2024 (10) TMI 596 - AT - Income Tax

Unexplained income u/s 69A - penalty proceedings u/s 271AAC - HELD THAT - We conclude that the cash withdrawals from ICICI and SBI were sufficiently documented. There is no evidence on record that the withdrawn funds were used for any other purposes, and the Department has not provided contrary evidence. Therefore, the Tribunal concludes that the withdrawals from these accounts should be treated as the source of the deposits during demonetization. Judicial precedents, such as, judgement of Shailesh Rasiklal Mehta 2008 (9) TMI 950 - GUJARAT HIGH COURT support this conclusion by establishing that once cash withdrawals are demonstrated, the burden shifts to the Department to disprove their availability for subsequent deposits. Claim of the deposits came from USD conversions - We concur with the CIT(A) s findings that the absence of forex receipts is a critical flaw. We cannot accept the assessee s claim without documentary evidence from an authorized money exchanger. The conversion of foreign currency to INR is a highly regulated process, and the failure to provide documentation creates a significant evidentiary gap. Thus, we conclude that the addition has been satisfactorily explained through documented cash withdrawals. The remaining amount claimed to be sourced from USD conversion, is sustained u/s 69A of the Act due to the lack of dependable evidence and explanations. Penalty u/s. 271AAC and Interest Charged u/s. 234A, 234B, and 234C - As the addition has been reduced to Rs. 3,70,000/-, the penalty under Section 271AAC of the Act and the interest under Sections 234A, 234B, and 234C of the Act will be recalculated based on the revised assessed income. The AO is directed to re-compute the penalty and interest accordingly.

Summary

Issues:
1. Addition of Rs. 12,00,000 as unexplained money under Section 69A of the Income Tax Act, 1961.
2. Nexus between cash withdrawals and subsequent deposits in the bank account.
3. Validity of penalty proceedings under Section 271AAC of the Act.
4. Charging of interest under Sections 234A, 234B, and 234C of the Act.

Analysis:

Issue 1: Addition of Rs. 12,00,000 as unexplained money under Section 69A of the Income Tax Act, 1961
The case involved an NRI who made cash deposits during demonetization, sourced from cash withdrawals from his bank accounts and leftover foreign currency. The Assessing Officer (AO) added Rs. 12,00,000 as unexplained income, questioning the nexus between withdrawals and deposits. The CIT(A) upheld the addition citing lack of evidence, despite the assessee's explanations and supporting documents. The Tribunal considered the documented cash withdrawals from ICICI and SBI accounts totaling Rs. 8,30,000 as valid sources for deposits. However, the claim of Rs. 3,70,000 sourced from USD conversions lacked proper documentation, leading to sustaining this portion of the addition under Section 69A.

Issue 2: Nexus between cash withdrawals and subsequent deposits in the bank account
The Tribunal found the withdrawals from ICICI and SBI accounts adequately documented and accepted them as the source for a portion of the deposits. The burden shifted to the Department to disprove the availability of these funds for deposits, as supported by judicial precedents. However, the lack of forex receipts for the claimed USD conversions created a significant evidentiary gap, leading to the sustenance of this portion of the addition.

Issue 3: Validity of penalty proceedings under Section 271AAC of the Act
The Tribunal directed the AO to re-compute the penalty under Section 271AAC and interest under Sections 234A, 234B, and 234C based on the revised assessed income, following the reduction of the addition to Rs. 3,70,000. The penalty and interest were deemed consequential to the primary addition and required recalibration.

Issue 4: Charging of interest under Sections 234A, 234B, and 234C of the Act
Given the reduction of the primary addition to Rs. 3,70,000, the recalibration of penalty and interest under Sections 234A, 234B, and 234C was mandated. The AO was instructed to adjust these amounts based on the revised assessed income, resulting from the partial allowance of the appeal.

In conclusion, the Tribunal partially allowed the appeal, reducing the addition to Rs. 3,70,000 and directing the re-calculation of penalty and interest in accordance with the revised assessed income.