2022 (9) TMI 590 - AT - Income Tax

Unexplained money u/s 69A - Unexplained deposit in the bank account - Assessee argued cash deposits was out of cash in hand with the members of HUF and due to demonetization Rs. 500 and Rs.1000 notes, the same was deposited in the bank account and nothing was from undisclosed sources - HELD THAT - Once, the assessee has explained before the CIT(A) that the cash was deposited in the bank account after the demonetization as it was required to deposit in the bank otherwise the value of the currency would be zero and keeping the same with the assessee would be illegal. The assessee has declared this deposit in the return of income and therefore, the explanation of the source as past saving of the assessee HUF and its members cannot be doubted having regard to the fact that in the past there are the entries of withdrawal of more than 1,00,000/- from the bank account of the assessee. Though, these withdrawals were in the long past and there is a big gap between the withdrawals and deposits but once the assessee has declared this amount of Rs. 1,00,000/- and by considering this amount as well as the total income declared by the assessee at Rs. 1,39,090/- which is below a minimum amount of taxable income the assessment of the income of the assessee under the provisions of section 115BBE is not justified. Accordingly when the assessee has explained the source of Rs. 1,00,000/- as past savings of the assessee HUF and its members and there is no other deposits during the demonetization the addition made by the Assessing Officer is deleted. The appeal of the assessee is allowed.

Summary

Issues:
1. Addition of Rs.1,00,000 as unexplained money u/s 69A to the income of the assessee.
2. Treatment of deposit made through old currency during demonetization period.
3. Challenge against all additions and disallowances.
4. Right to alter, modify, or take additional grounds of appeal.
5. Contrary nature of the order to facts, law, and principles of natural justice.

Analysis:

Issue 1: Addition of Rs.1,00,000 as unexplained money u/s 69A:
The assessee, an HUF, declared a total income of Rs. 40,743 and faced scrutiny due to cash deposits during demonetization. The Assessing Officer added Rs. 1,00,000 as unexplained money taxed under section 115BBE. The CIT(A) upheld the addition, stating the source was not justified. However, the Tribunal found the explanation valid as the deposit was from past savings and withdrawals, properly disclosed in the return. The addition was deemed unjustified and arbitrary, leading to its deletion.

Issue 2: Treatment of deposit made through old currency:
The deposit of Rs. 1,00,000 in demonetized notes was challenged by the assessee, claiming it was disclosed in the return and sourced from past savings. The Assessing Officer and CIT(A) doubted the explanation, but the Tribunal accepted it based on documentary evidence and past transactions. The Tribunal noted the bank's error in recording a larger deposit, clarifying the actual deposit amount. The Tribunal found the deposit legitimate and not undisclosed income, leading to the allowance of the appeal.

Issue 3: Challenge against all additions and disallowances:
The assessee challenged all additions and disallowances made by the Assessing Officer, emphasizing the legitimacy of the deposit and proper disclosure in the return. The Tribunal considered the submissions and evidence provided, ultimately ruling in favor of the assessee due to the valid explanation and lack of undisclosed income.

Issue 4: Right to alter, modify, or take additional grounds of appeal:
The appellant reserved the right to alter, modify, or introduce additional grounds of appeal during the hearing. This right was crucial in ensuring the appellant could address any new developments or arguments that arose during the appeal process, maintaining fairness and thoroughness in the legal proceedings.

Issue 5: Contrary nature of the order to facts, law, and principles of natural justice:
The appellant contended that the order appealed against was contrary to facts, law, and principles of natural justice. The Tribunal, after thorough consideration of submissions and evidence, found the addition of Rs. 1,00,000 unjustified and ruled in favor of the assessee. This decision aligned with the principles of natural justice and fairness, ensuring a just outcome in the legal proceedings.