2024 (4) TMI 932 - AT - Income Tax

Addition u/s 69A - amount received in cash from persons for online fund transfer through novapay online portal and deposited in Bank - as per AO assessee has not produced / furnished the details showing from whom cash was collected and for which purpose - HELD THAT - As during the two months of demonetization only the assessee carried both types of work viz. deposit of utility bills and Hotel and Ticket bookings. The assessee had executed an Agreement with Novapay which is a portal for money transfer mainly. The assessee was working for this portal earlier also, but the quantum of commission was very low as is evident from the entries appearing in form 26AS. It is apparent from TDS made by above named Novapay that during the months of December 2016 to March 2017 the quantum of commission has recorded growth as compared to commissions in the months of April, 16 to November, 2016. The bank statements of the assessee evidences that the amount deposited by the assessee in the bank accounts during these two months of demonetization was transferred to other accounts as is apparent from the transactions appearing therein. Thus, when the assessee has is not directly benefit for cash deposit by making any personal investment but has transferred the money for services he rendered to the party whose service are availed and the commission arising out of that activity was already taxed in the hands of the assessee. The bench also noted that the activities of the assessee are genuine based on the fact that during the period of two months of demonetization the assessee had deposited only Rs. 27,500 as SBN out of total deposit of more than 56 Lacs and there is no allegation against the assessee that the assessee had deposited amount in SBN. Based on the discussion so recorded and evidences in the form of form no. 26AS bank statement and TDS deducted on commission the cash deposited by the assessee cannot be taxed u/s. 69A of the Act. Appeal of the assessee is allowed.

Summary

Issues Involved:
1. Addition of Rs. 22,37,511/- as unexplained credits u/s 69A.
2. Initiation of penalty proceedings u/s 271AAC(1) & 271A(1)(d).

Summary:

Issue 1: Addition of Rs. 22,37,511/- as unexplained credits u/s 69A

The assessee, running an E-Mitra Kiosk, filed a return of income for AY 2017-18 declaring a total income of Rs. 4,13,210/-. The case was selected for scrutiny to examine cash deposits during the demonetization period. The assessee explained that the cash deposited in his bank account was collected from customers for payment of utility bills and other services, and provided supporting documents such as bank statements, transaction summaries, and payment sheets. However, the AO found that the assessee failed to provide complete details of the source of Rs. 22,37,511/- deposited in the bank account, treating it as unexplained credits u/s 69A.

Upon appeal, the CIT(A) upheld the AO's decision, noting that the assessee could not provide details of the customers and the purpose of the money deposited. The Tribunal, however, found that the assessee had provided sufficient evidence, including Form 26AS, transaction statements, and bank account statements, showing that the cash deposits were related to his business activities and commissions earned. The Tribunal concluded that the cash deposits could not be taxed u/s 69A and deleted the addition of Rs. 22,37,511/-.

Issue 2: Initiation of penalty proceedings u/s 271AAC(1) & 271A(1)(d)

The initiation of penalty proceedings u/s 271AAC(1) & 271A(1)(d) was related to the addition made u/s 69A. Since the Tribunal deleted the addition of Rs. 22,37,511/-, the grounds for penalty proceedings were also dismissed.

Conclusion:

The appeal of the assessee was allowed, and the addition of Rs. 22,37,511/- made by the AO was deleted. Consequently, the related penalty proceedings were also dismissed.