2024 (6) TMI 1207 - AT - Income Tax

Addition u/s 69A - cash deposit made in the bank account during the demonetization period - HELD THAT - The source of cash deposits is clearly explainable from the cash withdrawal made earlier which is reflected in the same bank account. The reason for holding huge cash of Rs. 15 lakhs for a period of 14 months had also been explained by the assessee as she had to pay the requisite fees to the medical college within three days from the date of intimation by the College management. The assessee had also explained the source of withdrawal of cash to be out of maturity proceeds of fixed deposits which is also evident from the bank statement reproduced. Hence, no hesitation in deleting the addition made on account of cash deposit u/s 69A in the instant case. Accordingly, grounds raised by the assessee on merits are hereby allowed.

Summary

Issues:
Validity of assessment order under Income Tax Act, 1961 and additions made under section 69A based on cash deposits during demonetization period.

Analysis:
The appeal before the Appellate Tribunal ITAT DELHI arose from the order of the National Faceless Appeal Centre (NFAC) in Appeal No. ITBA/NFAC/S/250/2023-24/1055071262(1) dated 11.08.2023 against the assessment order passed under section 143(3) of the Income Tax Act, 1961 by the Income Tax Officer. The primary issue raised by the assessee was the validity of the assessment order, contending that the unsigned notice under section 143(2) and the subsequent order were non est and lacked legal standing. The assessee further challenged the addition of Rs. 15 lakhs as unexplained income under section 69A, arguing that the amount withdrawn and redeposited did not constitute undisclosed income chargeable to tax. The Tribunal examined the facts and circumstances surrounding the cash deposits made during the demonetization period and the explanations provided by the assessee.

The Tribunal noted that the assessee, an individual earning income from interest and rental income, had deposited Rs. 15 lakhs in her bank account during the demonetization period. The source of this deposit was explained by the assessee as a withdrawal from the same bank account out of the maturity proceeds of fixed deposits for the purpose of securing medical admission for her son. The Tribunal considered the detailed explanation provided by the assessee, including the events leading to the cash deposits and the subsequent need to deposit the money in the bank due to the demonetization policy announced by the Government of India. The Tribunal observed that the bonafide intention of the assessee and the source of the cash deposits were adequately explained, supported by documentary evidence such as the bank statement.

Based on the evidence and explanations presented, the Tribunal concluded that the addition made on account of cash deposit under section 69A of the Income Tax Act was unjustified in the instant case. Consequently, the Tribunal allowed the grounds raised by the assessee on merits and granted relief by deleting the addition. As a result of the decision on the primary issue, the Tribunal did not delve into the other legal grounds raised by the assessee regarding the unsigned notice under section 143(2) of the Act. Ultimately, the Tribunal allowed the appeal of the assessee, pronouncing the order in open court on 19/01/2024.