2024 (11) TMI 964 - AT - Income Tax

Unexplained cash deposits u/s.69A - rectification application had been filed to correct the amount of cash deposited in one of the bank accounts, which was initially noted as Rs.15 lakhs but was actually Rs.1.50 lakhs HELD THAT - We do not find any merit in the appeal filed by the assessee against the addition made to its income on account of cash found deposited in nits bank accounts to the tune of Rs.32 lacs, except to the extent of addition to the tune of Rs. 13.50 lacs . For the simple reason that the AO himself has reduced the addition to this extent by passing a rectification order u/s.154 of the Act noting and agreeing with the fact brought to his notice of the incorrect quantum of cash noted to be deposited by the assessee in one of his bank accounts. This fact was brought to the notice of the CIT(A), but it seems to have not been taken note of by him since his order reveals no reason for confirming the addition made to the tune of Rs.32 lacs despite the AO having reduced it by Rs.13.50 lacs. Therefore, to this extent, we hold that the Ld.CIT(A) has erred in confirming the addition made to the tune of Rs.32 lakhs when the addition ought to have been confirmed only to the extent of Rs.18.50 lakhs. Having said so, we further hold that we do not find any merit in the contentions of assessee on the merits of the addition made. Undoubtedly the only manner in which the assessee has explained the source of cash deposit in his bank account is by way of furnishing book/cash flow statement, that too, all entries therein being unsubstantiated. Also the primary source of cash deposited in Bank is attributed to cash withdrawn from his bank account almost four years back and no reason has been given by the assessee for holding such huge amount of liquid asset for such a long period of time and redepositing it later. We agree with the findings of the Ld.CIT(A) that it is highly improbable that any person would withdraw such a huge amount of cash and retain it for such a long period of time for no reason at all. We agree with the Ld.CIT(A) that the assessee has given no reasonable explanation of the source of cash deposit in his bank account to the extent of Rs.18.50 lakhs. The addition to this extent made to the income of the assessee is accordingly confirmed by us. Decided partly in favour of assessee.

Summary

Issues:
Addition to income on account of unexplained cash deposits during demonetization period.

Analysis:
The appeal was filed against the order passed by the Ld. Commissioner of Income-Tax(Appeals) pertaining to the addition of Rs.32,00,000 to the income of the assessee on account of unexplained cash deposits during demonetization. The main contention raised by the assessee was that the addition made by the assessing officer was unjustified and should have been restricted to Rs.18.50 lakhs based on rectification made by the AO. The assessee argued that the Ld. CIT(A) confirmed the addition without proper justification and without considering the rectification made by the AO.

The Ld. Counsel for the assessee pointed out that a rectification application had been filed to correct the amount of cash deposited in one of the bank accounts, which was initially noted as Rs.15 lakhs but was actually Rs.1.50 lakhs. The AO rectified this mistake and reduced the addition to Rs.18.50 lakhs. However, the Ld. CIT(A) ignored this rectification and confirmed the addition of Rs.32 lakhs. The Ld. Counsel argued that the addition was not justified as the cash book presented by the assessee explaining the source of cash deposits was rejected without proper reasoning.

On the other hand, the Ld. DR contended that the evidence provided by the assessee for the source of cash deposits was unsubstantiated and unreliable. The Ld. CIT(A) noted discrepancies in the cash book and found that the cash withdrawals made in previous years were used to explain the cash deposits during the demonetization period. The Ld. CIT(A) also questioned why such a large amount of cash was kept idle for a long period instead of being used in business transactions when banking facilities were available.

The Tribunal held that the Ld. CIT(A) erred in confirming the addition of Rs.32 lakhs when the rectification by the AO had reduced it to Rs.18.50 lakhs. However, the Tribunal found no merit in the contentions of the assessee regarding the source of cash deposits. The Tribunal agreed with the Ld. CIT(A) that the explanations provided by the assessee were insufficient and improbable, considering the long period of holding such a large amount of cash without reasonable cause. Therefore, the Tribunal confirmed the addition of Rs.18.50 lakhs to the income of the assessee.

In conclusion, the appeal of the assessee was partly allowed, and the addition to the income was confirmed to the extent of Rs.18.50 lakhs.