2024 (9) TMI 1111 - AT - Income Tax

Addition u/s 69A r.w.s.115BBE - cash deposits during demonetization period - assessee contented AO should have assessed the joint holders separately instead of attributing all the transactions solely in the hands of the assessee, and made assessment U/s. 144 of the Act treating the entire cash deposits as unexplained money U/s. 69A HELD THAT - Cash deposits were made out of the sale proceeds only. It is also an admitted fact that the assessee and the joint holder Mrs. Satya Sri Kanchumarthi have filed their returns of income separately in their individual status disclosing their respective turnovers. Source of the cash deposited was the loan of a similar account sanctioned by the same bank and branch (Karur Vysya Bank) and the said joint account was merely utilized as a conduit to transmit the loan funds and no other transactions were made in the said account - Assessee and the joint holder Mrs. Satya Sri Kanchumarthi have availed the bank loan jointly which clearly establishes at page 5 of the paper book evidencing the joint account held by the assessee and Mrs. Satya Sri Kanchumarthi. It is also an undisputed fact that the loan availed was a short term loan and the assessee and Mr. Satya Sri Kanchumarthi have repaid the loan amount after liquidating the stocks of raw cashew nuts. Therefore, assessee has properly explained the source for her cash deposits during the demonetization period as it is nothing but repayment of loan of the assessee along with the joint holder. Therefore, I am of the considered view that the Ld. AO and the Ld. CIT(A)-NFAC have not properly appreciated the facts and made the addition U/s. 69A of the Act which is not in accordance with the law. Appeal of the assessee is allowed.

Summary

Issues:
Assessment based on unexplained cash deposits during demonetization period, invocation of sections 69A and 115BBE of the Income Tax Act, 1961, appeal against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre.

Analysis:
The appeal was filed against an order passed under Section 144 of the Income Tax Act, 1961, for the assessment year 2017-18. The case involved the assessee, an individual deriving income from business and other sources, who had made cash deposits during the demonetization period. The Assessing Officer (AO) proceeded ex-parte under Section 144(1)(b) as the assessee did not respond to notices or provide explanations for the cash deposits. The AO treated the cash deposits as undisclosed income and added it to the assessed income under Section 69A, charging tax under Section 115BBE. The assessment order was dated 25/12/2019. The assessee appealed the order before the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre.

The Learned CIT(A)-NFAC upheld the addition made by the AO under Section 69A and invoked Section 115BBE. The assessee then appealed to the Tribunal, challenging the addition of Rs. 41,46,000 as unexplained cash deposits and contending that Section 115BBE was not applicable to the case. The assessee argued that the cash deposits were repayment of a joint loan taken for purchasing raw cashew nuts, supported by loan account details indicating a joint account.

During the Tribunal hearing, it was established that the cash deposits were made from the sale proceeds of raw cashew nuts, as the assessee and a joint holder had availed separate loans and repaid them after liquidating the stocks. The joint account was used as a conduit for loan funds and sale proceeds. The Tribunal concluded that the AO should have assessed the joint holders separately and not solely attributed the transactions to the assessee. The Tribunal found that the cash deposits were explained as loan repayment and set aside the orders of the Revenue Authorities, allowing the assessee's appeal.

The Tribunal's decision was based on the proper appreciation of facts, concluding that the cash deposits were not unexplained income but loan repayment. The Tribunal's ruling set aside the addition made by the AO under Section 69A and confirmed the assessee's explanation regarding the source of the cash deposits. The appeal of the assessee was allowed, overturning the orders of the Revenue Authorities.