2024 (5) TMI 25 - AT - Income Tax

Addition u/s 69A r.w.s. 115BBE - assessee deposited cash during demonetization period - AO rejected the claim of the assessee and held that there were no cash sales since the assessee failed to disclose the identity of the persons to whom cash sales were made on 08.11.2016 - assessee submitted that due to announcement of demonetization by GOI, there was huge demand for investment in gold and due to rush, the assessee failed to collect the identity of the person to whom sales were made - HELD THAT - When the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation which is impermissible in law. The cash sales proceeds have been credited in the books of accounts and the same form part of assessee s cash book. On these facts, it could very well be said that the assessee s claim was backed up by sufficient documentary evidences. The allegation of AO is that such abnormal sales could not be achieved by the assessee immediately upon announcement of demonetization by the Government. However, such allegations are bereft of any concrete evidence on record. It is trite law that no addition could be made merely on the basis of suspicion, conjectures and surmises. In the present case, the assessee has duly discharged the burden of establishing the source of cash deposit and the onus was on Ld. AO to disprove the same. However, except for mere allegation and few statistics, there is nothing on record to support the conclusions drawn by Ld. AO that the cash deposited by the assessee was her unaccounted money. There is no finding by Ld. AO that any particular sales affected by the assessee exceeded threshold limit which cast an additional obligation on the assessee to obtain requisite particulars from the customers. Since cash generated out of sales has been credited in the books of accounts, the provisions of Sec.69A could not be invoked in the present case. Therefore, on the given facts, the impugned additions are not sustainable. Interest disallowance - assessee has advanced loan to her son only at the fag-end of this year . In fact, initially the assessee has obtained interest free funds from her son. Subsequently, she has repaid the loan in excess leaving closing balance of Rs. 70.15 Lacs. Further, the fact that the assessee has sufficient capital balance has also not been disputed by lower authorities. No nexus of borrowed funds vis- -vis loans granted by the assessee has been established by Ld. AO. Therefore, considering all these facts, the interest disallowance is not justified. We delete the same.

Summary

Issues:
1. Appeal against the order of Commissioner of Income Tax (Appeals) regarding addition u/s 69A and interest disallowance.

Addition u/s 69A:
The appellant contested the addition of Rs. 1,85,00,000 under section 69A, arguing that the explanation supported by documentary evidence was unreasonably rejected. It was highlighted that the appellant maintained regular books of account and had provided necessary documents during assessment proceedings. The assessing officer's addition under section 69A was criticized for being based on suspicion rather than concrete evidence. The appellant also pointed out that the assessing officer did not adhere to the standard operating procedure in demonetization cases. Moreover, it was argued that the appellant's cash sales did not require identity proof of customers as per the Income Tax Act, and the addition was unjustified.

Interest Disallowance:
Regarding the disallowance of Rs. 9,06,599 under section 37 of the Income Tax Act, the appellant contended that the loan given to her son was from her own funds, supported by ledger entries. The appellant's sufficient capital balance and the lack of evidence linking borrowed funds to the loans granted were emphasized. The disallowance was deemed incorrect both on legal and factual grounds.

The appellate tribunal found that the appellant, engaged in trading of bullion, had adequately explained the source of cash deposits made during demonetization. Documentary evidence, including sales registers and bank statements, supported the cash deposits. The tribunal noted that the cash sales proceeds were already reflected in the books of accounts and had been subjected to tax, thus precluding double taxation. The assessing officer's allegations of abnormal sales post-demonetization lacked concrete evidence and were deemed insufficient to justify the addition under section 69A. As the appellant had established the source of cash deposits, the tribunal ruled in favor of the appellant on this issue.
Regarding interest disallowance, the tribunal observed that the appellant's loan to her son was backed by her own funds, and there was no proven link between borrowed funds and the loans granted. Consequently, the tribunal concluded that the interest disallowance was unwarranted and ruled in favor of the appellant.

In conclusion, the appeal was allowed, and the impugned additions under section 69A and interest disallowance were deleted.