2024 (4) TMI 454 - AT - Income Tax

Unexplained money u/s. 69A - Limited scrutiny u/s. 143(2) verifying the large cash deposits made by the assessee in his bank account during the demonetization period - As the assessee in the course of proceedings before the first appellate authority had failed to explain the nature and source of the cash deposits in his bank account during the subject year, therefore, the addition made by the A.O was upheld by the CIT(A) - HELD THAT - Admittedly, as stated by the Ld. AR, and rightly so, the provisions of Section 69A of the Act can be triggered only where the assessee is found to be the owner of any money that is not recorded in the books of accounts and the assessee fails to offer any explanation about the nature and source of acquisition of the money; or the explanation so offered by him is not in the opinion of the A.O satisfactory. Although it is the claim of the Ld. AR that the cash deposits made in the bank account of the assessee were duly recorded in his books of account, but we are unable to concur with the same. Assessee had prepared a consolidated cash flow statement for a period of three years, i.e. 01.04.2014 to 31.03.2017 to justify the source of the cash deposits in his bank account. As the aforesaid cash/fund flow statements filed by the assessee in the course of the assessment proceedings cannot not be construed as the regular books of account maintained by him, therefore, his aforesaid contention, for which, support had been drawn from the aforementioned judicial pronouncements would not carry his case any further. Apropos the cash deposits in the joint Agricultural Kisan Credit (KCC) Account, we find substance in the contention of the Ld. AR that as his brother, had by way of an affidavit dated 04.01.2024 filed before the CIT(A) deposed that the said bank account was solely being used by him and the deposits/withdrawals made in the same related to his farming business, therefore, there was no justification for the CIT(Appeals) to have summarily brushed aside the said material fact and without rebutting the contents of the same held the cash deposits in the said bank account as the unexplained money of the assessee u/s 69A - matter in all fairness requires to be restored to the file of the CIT(Appeals) with a direction to re-adjudicate the same after taking cognizance of the aforesaid affidavit filed by the assessee before him. Addition made by the A.O concerning the cash deposits made by the assessee in his savings bank account there is substance in the claim of the Ld. AR that as the government had demonetized the currency, therefore, it was for the said reason that the assessee was compelled to deposit the demonetized currency available with him in his bank account, which, thus, justified the change in trend concerning the cash deposits in his bank account as in comparison to the earlier period. Thus, the Ground of Appeal No.1 raised by the assessee is partly allowed/allowed for statistical purpose

Summary

Issues Involved:

1. Addition of Rs. 22,30,000/- as unexplained money u/s 69A due to cash deposits in the bank account.
2. Validity of jurisdiction assumed by the A.O for making the addition u/s 69A of the Act.

Summary:

Issue 1: Addition of Rs. 22,30,000/- as unexplained money u/s 69A due to cash deposits in the bank account.

The assessee filed a return of income for A.Y. 2017-18 declaring an income of Rs. 1,53,780/-. The case was selected for limited scrutiny u/s 143(2) to verify large cash deposits during the demonetization period. The A.O observed cash deposits of Rs. 22.30 lacs in the assessee's bank accounts and held them as unexplained money u/s 69A. The assessee claimed the deposits were from the sale of agricultural produce, but failed to provide documentary evidence. The CIT(Appeals) upheld the addition, stating the assessee could not explain the nature and source of the cash deposits.

Issue 2: Validity of jurisdiction assumed by the A.O for making the addition u/s 69A of the Act.

The assessee argued that the provisions of Section 69A were not applicable as the cash deposits were recorded in the cash book. However, the Tribunal noted that the assessee had compiled a consolidated cash flow statement for three years, which could not be construed as regular books of account. Therefore, the applicability of Section 69A was not ousted.

Decision:

1. Cash Deposits in Joint Agricultural Kisan Credit (KCC) Account:
The Tribunal found substance in the claim that Rs. 9.95 lacs deposited in the joint KCC account was owned by the assessee's brother, who had filed an affidavit admitting the same. The CIT(Appeals) had arbitrarily brushed aside this affidavit. The Tribunal restored the matter to the CIT(Appeals) for re-adjudication after considering the affidavit.

2. Cash Deposits in Savings Bank Account:
The Tribunal accepted that Rs. 12.35 lacs deposited in the savings account was partly sourced from agricultural income and accumulated savings. It held that Rs. 4 lacs could be considered as available cash in hand for the deposits during the demonetization period. The Tribunal partly allowed the appeal for statistical purposes.

Conclusion:

The appeal was partly allowed for statistical purposes, with the Tribunal directing the CIT(Appeals) to re-adjudicate the issue concerning the joint KCC account after considering the affidavit, and acknowledging part of the cash deposits in the savings account as explained. The order was pronounced in open court on the 08th day of April 2024.