2022 (11) TMI 465 - AT - Income Tax

Unexplained investment u/s 69A - cash deposit by appellant in her two bank account - cash deposit in bank account during demonetization year - HELD THAT - Keeping in view that despite furnishing complete details for previous and subsequent period of demonetization year, the assessee has discharged his onus by showing the magnitude of cash deposit, during demonetisation period was not at much variance, comparative to previous and subsequent period, therefore, the addition made by AO does not stand in judicial scrutiny and we direct to delete the addition made. Appeal of assessee is allowed.

Summary

Issues Involved:
1. Confirmation of unexplained investment under Section 69A of the Income Tax Act, 1961.
2. Validity of cash deposits during the demonetization period.
3. Assessment of the assessee's business receipts and cash deposits.

Detailed Analysis:

1. Confirmation of Unexplained Investment under Section 69A:
The primary issue was whether the cash deposits of Rs. 15,38,500/- in the assessee's Axis Bank accounts during the demonetization period were unexplained investments under Section 69A of the Income Tax Act, 1961. The Assessing Officer (AO) treated these deposits as unexplained income derived from undisclosed sources due to the assessee's failure to provide satisfactory explanations and documentary evidence for the cash receipts. The assessee contended that the cash deposits were from her jewellery designing business and provided detailed submissions, including month-wise labour receipts and cash in hand. However, the Commissioner of Income Tax (Appeals) [CIT(A)] and the National Faceless Appeal Centre (NFAC) upheld the AO's decision, stating that the assessee did not establish the genuineness of the cash deposits.

2. Validity of Cash Deposits during the Demonetization Period:
The assessee argued that the cash deposits were in line with the Reserve Bank of India (RBI) guidelines during the demonetization period and were not abnormal compared to the pre- and post-demonetization periods. The assessee provided evidence of cash deposits and labour receipts for the financial years before, during, and after demonetization, showing a gradual increase in labour receipts. The Tribunal noted that the lower authorities did not consider the ratio of similar cash deposits in previous and subsequent financial years and failed to appreciate the evidence provided by the assessee.

3. Assessment of the Assessee's Business Receipts and Cash Deposits:
The Tribunal found that the assessee had consistently shown income from labour receipts in her jewellery designing business in previous years, which was accepted by the lower authorities. The assessee had also provided detailed month-wise labour receipts and cash deposits, which were not disputed. The Tribunal observed that the assessee had shown a substantial gross profit of 25.78% on total labour receipts and had sufficient cash in hand before demonetization. The Tribunal emphasized that the lower authorities did not provide adverse findings on the details furnished by the assessee and simply concluded that the assessee had not established the genuineness of cash receipts.

Conclusion:
The Tribunal concluded that the assessee had discharged her onus by providing complete details of cash deposits and labour receipts for the relevant periods. It found that the magnitude of cash deposits during the demonetization period was not significantly different from the previous and subsequent periods. The Tribunal referred to similar cases where additions under Section 68 were deleted due to the acceptance of business income and cash sales. Consequently, the Tribunal directed the deletion of the addition made by the AO, allowing the assessee's appeal.

Order:
The appeal of the assessee was allowed, and the addition made by the AO was deleted. The order was pronounced in the open court on 17th October 2022.