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2024 (9) TMI 514 - AT - Income TaxAddition u/s 69A - cash deposited during demonetization out of cash withdrawal - validity of cash flow statements - HELD THAT - As noted from the submissions of the assessee that the assessee was having income from salary, rent from house property which was received in cash and the assessee also earned interest from saving bank. Assessee was not required to maintain book of accounts. Assessee submitted cash flow statement alongwith supporting bank statement during the assessment proceedings as well as first appellate proceedings. It is noteworthy to mention that cash flow statement is the only method from which availability of cash for deposition can be examined. It is also noted that the assessee had received rental income in cash which has also been shown in the ITR and the same was also not disputed. Also noted that the assessee had admitted that he had deposited Rs. 1.500 lacs prior to demonetization out of cash withdrawal from bank. As during the proceedings before the AO and ld. CIT(A), the assessee had explained that the cash was deposited out of cash in hand accumulated over a period of time for which cash flow statement for the period 01-10-2015 to 31-12- 2016 demonstrating the history and status of the cash in hands was submitted which was rejected by the lower authorities. From the perusal of the cash flow statement, it is noted that the assessee was having balance of Rs. 25,09,620/- as on 8-11-2-016 which shows that the cash was lying with the assessee and it is also noted that cash balance was never disputed by the lower authorities during the proceedings. Thus assessee had deposited in cash in bank accounts during the demonetization whose details were put forth before the lower authorities by the assessee as mentioned in the cash flow statement and supporting bank statement. We found that the assessee has submitted full details of amount through his written submission and there remains no ambiguity in the submission giving the details deposited during the demonetization period - Asssessee appeal allowed.
Issues Involved:
1. Jurisdiction of AO under Section 143(3) of the Income Tax Act, 1961. 2. Invocation of Section 69A for addition of Rs. 25.04 lacs on account of cash deposited during demonetization. 3. Basis of addition under Section 69A as unexplained money. Issue-wise Detailed Analysis: 1. Jurisdiction of AO under Section 143(3) of the Income Tax Act, 1961: - Ground No. 1: The assessee contended that the AO erred by initiating proceedings and passing an order under Section 143(3) without jurisdiction, making the resultant order unlawful. - Outcome: The assessee did not press this ground during the hearing, leading to its dismissal. 2. Invocation of Section 69A for addition of Rs. 25.04 lacs on account of cash deposited during demonetization: - Grounds No. 2 & 3: The assessee challenged the addition of Rs. 25.04 lacs under Section 69A, arguing it was based on cash withdrawals and rental income. - Facts: The assessee, deriving salary from Vibrant Academy Pvt. Ltd., rental income, and interest, filed a return declaring an income of Rs. 40,03,580/-. The AO, after scrutiny, determined the total income as Rs. 65,17,580/- by adding Rs. 25.04 lacs under Section 69A for cash deposited during demonetization. - CIT(A) Decision: The CIT(A) confirmed the AO's action, noting the implausibility of holding large cash amounts for a year and the sporadic nature of deposits, suggesting undisclosed income. - Assessee's Argument: The assessee submitted a cash flow statement and supporting bank statements, asserting the cash deposits were from previous withdrawals and rental income. The assessee cited various judicial precedents supporting the validity of cash flow statements and the continuity of cash availability over time. - Legal Precedents Cited: - CIT vs. Kulwant Rai [291 ITR 36]: Rejection of cash flow statements based on suspicion without material evidence is improper. - Shri Sunil Mathur vs. ITO [ITA No. 660/JP/2019]: Cash flow statements explaining deposits from earlier withdrawals and income sources were accepted. - CIT vs. K. Sreedharan [201 ITR 1010]: Four-year gap between withdrawals and deposits does not rebut the presumption of cash availability. - Muon Computing Pvt. Ltd. vs. ITO [ITA No. 7606/Del/2019]: Additions based on suspicion without evidence are not sustainable. - Hasmukh Kanjibhai Tadhani vs. ITO [ITA No. 19/SRT/2023]: Cash deposits explained through cash flow statements and supporting documents should be accepted unless proven otherwise. - Shri Vinay Deshrath Guptaibhai Tadhani vs. ITO: Cash deposits justified by withdrawals and lack of contrary evidence should be accepted. 3. Basis of addition under Section 69A as unexplained money: - AO's Findings: The AO applied the "Theory of Human Probability," arguing that no prudent person would hold large cash amounts for long periods and deposit them sporadically. The AO deemed the deposits as unexplained money under Section 69A. - CIT(A)'s Findings: The CIT(A) reiterated the AO's reasoning, emphasizing the improbability of holding large cash amounts and the sporadic nature of deposits. - Assessee's Counter: The assessee argued that the addition was based on suspicion and conjecture without material evidence. The assessee highlighted the chaotic conditions during demonetization and the practical difficulties in depositing large amounts at once. The assessee also pointed out that the authorities ignored the "Principle of Apparent Reality," which presumes the apparent state of affairs as real unless proven otherwise. - Judicial Precedents: - Lalchand Bhagat Ambical vs. CIT [1959 AIR 1295]: Additions based on suspicions and conjectures without evidence are improper. - ITO vs. Shri M. Prabhakar [ITA No. 1727/Hyd/2014]: Additions based on suspicion without material evidence are not sustainable. - Abhilasha Jain vs. DCIT [ITA No. 05/JP/2022]: Additions based on suspicion without disproving the cash flow statement and supporting documents are improper. Final Judgment: - The Tribunal found that the assessee provided sufficient evidence through cash flow statements and supporting documents to justify the cash deposits. The Tribunal noted that the authorities' reliance on the "Theory of Human Probability" without material evidence was improper. The Tribunal allowed Grounds No. 2 & 3, directing the deletion of the addition of Rs. 25.04 lacs under Section 69A. Conclusion: - The appeal was partly allowed, with the Tribunal directing the deletion of the addition under Section 69A, as the assessee satisfactorily explained the cash deposits with supporting evidence. The judgment emphasized the need for material evidence over suspicion and conjecture in making additions under Section 69A.
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