2024 (6) TMI 211 - AT - Income Tax

Addition u/s 69A - cash deposits during demonetization period - Assessee claimed deposits were from parents savings and agricultural income for house renovation - HELD THAT - As noted that the AO did not conduct any independent verification or enquiry into the claims made in the affidavits.AO has simply dismissed the affidavits without assigning any cogent reasons. CIT(A) too has upheld the AO s order without addressing the merits of the affidavits and the explanation provided by the assessee. In the case of CIT v. P.K. Noorjahan 1997 (1) TMI 6 - SUPREME COURT held that the burden of proof is on the revenue to show that the amount in question is income of the assessee. In the instant case the affidavits provided by the assessee s parents explaining the source of cash deposits were disregarded without any substantial counter evidence. Also when the assessee provides a plausible explanation supported by affidavits it is the duty of the revenue to conduct proper verification before making any adverse conclusion. In the present case neither the AO nor the CIT(A) conducted any verification of the affidavits or the claims made therein. We find that the addition made u/s 69A is not sustainable. AO and CIT(A) have failed to discharge their duty of conducting a thorough and fair investigation into the source of the cash deposits. The affidavits provided by the assessee s parents should have been subjected to verification and the explanation provided should have been considered in a judicious manner. As stated that there is no any proof of agricultural income. However neither AO nor CIT(A) have asked assessee to produce any proof for the agricultural income of father. Therefore direct the AO to delete the addition u/s 69A - Decided in favour of assessee.

Summary

Issues:
1. Addition made under section 69A of the Income Tax Act, 1961 based on cash deposits during demonetization.
2. Rejection of explanation provided by the assessee regarding the source of cash deposits.
3. Failure of the lower authorities to consider the affidavits submitted by the assessee's parents.
4. Burden of proof on the revenue to show the cash deposits as income of the assessee.
5. Lack of verification by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) (CIT(A)) regarding the claims made in the affidavits.
6. Duty of the revenue to conduct proper verification when the assessee provides a plausible explanation supported by affidavits.

Analysis:
The appeal before the Appellate Tribunal ITAT Ahmedabad involved the addition of Rs. 4,28,000 under section 69A of the Income Tax Act, 1961, based on cash deposits made during demonetization. The Assessing Officer treated the cash deposits as unexplained money despite the assessee's explanation that the funds were from accumulated savings and agricultural income of the parents. The CIT(A) upheld the addition without giving due consideration to the affidavits provided by the parents, which supported the source of the cash deposits. The Tribunal observed that the lower authorities did not properly weigh the affidavits, which clearly stated the source of the funds. The Tribunal cited legal precedents emphasizing the burden of proof on the revenue to establish the cash deposits as income of the assessee and the duty to conduct proper verification when the assessee provides a plausible explanation with supporting affidavits.

The Tribunal noted that neither the AO nor the CIT(A) conducted independent verification or enquiry into the claims made in the affidavits, failing to fulfill their duty of fair investigation. The lack of verification and consideration of the explanation provided by the assessee's parents led the Tribunal to conclude that the addition under section 69A was unsustainable. The Tribunal highlighted that the revenue authorities should have verified the affidavits and considered the explanation judiciously, as required by legal principles. The Departmental Representative's argument regarding the absence of proof of agricultural income was deemed insufficient, especially since neither the AO nor the CIT(A) requested such proof from the assessee.

Ultimately, in the interest of justice, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the addition of Rs. 4,28,000 under section 69A of the Act. The appeal of the assessee was allowed, emphasizing the importance of conducting thorough verification and considering explanations supported by credible evidence in income tax assessments.