2024 (10) TMI 656 - AT - Income Tax

Addition u/s. 69A - cash deposited in bank account - claim of the appellant that the same was deposited out of the cash withdrawn from bank account is not disputed by the AO - HELD THAT - We find that in the Financial Year 2009-10 the assessee received an amount of Rs. 1,00,000/- as advance from Shri B. T. Sonawane which was returned to Shri B. T. Sonawane on 02-07-2018 i.e. after the period under consideration. Therefore, there was no occasion before the AO to make the addition on the basis of above payment during the period under consideration. We further find force in the argument of assessee that the total income of the assessee was determined at Rs. 1,00,000/- which is admittedly/apparently below the taxable income limit of Rs. 2,50,000/-. Even otherwise the assessee has explained the source of cash deposit successfully. We are of the considered opinion that the AO committed grave error in making addition of Rs. 1,00,000/- as taxable income and further imposing tax u/s 115BBE of the IT Act @ 60%. We therefore set-aside the ex-parte order passed by ld. Addl./JCIT(A)-2, Vadodara delete the addition of Rs. 1,00,000/- made by the Assessing Officer. Thus, the grounds of appeal raised by the assessee are allowed.

Summary

Issues:
Assessment of unexplained cash deposits during demonetization period, validity of assessment order, adequacy of opportunity of hearing before the appellate authority, determination of taxable income based on cash deposits and payments made.

Analysis:
The case involved an appeal against an assessment order passed by the Ld Addl./JCIT(A)-2, Vadodara for the assessment year 2017-18. The appellant contested the addition of Rs. 1,00,000 made under section 69 of the Income Tax Act on account of cash deposited in the bank account during the demonetization period. The appellant argued that the Assessing Officer wrongly treated the cash deposits as unexplained, despite the explanation provided regarding the source of funds. The appellant also highlighted that the total income determined by the Assessing Officer was below the taxable limit, making the addition unwarranted. The appellant further challenged the adequacy of the opportunity of hearing provided by the appellate authority, emphasizing the procedural irregularities in issuing hearing notices.

The facts revealed that the assessee had deposited Rs. 12,00,000 in the bank account during the demonetization period, but later clarified that only Rs. 6,00,000 was deposited, sourced from a withdrawal of Rs. 6,69,000 from the same bank account. The source of these cash deposits was explained by the assessee, including details of a fixed deposit maturity amount. The Assessing Officer raised concerns about payments made to third parties after the demonetization period, specifically Rs. 1,00,000 transferred to an individual, which was treated as unexplained income. However, it was established that this payment was a repayment of an advance received in a previous financial year, not related to the demonetization period under consideration. The Tribunal found that the Assessing Officer erred in making the addition of Rs. 1,00,000 as taxable income, especially since the total income was below the taxable limit and the source of cash deposits was adequately explained. The Tribunal set aside the assessment order and deleted the addition of Rs. 1,00,000, allowing the grounds of appeal raised by the assessee.

In conclusion, the Tribunal overturned the assessment order, emphasizing that the Assessing Officer's decision to treat the cash deposits as unexplained and impose tax was erroneous. The Tribunal held that the appellant had successfully explained the source of funds and that the addition of Rs. 1,00,000 as taxable income was unjustified. The Tribunal also noted the procedural lapses in the opportunity of hearing provided by the appellate authority, further supporting the decision to allow the appeal and delete the addition made by the Assessing Officer.