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2025 (4) TMI 96 - AT - Income TaxAddition of cash deposits made during demonetization period in Specified Bank Notes - unexplained credit u/s.69A and taxing the same u/s.115BBE of the Act - HELD THAT - We noted that admitted facts are that the assessee produced complete books of accounts computation of income profit loss account balance sheet and audit report in Form No.3CD along with enclosures. The assessee in his paper-book also filed comparative figures of gross turnover profit rate comparing with previous year with that of the preceding previous year. The arguments of AR could not be controverted by the Department that the cash deposit is part of sales turnover of the assessee. It is admitted fact that assessee is engaged in trading in vegetables and fruits on commission basis and as argued that this year he was in wholesale trading we noted that on identical facts the Co-ordinate Bench of this Tribunal in the case of Ganapathy Palaniyappan 2023 (1) TMI 1432 - ITAT CHENNAI . Addition deleted - Decided in favour of assessee.
ISSUES PRESENTED and CONSIDERED
The core legal issue considered in this judgment is whether the cash deposits made by the assessee during the demonetization period, amounting to Rs. 69,46,130/-, should be treated as unexplained money under Section 69A of the Income Tax Act, 1961, and consequently taxed under Section 115BBE. The Tribunal also considered whether the assessee's explanation regarding the source of these deposits as part of sales turnover was satisfactory and credible. ISSUE-WISE DETAILED ANALYSIS Relevant Legal Framework and Precedents The legal framework involves Section 69A of the Income Tax Act, which deals with unexplained money, and Section 115BBE, which prescribes the tax rate for such unexplained income. The Tribunal referenced similar cases, notably the decision in the case of Mr. Ganapathy Palaniyappan and the ITAT Visakhapatnam case of ITO vs. Sri Tatiparti Satyanarayana, where similar issues of cash deposits during demonetization were considered. Court's Interpretation and Reasoning The Tribunal focused on whether the assessee could satisfactorily explain the source of the cash deposits. The Tribunal noted that the assessee provided comprehensive documentation, including books of accounts, profit & loss statements, and audit reports. The assessee argued that the deposits were part of the business turnover, which was predominantly conducted in cash due to the nature of the wholesale market for fruits and vegetables. Key Evidence and Findings The assessee presented evidence of a significant increase in turnover, which aligned with the cash deposits. The Tribunal found that the explanation for the cash deposits being part of the business turnover was plausible, especially given the nature of the business and the historical pattern of cash transactions. Application of Law to Facts The Tribunal applied the legal provisions to the facts, emphasizing that the source of the cash deposits was crucial. Since the assessee demonstrated that the deposits were part of the sales turnover and provided substantial evidence to support this claim, the Tribunal found the explanation satisfactory. Treatment of Competing Arguments The Tribunal considered the Department's argument that the cash deposits were unexplained. However, it found that the Department did not adequately counter the assessee's evidence and arguments. The Tribunal also referenced previous decisions where similar explanations were accepted. Conclusions The Tribunal concluded that the assessee successfully explained the source of the cash deposits as part of the business turnover. Therefore, the addition of Rs. 69,46,130/- as unexplained money under Section 69A was not justified, and the appeal was allowed in favor of the assessee. SIGNIFICANT HOLDINGS Preserve Verbatim Quotes of Crucial Legal Reasoning The Tribunal stated, "In this view of the matter and by following the decision of the co-ordinate bench of ITAT, Visakhapatnam in the case of ITO vs Sri Tatiparti Satyanarayana, we are of the considered view that the AO as well as the CIT(A) has erred in sustaining addition towards cash deposits to bank account u/s. 69 of the Act and also levied tax u/s. 115BBE of the Act." Core Principles Established The judgment reinforced that when an assessee can provide a satisfactory explanation for cash deposits, supported by comprehensive documentation and consistent business practices, such deposits should not be treated as unexplained money under Section 69A. Final Determinations on Each Issue The Tribunal determined that the cash deposits were part of the legitimate business turnover of the assessee and not unexplained money. Consequently, the addition made by the Assessing Officer and upheld by the CIT(A) was deleted, and the appeal was allowed in favor of the assessee.
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