2023 (5) TMI 582 - AT - Income Tax

Addition u/s 69A - unexplained cash - CIT-A disbelieved the confirmation of Appellants client having deposited cash with Appellant for his matter in Supreme Court - HELD THAT - Addition under section 69A could be made if the assessee is found to be the owner of money that is not recorded in the books of account and the assessee is not offering explanation about the source of money. In assessee s case we notice that the assessee has recorded the impugned amount in the books of account and has also offered the same to tax by including the it as professional fees. In view of these discussions and considering the facts of the present case, we are of the view that the amount cannot be treated as unexplained and therefore we delete the addition u/s 69A of the Act. Decided in favour of assessee.

Summary

Issues Involved:
1. Whether the CIT(A) erred in disbelieving the confirmation of cash deposits by the assessee's client.
2. Whether the CIT(A) can demand an explanation of the source of the amount received from the client.
3. Whether the CIT(A) erred in disbelieving the possession of cash and raising objections based on assumptions.
4. Whether the CIT(A) erred in invoking Section 69A for amounts duly accounted for in the audited books.

Summary:

Issue 1: Disbelief in Confirmation of Cash Deposits
The assessee, a practicing advocate, was intercepted at the airport with Rs. 16,00,000 in cash. The assessee claimed that the cash was received from clients, Mr. Biren Limbachiya and Mr. Sagun Naik, for professional fees. The CIT(A) disbelieved the confirmation from Mr. Sagun Naik about depositing Rs. 6,00,000, citing a lack of justification for such a large cash amount and the absence of details regarding Mr. Naik's income and cash availability.

Issue 2: Explanation of Source of Amount Received
The CIT(A) demanded an explanation for the source of the amount received from Mr. Sagun Naik. The assessee provided confirmations and detailed statements, but the CIT(A) found the explanations unsatisfactory, stating that normally, professional fees are deposited in the bank immediately, and there was no logic in keeping the cash till the date of interception.

Issue 3: Possession of Cash and Assumptions
The CIT(A) raised objections to the possession of Rs. 16,00,000, arguing that the amount could have been transferred digitally. The CIT(A) found it improbable for the assessee to keep such a large amount of cash without incurring other expenditures and deemed the cash as unexplained money u/s 69A of the Act.

Issue 4: Invocation of Section 69A
The CIT(A) upheld the addition of Rs. 16,00,000 u/s 69A, stating that the amount was not recorded in the books of accounts and the explanation offered was not satisfactory. The assessee argued that the amounts were properly accounted for in the books and included in the taxable income.

Tribunal's Decision:
The Tribunal noted that the assessee had submitted detailed records, including the cash book, bank statements, and ledger accounts, showing the receipt of professional fees. The Tribunal found merit in the assessee's submissions, noting that the amounts were recorded in the books of accounts and included in the taxable income. The Tribunal concluded that the addition u/s 69A was not justified as the source of the cash was explained and recorded. Consequently, the Tribunal deleted the addition u/s 69A and allowed the assessee's appeal.

Conclusion:
The appeal of the assessee was allowed, and the addition u/s 69A was deleted as the Tribunal found that the cash was properly accounted for in the books of accounts and included in the taxable income. The Tribunal emphasized that the provisions of Section 69A could not be invoked when the source of the money was explained and recorded in the books.