2025 (4) TMI 261 - AT - Income Tax

Unexplained cash deposits u/s 68 r.w.s 115BBE - assessee has failed to furnish supporting documentary evidences to explain the source of these cash deposits during the assessment proceedings - CIT(A) deleted addition - HELD THAT - The assessee submitted a certificate of the bank that out of the money so deposited into the bank account by the assessee is the legal tender money and part as Old demonetized currency notes. The assessee also submitted that the source of this cash deposited into the bank account is the sales receipt which is already forming part of the audited books of accounts of the assessee. CIT(A) has based on the remand report deleted the addition on merits of the case. Before us ld. AO through ld. DR did not bring anything contrary that the cash deposited by the assessee is not forming of the sales recorded in the books of account of the assessee. Ld. CIT(A) has after detailed deliberation directed to the delete the addition. Addition u/s 40A(3) - CIT(A) deleted addition - HELD THAT -Assessee has produced the cash book before us before the ld. CIT(A) in the remand proceedings. AO while challenging the finding of the CIT(A) before us did not brough to our notice as to quantum of payment made by the assessee in violation of section 40A(3) of the Act. CIT(A) has deleted that addition after giving due opportunity to the assessing officer who has not availed that opportunity even before us and therefore we do not find any merits in the contentions so raised. Appeal of the revenue is dismissed.

1. ISSUES PRESENTED and CONSIDERED

The Tribunal considered two primary issues in this appeal:

Whether the CIT(A) erred in deleting the addition of Rs. 79,81,000/- made as unexplained cash deposits under section 68 read with section 115BBE of the Income Tax Act.
Whether the CIT(A) erred in deleting the disallowance of expenditure amounting to Rs. 6,48,20,559/- under section 40A(3) of the Income Tax Act.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Addition of Rs. 79,81,000/- as Unexplained Cash Deposits

Relevant Legal Framework and Precedents: Section 68 of the Income Tax Act pertains to unexplained cash credits, requiring the assessee to satisfactorily explain the nature and source of any sum credited in the books. Section 115BBE deals with the tax treatment of unexplained income.
Court's Interpretation and Reasoning: The CIT(A) found that the assessee had provided sufficient documentation to explain the source of the cash deposits, which included sales receipts forming part of the audited books of accounts.
Key Evidence and Findings: The assessee submitted a bank certificate indicating that out of the total cash deposited, Rs. 67,93,000/- was legal tender and Rs. 10,85,000/- was demonetized currency. The CIT(A) noted that the submissions and evidence were available on the e-filing portal and had been considered.
Application of Law to Facts: The CIT(A) applied the principles of natural justice, considering the evidence presented by the assessee, and concluded that the addition was unjustified.
Treatment of Competing Arguments: The Revenue argued that the assessee failed to provide necessary documentation during the assessment proceedings. However, the CIT(A) found that the evidence was available and not examined by the AO.
Conclusions: The CIT(A) directed the deletion of the addition, concluding that the assessee had sufficiently demonstrated the sources of the cash deposits.

Issue 2: Disallowance of Rs. 6,48,20,559/- under Section 40A(3)

Relevant Legal Framework and Precedents: Section 40A(3) of the Income Tax Act disallows any expenditure in respect of which payment is made in cash exceeding Rs. 20,000/- to a person in a single day, subject to certain exceptions.
Court's Interpretation and Reasoning: The CIT(A) found that the AO had incorrectly treated cash deposits into the bank account as cash payments violating Section 40A(3), without considering the nature of the transactions.
Key Evidence and Findings: The assessee provided detailed cash books and evidence of daily cash sales and deposits. The AO's disallowance was based on an incorrect assumption that cash deposits equated to cash payments for expenses.
Application of Law to Facts: The CIT(A) determined that the AO's estimation of disallowance based on average figures was beyond the legislative scope, as the actual nature of transactions was not considered.
Treatment of Competing Arguments: The Revenue contended that the assessee did not provide adequate documentation during the assessment. However, the CIT(A) noted that the necessary documents were submitted and available for review.
Conclusions: The CIT(A) directed the deletion of the disallowance, finding the AO's action to be based on incorrect assumptions and not supported by the facts on record.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: The CIT(A) stated, "As the evidences are very much available in the e-filing portal where the appellant has proved that he had participated, those details submitted has to be considered as per principles of natural justice."
Core Principles Established: The Tribunal upheld the principle that evidence submitted electronically and available on the e-filing portal must be considered, and that disallowances based on incorrect assumptions without examining available evidence are unjustified.
Final Determinations on Each Issue: The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision to delete both the addition of Rs. 79,81,000/- under Section 68 and the disallowance of Rs. 6,48,20,559/- under Section 40A(3).

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