2022 (9) TMI 284 - AT - Income Tax

Addition u/s 68 - excess cash deposit and to tax the same u/s 115BBE - appellant deposited cash in her bank account during the demonetization period - case was selected for Limited scrutiny assessment under CASS - HELD THAT - As during assessment proceeding, the assessee submitted that Rs. 10,00,000/- disclosed under IDs-2016 and remaining Rs. 3,00,000/- it was out of cash in hand from earlier savings withdrawals, but the AO was of the view that when appellant had Rs. 2,80,000/- in hand till 31.03.2016 that event why she would have withdrawn Rs. 95,000/- upto 08.11.2016. An addition made only on the sole ground of assumption cannot be sustained the explanation of assessee cannot be rejected and hence the addition confirmed by the ld. CIT(A) is not correct. AO has made the addition merely on surmises and conjectures without assigning any cogent reason to justify the addition. Since source of the alleged amount is from part savings and opening cash in hand, in our view addition was not warranted. Thus finding of ld. CIT(A) is reversed and the addition in question is deleted and appeal of the assessee is allowed.

Summary

Issues Involved:
- Appeal against order of National Faceless Appeal Centre for A.Y. 2017-18
- Addition of Rs. 3,00,000 on alleged ground of excess cash deposit
- Application of section 68 read with section 115BBE of the Income-tax Act, 1961
- Contradictory statements regarding source of cash deposits
- Consideration of submissions and evidences by CIT(A)
- Perversity of CIT(A)'s order
- Addition based on presumption and assumption

Analysis:

1. The appeal was filed against the order of the National Faceless Appeal Centre for A.Y. 2017-18. The appellant challenged the lower authorities' orders as arbitrary, erroneous, and prejudicial to their interests. The key issue revolved around the addition of Rs. 3,00,000 on the alleged ground of excess cash deposit during demonetization.

2. The Assessing Officer (AO) initiated limited scrutiny assessment under CASS due to cash deposits during the demonetization period. Despite the assessee's submissions and explanations, the AO added Rs. 3,00,000 as unexplained cash deposit, taxed under section 115BBE of the Income-tax Act, 1961.

3. The appellant appealed to the CIT(A) who upheld the AO's decision. The appellant contended that the cash deposits were partly disclosed under IDS-2016 and the remaining amount was from earlier savings and withdrawals. The AO's presumption regarding the appellant's cash in hand was challenged as unfounded.

4. During the appeal, the appellant raised multiple grounds, with the second ground being pivotal. The Tribunal focused on this issue, considering the explanation provided by the appellant regarding the source of cash deposits during demonetization.

5. After hearing both parties and examining the evidence, the Tribunal found that the AO's addition of Rs. 3,00,000 was based on surmises and conjectures without sufficient justification. As the alleged amount had a legitimate source from savings and opening cash in hand, the addition was deemed unwarranted.

6. Consequently, the Tribunal reversed the CIT(A)'s decision, deleted the addition of Rs. 3,00,000, and allowed the appellant's appeal. The judgment emphasized the importance of substantiated reasoning and rejected additions based solely on assumptions.

7. In conclusion, the Tribunal's detailed analysis highlighted the necessity of a valid rationale for additions in tax assessments, ensuring fair treatment for taxpayers and preventing arbitrary decisions based on presumptions.