2024 (6) TMI 1124 - AT - Income Tax

Unexplained cash deposits u/s 69A - cash deposits during the demonetization period - CIT(A)-NFAC dismissed the appeal of the assessee by holding that the availability of so called cash balance in the books of account is only evidence on paper and the said amount must have been utilized for some other purposes which are not brought on record HELD THAT - As an undisputed facts that the assessee has disclosed the investment in his books of account and also shown the same in the computation of income which was offered for taxation. Therefore, the Ld. AR s contention that the provisions of section 69A are not applicable in the present case of the assessee as the cash deposits during the demonetization period are duly recorded in the assessee s books of accounts holds good. Also decided in the case of Sri Tatiparti Satyanarayana 2022 (3) TMI 896 - ITAT VISAKHAPATNAM wherein the Tribunal held that the provisions of section 69 cannot be invoked when the assessee has disclosed investment in the books of account and in the computation of income which was offered for taxation. Thus we direct the Ld. AO to delete the addition made on account of unexplained money since the provisions of section 69A are not applicable in the case of the assessee. Assessee appeal allowed.

Summary

Issues:
1. Assessment under section 143(3) of the Income Tax Act, 1961 for AY 2017-18.
2. Addition of unexplained cash deposits under section 69A of the Act.
3. Appeal against the order of the Ld. CIT(A)-NFAC.

Analysis:
1. The appeal was against the order of the Ld. CIT(A)-NFAC, arising from the assessment under section 143(3) of the Income Tax Act, 1961 for the AY 2017-18. The assessee had initially filed the return of income admitting a total income of Rs. 7,84,640, which was later selected for 'limited scrutiny' under CASS to verify cash deposits during the demonetization period. The Ld. AO noted cash deposits of Rs. 29,75,000 in the bank, out of which only Rs. 2,25,000 was accepted as explained. The remaining Rs. 27,50,000 was treated as unexplained money under section 69A and brought to tax under section 115BBE, resulting in a total income determination of Rs. 35,34,640.

2. The Ld. CIT(A)-NFAC dismissed the appeal, stating that the availability of cash balance in the books of account was not sufficient evidence, as the amount might have been utilized for other purposes not recorded. The assessee appealed to the Tribunal, challenging the addition of Rs. 27,50,000 as unexplained cash deposits under section 69A. The Authorized Representative argued that as the investments were disclosed in the books of accounts and offered for taxation, section 69A should not apply. Citing a Tribunal decision, the AR contended that when investments are disclosed, section 69A does not apply. The Departmental Representative opposed, stating the lack of details provided by the assessee.

3. After considering the arguments and previous Tribunal decisions, the Tribunal held in favor of the assessee. It noted that the investments were disclosed in the books of account and for taxation, making section 69A inapplicable. Relying on precedent, the Tribunal directed the Ld. AO to delete the addition of Rs. 27,50,000 as unexplained money. The appeal of the assessee was allowed, and the decision was pronounced in open court on 31st January, 2024.