2024 (5) TMI 1409 - AT - Income Tax

Unexplained cash deposits u/s 69A - Credibility of earlier withdrawals as a source for redeposits - Examination of fund flow and cash flow statements - Presumption of cash availability for redeposit - assessee had deposited a sum during the demonetization period - HELD THAT - The assessee has filed the details bank accounts, showing the cash deposit and withdrawals and details of rent agreements and rental income earned by the assessee and also confirmation from certain tenants. Regarding receipt of rent by cash, confirmation is kept on record - According to the assessee, he has deposited earlier withdrawals made by assessee and amount received by the tenants into assessee s bank accounts during the demonetization period. The assessee submitted that assessee has been regularly withdrawing the cash from the bank account on abundant caution to meet unforeseen expenses relating to the maintenance of assessee s house properties. This practice has been accepted by the ld. AO by giving credit towards opening balance. As held in the case of S.R. Venkataratnam 1980 (8) TMI 73 - KARNATAKA HIGH COURT if assessee states that earlier withdrawal is available to the assessee to redeposit the same into bank account, the credit to that amount cannot be denied without bringing any material on record to suggest that, that earlier withdrawal has been spent by the assessee for some other purpose. Assessee has to get due credit towards the cash withdrawals made by assessee and also rental income collected by assessee in the form of cash to deposit the said amount to assessee s bank account. Accordingly, we delete the addition made towards unexplained cash deposit made into assessee s bank account on various dates during the demonetization period. This ground of assessee is allowed.

Summary

Issues Involved:
1. Addition of unexplained cash deposits u/s 69A.
2. Interest u/s 234B and 234D.

Summary:

1. Addition of unexplained cash deposits u/s 69A:
The crux of ground Nos. 2 to 5 pertains to the addition of Rs. 23,07,131/- u/s 69A of the Act. The assessee deposited Rs. 60,00,000/- during the demonetization period, claiming the cash was from earlier withdrawals and rental income. The AO accepted Rs. 33,07,869/- as explained but added Rs. 23,07,131/- as unexplained, citing a lack of nexus between withdrawals and deposits. The CIT(A) upheld this, referencing judgments in CIT Vs. Durga Prasad More and Sumati Dayal Vs. CIT, suggesting the explanation was an afterthought. The Tribunal, however, noted that similar cases have allowed credit for earlier withdrawals if no contrary evidence is presented, citing multiple precedents including S.R. Venkataratnam Vs. CIT and Sri Krishnamurthy Narayana Murthy Vs. ITO. The Tribunal directed the AO to give due credit for earlier withdrawals and rental income, thereby deleting the addition.

2. Interest u/s 234B and 234D:
Consequential to the above adjustment, the levy of interest u/s 234B and 234D amounting to Rs. 6,08,814 was deemed incorrect. The Tribunal did not specifically address this issue separately, implying that the deletion of the addition under u/s 69A would also nullify the interest levied.

Conclusion:
The appeal was allowed, and the addition of Rs. 23,07,131/- u/s 69A was deleted, with directions to the AO to give credit for earlier withdrawals and rental income. Consequently, the interest levied u/s 234B and 234D was also deemed incorrect.