2022 (6) TMI 598 - AT - Income Tax

Addition u/s 69A being cash deposit in the Bank A/c during the demonetization period - as argued by assessee that the deposit of old currency notes in the Bank A/c is out of the sale proceeds effected prior to the ban of currency notes i.e. from the midnight of 8/11/2016 and a perusal of the month-wise cash deposits made by the assessee during the financial year 2015-16 and 2016-17 would show that such cash deposits made in the Bank A/c is commensurate with the sales made by the assessee in every month both during the preceding year and subsequent year - HELD THAT - We find sufficient force in above arguments made by the learned Counsel for the assessee. The month-wise cash sales and cash deposits made by the assessee in the Bank A/c are already reproduced in the preceding paragraphs. A perusal of the same shows that the cash sales made by the assessee during every month is substantial. Similarly the cash deposit made by the assessee in the Bank A/c from April 2015 to Nov.2015 and thereafter is also commensurate with the regular trend. It is not a case where the assessee in this particular period has made substantial cash deposits in the Bank A/c. Therefore the lower authorities in my opinion have erred in disbelieving the submissions made by the assessee An identical issue came in the case of Pr. CIT vs. Agson Global (P) Ltd 2022 (1) TMI 848 - DELHI HIGH COURT wherein Tribunal deleted the additions sustained by the CIT (A) of Rs.73.13 crores in respect of cash deposits made with the Bank during demonetization period. Thus NFAC was not justified in sustaining the addition of Rs.30.00 lakhs made by the Assessing Officer in the Bank A/c during the demonetization period in old currency notes of Rs.1000. Accordingly the order of the NFAC on this issue is set aside and the grounds raised on this issue are allowed. Addition on account of low withdrawals - Addition made by the Assessing Officer and sustained by the NFAC is concerned the same in my opinion is purely based on presumptions and surmises without bringing any material on record to suggest that the assessee has incurred more expenditure than what has been shown in the capital a/c towards withdrawals. There is noting on record to suggest that the assessee has purchased any movable or immovable properties incurred any expenditure for marriage or any other function or is leading a lavish lifestyle. Since the addition is based purely on presumption and surmises therefore without bringing any material on record such an addition in my opinion cannot be sustained. We therefore set aside the order of the NFAC on this issue and direct the Assessing Officer to delete the addition. Assessee appeal allowed.

Summary

Issues Involved:
1. Addition of Rs. 30.00 lakhs under Section 69A due to cash deposits during the demonetization period.
2. Addition of Rs. 2.40 lakhs due to low withdrawals.

Issue-wise Detailed Analysis:

1. Addition of Rs. 30.00 lakhs under Section 69A:

The assessee, an individual, filed a return of income declaring Rs. 11,39,450/-. During the assessment, the Assessing Officer (AO) noticed a cash deposit of Rs. 30.00 lakhs in old Rs. 1000 notes during the demonetization period in the assessee's bank account. The assessee claimed the deposits were from business sales. However, the AO rejected this explanation, stating that since the old currency notes were banned from 08/11/2016, the sales proceeds in old notes could not be treated as business receipts, thus deeming the amount unexplained.

The AO rejected the book results and computed the net profit at Rs. 12,27,647/- after deducting the Rs. 30.00 lakhs from the sales/gross receipts. The CIT (A) sustained the addition, noting that the assessee failed to provide concrete details or documentary evidence to substantiate the source of the cash deposits.

Upon appeal, the Tribunal found that the month-wise cash sales and deposits were substantial and consistent with the sales trends in previous and subsequent years. The Tribunal referenced the Delhi High Court decision in Pr. CIT vs. Agson Global (P) Ltd, where under similar circumstances, the court dismissed the Revenue's appeal, noting that the cash deposits corresponded with cash sales and showed a similar growth trend. The Tribunal concluded that the lower authorities erred in disbelieving the assessee's submissions and set aside the addition of Rs. 30.00 lakhs.

2. Addition of Rs. 2.40 lakhs due to low withdrawals:

The AO noted that the assessee's withdrawals were Rs. 7,40,508/-, which was low compared to the claimed expenses of Rs. 24,96,743/- in the P&L account. Consequently, an addition of Rs. 2.40 lakhs was made for low withdrawals. The CIT (A) upheld this addition, stating that the assessee failed to provide proof of business and personal expenditures.

The Tribunal, however, found that the addition was based purely on presumptions and surmises without any material evidence suggesting that the assessee incurred more expenditure than shown. There was no indication of the assessee purchasing any properties, incurring significant expenditures, or leading a lavish lifestyle. Therefore, the Tribunal set aside the addition of Rs. 2.40 lakhs.

Conclusion:

The Tribunal allowed the appeal filed by the assessee, setting aside the additions of Rs. 30.00 lakhs under Section 69A and Rs. 2.40 lakhs for low withdrawals, finding both additions unjustified based on the evidence and circumstances presented.