2022 (7) TMI 1110 - AT - Income Tax

Cash deposited in Bank on different dates during demonetization period - Deposits in three bank accounts out of cash in hand being Income from Agriculture activities, Receiving from Transport Business and out of accumulated past savings - only reason for not accepting the contention of the assessee that such deposits were part of business receipts is that the assessee had deposited these amounts in cash during the demonetization period - HELD THAT - While making addition the authorities below have ignored the fact that in the same year before the demonization period started i.e. from 01/04/2016 to 08/11/2016, there was cash deposits which fact is apparent from the order of CIT(A) where he has noted this fact of having deposited such amount in cash during these dates. If in the same year, cash can be accepted to be belonging to the business and has been accepted to be part of business receipts, there cannot be reason that a sum in the same year should not be accepted as income from the same business. Moreover, we find that in the immediate preceding year, the assessee had declared total receipts of Rs.62 lacs and all of the receipts were in cash and AO during assessment proceedings had accepted the net income declared by assessee. A copy of assessment order dated 17/12/2018 is placed. The fact that in the preceding year all receipts were in cash is verifiable from the copy of reply filed by assessee. The nature of business run by the assessee is transport business and agricultural income and in both businesses, there is a pre dominant role of cash. Moreover, we find that the assessee s husband is also old income tax payee like the assessee which fact is verifiable where the copies of returns of income of her husband are placed. The assessee has been declaring her income on presumptive basis every year and therefore, there is no justification in the action of CIT(A) by which he has upheld the addition. In view of the above, the addition sustained by learned CIT(A) is deleted and the appeal of the assessee is allowed.

Summary

Issues:
Appeal against CIT(A) order for assessment year 2017-18 - Addition of cash deposits during demonetization period - Condonation of delay in filing appeal.

Analysis:
The appeal was filed against the CIT(A) order for the assessment year 2017-18, challenging the addition of Rs. 10,24,000 as cash deposits made during the demonetization period. The appellant argued that the cash deposited was from income generated through agriculture activities, transport business, and past savings. The appellant contended that the Assessing Officer erred in making the addition under section 69A r.w.s. 115 BBE of the Income Tax Act, despite the income being declared under section 44AD. The appellant also raised concerns about the excessive nature of the addition and lack of opportunity to present their case before the CIT(A).

The appellant sought condonation of an 18-day delay in filing the appeal, attributing it to the late receipt of the CIT(A) order due to communication issues with the appellant's counsel. The delay was deemed unintentional, and the appellant's request for condonation was accepted.

During the proceedings, the appellant's counsel argued that the cash deposits were from legitimate sources, including income from transport business and agriculture, supported by consistent filing of returns under section 44AD over the past decade. The Assessing Officer, however, viewed the cash deposits during demonetization as unexplained income, disregarding the appellant's explanations. The appellant emphasized that similar deposits were made in the previous year, which were accepted by the Assessing Officer, indicating a regular business practice.

The Departmental Representative contended that the substantial cash deposits during demonetization suggested undisclosed income rather than legitimate business receipts. In response, the appellant highlighted the tax compliance history of both the appellant and her husband, who was also a regular taxpayer, to support the legitimacy of the income sources.

After considering the arguments and evidence, the tribunal found merit in the appellant's contentions. The tribunal noted that the appellant had consistently declared income under section 44AD, and the cash deposits during demonetization should be viewed in the context of regular business practices. The tribunal also observed that the appellant's husband was a regular taxpayer, further supporting the legitimacy of the income sources. Consequently, the tribunal ruled in favor of the appellant, overturning the addition upheld by the CIT(A) and allowing the appeal.

In conclusion, the tribunal allowed the appeal, emphasizing the consistent declaration of income under section 44AD, the regular tax compliance history of the appellant and her husband, and the contextual understanding of cash deposits during demonetization in the appellant's transport business and agriculture activities.