2024 (8) TMI 1234 - AT - Income Tax

Addition u/s 69A - Cash deposits during demonetization period - HELD THAT - AO has made addition u/s. 69A which will be applicable only when the assessee is found to be the owner of any money, bullion, jewellery or other valuable articles and such money etc. is not recorded in the books of accounts maintained by him from any source of income and any explanation offered by the assessee is not in the opinion of the AO is satisfactory then, the same can be added as the unexplained money in the hands of the assessee. In the present case, the assessee has recorded the above cash deposits in his books of accounts and source of cash deposits during demonetization period were also been maintained by the assessee. Therefore in our considered view, the A.O. is not correct invoking provisions of Section 69A of the Act and charging tax u/s. 115BBE of the Act. Thus the addition made by the Assessing Officer is liable to be deleted. Decided in favour of assessee.

Issues Involved:
1. Addition of Rs. 10,75,000 as unexplained money under section 69A of the Income Tax Act, 1961.
2. Application of section 115BBE of the Income Tax Act, 1961.

Detailed Analysis:

1. Addition of Rs. 10,75,000 as Unexplained Money under Section 69A:

Facts and Background:
- The assessee, a Karta of HUF, derived income from House Property and Other Sources.
- For the Assessment Year 2017-18, the assessee filed a return declaring income of Rs. 5,73,170.
- During the demonetization period, the assessee deposited Rs. 10,75,000 in Bank of Baroda.
- The source of the cash deposit was claimed to be withdrawals from four other bank accounts.
- The Assessing Officer (AO) rejected this explanation, noting discrepancies in the cash book and return of income, and added the amount as unexplained money under section 69A.

CIT(A) Findings:
- The CIT(A) confirmed the addition, observing that the assessee's claim of preserving small withdrawals over three years was not plausible.
- Cited the Supreme Court decisions in CIT v. Durga Prasad More and Sumati Dayal v. CIT, applying the Human Probability test to reject the explanation.

Assessee's Argument:
- The assessee argued that the cash withdrawals and deposits were recorded in the cash book, profit and loss account, and balance sheet.
- Relied on various case laws to support the claim that the cash deposits were legitimate and accounted for.

Tribunal's Findings:
- The Tribunal noted that the assessee had provided sufficient documentation, including previous years' financial statements, to support the claim.
- Emphasized that the cash deposits were reflected in the books of accounts and the source was explained.
- Cited relevant case laws, including Balwinder Kumar v. ITO and DCIT v. Sri Sriram Manchukonda, where similar additions were deleted.
- Concluded that section 69A was not applicable as the cash deposits were recorded in the books of accounts and the source was satisfactorily explained.

Conclusion:
- The addition of Rs. 10,75,000 as unexplained money under section 69A was deleted.

2. Application of Section 115BBE:

Facts and Background:
- The AO applied section 115BBE, which imposes a higher tax rate on unexplained money, treating the cash deposit as unexplained income.

Assessee's Argument:
- The assessee argued that section 115BBE was not applicable as the cash deposits were recorded in the books of accounts and the source was explained.

Tribunal's Findings:
- The Tribunal held that section 115BBE applies only when the money is not recorded in the books of accounts and the explanation is unsatisfactory.
- Since the cash deposits were recorded and the source was explained, section 115BBE was not applicable.

Conclusion:
- The application of section 115BBE was quashed.

Final Judgment:
- The appeal filed by the assessee was allowed.
- The addition of Rs. 10,75,000 as unexplained money under section 69A was deleted.
- The application of section 115BBE was quashed.

Order Pronouncement:
- The order was pronounced in the open court on 22-08-2024.

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