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2024 (8) TMI 919 - AT - Income TaxAddition u/s 69A - unexplained cash deposits during demonetization period - HELD THAT - The cash has been deposited in the said three financial years from 87, 92 to 91.20% of cash sales, it is 15% to 28% of the total sales. Cash is being deposited as per trends practice of business. Cash deposited during the FY 2016-17 is less 87.92% of the cash sales as compared to earlier years of 91.2%. It means that during the period in question, the cash deposits of the assessee is not at variance with the other years. On going through the entire factual information available on record and not disputed by the revenue, it can be held that the assessee had sufficient cash balance as per the accepted books of accounts and hence, the cash deposits cannot be treated as undisclosed income. Decided in favour of assessee.
Issues Involved:
1. Sustenance of assessment under section 143(3) of the Act. 2. Addition of Rs. 2,07,04,000/- under section 69A of the Act. 3. Application of section 69A read with section 115BBE of the Act. 4. Consideration of documentary evidence and explanations provided by the assessee. 5. Principles of natural justice and fair hearing. Issue-wise Detailed Analysis: 1. Sustenance of assessment under section 143(3) of the Act: The assessee filed a return of income on 29.10.2017, declaring income of Rs. 13,77,850/-. The case was selected for complete scrutiny under CASS due to large cash deposits. The Assessing Officer (AO) observed that the assessee deposited Rs. 2,07,04,000/- in three bank accounts, two of which were not declared in the return of income. The AO concluded that the source of these cash deposits was unexplained, leading to an addition under section 69A of the Act. 2. Addition of Rs. 2,07,04,000/- under section 69A of the Act: The AO found that the assessee did not provide details of the persons from whom the cash was received. The AO relied on judgments from the Hon'ble Apex Court (Roshan Di Hatti vs. CIT and Kale Khan Mohammad Hanif vs. CIT) to support the view that the onus of explaining the source of money lies with the assessee. The AO concluded that the cash deposits were unexplained and treated them as income under section 69A. 3. Application of section 69A read with section 115BBE of the Act: The AO applied section 69A read with section 115BBE, which deals with the tax treatment of unexplained money. The addition of Rs. 2,07,04,000/- was made under these sections. The CIT(A) confirmed this addition, leading to the present appeal before the Tribunal. 4. Consideration of documentary evidence and explanations provided by the assessee: The assessee argued that the cash deposits were part of regular business transactions and were less than the cash sales percentage in previous years. The books of accounts were audited and accepted by the department. The assessee also highlighted that the cash deposits were in line with past business practices and were necessitated by the demonetization policy. The Tribunal examined month-wise cash and credit sales, purchases, and cash deposits over three financial years (2014-15, 2015-16, and 2016-17). The Tribunal found that the cash deposits during the demonetization period were consistent with past trends and practices. 5. Principles of natural justice and fair hearing: The assessee contended that the CIT(A) did not provide a fair hearing and arbitrarily brushed aside the detailed submissions and evidence. The Tribunal noted that the cash in hand as on 09.11.2016 was Rs. 2,09,55,018/-, which was sufficient to cover the cash deposits of Rs. 2,07,04,000/-. The Tribunal concluded that the cash deposits could not be treated as undisclosed income, as the assessee had sufficient cash balance as per the accepted books of accounts. Conclusion: The Tribunal allowed the appeal of the assessee, holding that the cash deposits were not unexplained and could not be treated as undisclosed income. The order of the CIT(A) sustaining the addition under section 69A read with section 115BBE was set aside. The Tribunal emphasized that the assessee had sufficient cash balance and the deposits were consistent with past business practices. Order Pronounced in the Open Court on 14/08/2024.
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