charging of Interest u/s 234B and 234C
- The assessee challenged the interest charged u/s 234B and 234C. The Tribunal noted that charging such interest is "consequential and mandatory." The A.O. was directed to charge interest as per the relevant provisions while giving effect to the appeal order.

Issue 4: Initiation of Penalty Proceedings u/s 271AAC
- The assessee contested the initiation of penalty proceedings u/s 271AAC. The Tribunal found this ground "premature and non-appealable," thus requiring no independent adjudication.

Conclusion:
- The Tribunal partly allowed the appeal, reducing the addition u/s 69A to Rs. 8,41,557/- and upheld the remaining aspects of the CIT(Appeals) order. The order was pronounced on 05th April, 2024.