2023 (1) TMI 520 - AT - Income Tax

Addition made u/s 69A r.w.s. 115BBE - cash deposited in the bank account during the demonetisation period - unexplained money on account of cash deposited in the bank account with Kotak Mahindra Bank, Mumbai - HELD THAT - From the copy of the bank statement of Kotak Mahindra Bank, we find that assessee had deposited Rs.6 lakh in cash in 600 old currency notes of Rs. 1000 denomination on 01/12/2016. At a glance, it may appear that since the assessee had sufficient cash in hand amounting to Rs. 6,36,031, therefore, the aforesaid deposit of cash would have been made on 01/12/2016, out of the said balance. At the same time, we cannot be oblivious to the fact that the assessee had also incurred certain expenses in cash. From the perusal of the cash book of the assessee for the year under consideration,we find that as on 01/11/2016, the assessee had an opening balance of Rs.5,25,114. It cannot be disputed that the demonetisation was declared on 08/11/2016, and therefore the cash available with the assessee till that day can only be in old currency notes. As on 01/12/2016, the assessee had an opening balance of Rs.6,09,661. It is pertinent to note that after 08/11/2016, the old currency notes were not legal tender and thus any cash which was withdrawn by the assessee after that date can only be in the new currency or the valid currency. Therefore, the cash withdrawn after 08/11/2016, cannot be said to have been in old currency notes which were available for deposit with the assessee on 01/12/2016. Hence, cash in hand till 08/11/2016, can only be in old currency notes which can be considered to have been deposited by the assessee on 01/12/2016. As per the cash book, the opening balance as on 01/11/2016 was only Rs.5,25,114. Since the assessee had deposited Rs.6 lakh in cash in 600 old currency notes of Rs. 1,000, denomination on 01/12/2016, therefore, we are of the considered view that the source of deposit of only Rs.5,25,114, in old currency notes can be said to have been satisfactorily explained by the assessee. Therefore, to this extent, the AO is directed to delete the addition. As regards the balance amount of Rs.74,886, the assessee has not given any satisfactory explanation and thus, the addition is upheld to an extent of Rs.74,886. Accordingly, the sole ground raised by the assessee is partly allowed.

Summary

Issues:
Challenge to addition of Rs.6,00,000 under section 69A r.w.s. 115BBE of the IT Act 1961.

Analysis:
1. The assessee contested the addition of Rs.6,00,000 as unexplained money deposited during demonetization. The Assessing Officer added the amount under section 69A of the Act, citing lack of satisfactory evidence regarding the source of the cash. The AO questioned the need for a large cash balance when income was credited through banks and expenses were minimal. The AO treated the deposited amount as unaccounted income, initiating penalty proceedings.

2. The CIT(A) dismissed the appeal, noting discrepancies in the cash book and the inability of the assessee to prove the source of the deposited cash. The CIT(A) highlighted that the cash in hand did not match the deposit amount. The assessee then appealed to the ITAT.

3. The ITAT analyzed the case, considering the cash deposited during demonetization. The assessee explained that the deposit comprised cash withdrawals and opening cash in hand. The ITAT verified the cash balances from bank statements and the cash book. It observed that post-demonetization, cash withdrawals were in new currency, indicating the deposited cash was from old currency notes available till 08/11/2016. The ITAT directed the AO to delete the addition of Rs.5,25,114, as it was satisfactorily explained. However, the remaining Rs.74,886 addition was upheld due to lack of satisfactory explanation.

4. The ITAT partially allowed the appeal, deleting the addition of Rs.5,25,114 and upholding Rs.74,886. The judgment emphasized the importance of explaining cash sources during demonetization and reconciling cash balances to support claims.