2024 (7) TMI 645 - AT - Income Tax

Addition for deposits of demonetized currency notes - onus to prove - assessee is a Gynecologist by profession and had also income from investment activity - HELD THAT - Based on that analysis of facts the lower authority without appreciating the facts when the demonetization announced the assessee has no option to carry the cash on hand but must deposit into the bank account. The source of that cash is duly explained and supported by the clear and cogent evidence placed on record. It has been held in a number of cases that it is trite law that suspicion howsoever strong cannot take place of a legal proof. The money deposited is from the professional income which is supported in the entries passed in the books supported by the patient register containing all the required details. Both that records were placed on record and no defects was observed in those record so it would be far starching that merely the assessee has deposited the cash available with her in SBN is deposited in bank account cannot be considered as unexplained money in the hands of the assessee. As assessee demonstrated that the income has not abnormal trend with that of with the last year month to month. The income is slightly higher, and it cannot be said sudden or irregular hike. Based on that finding so recorded herein above we hold that the cash deposited into the bank account of the assessee cannot be considered as unexplained considering the month wise receipt and income slightly more than last year cannot warrant the cash deposited into the bank account as unexplained cash which is proved as such and even taxed without rejecting the books of account. In the light of the discussion so recorded here in above we note that the cash so deposited by the assessee is explained to be emerges out of the her professional income and revenue has not proved that the assessee has any other source for the income which is already reflected in her books of account - addition so made by the ld. AO and sustained by the ld. CIT(A) is directed to be deleted. Decided in favour of assessee.

Issues Involved:
1. Sustaining addition of Rs. 80,96,000/- out of total addition of Rs. 99,96,000/- for deposits of demonetized currency notes.
2. Justification for allowing only partial relief of Rs. 19,00,000/- out of total addition of Rs. 99,96,000/- under section 68 of the Income Tax Act.
3. Non-disposal of the ground of appeal regarding the levy of special rate of tax under section 115BBE of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Sustaining Addition of Rs. 80,96,000/-:
The assessee, a gynecologist, filed a return of income declaring Rs. 1,74,96,020/- for AY 2017-18. During scrutiny, it was noted that the assessee deposited Rs. 99,96,000/- in demonetized currency notes. The Assessing Officer (AO) found the explanation unsatisfactory, citing the lack of detailed patient records and a sudden spike in cash deposits post-demonetization. The AO added the entire Rs. 99,96,000/- as unexplained income under section 68 of the Income Tax Act. On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] sustained Rs. 80,96,000/- of the addition, allowing relief for Rs. 19,00,000/-. The CIT(A) found discrepancies in the cash book and no reasonable justification for the spike in cash deposits. The CIT(A) invoked section 145(3) to reject the books of accounts, which was contested by the assessee.

2. Justification for Allowing Only Partial Relief:
The CIT(A) allowed partial relief of Rs. 19,00,000/- based on the assessee's claim of an opening cash balance and higher taxable income. The assessee argued that the entire deposit was from explained sources, including the opening cash balance and professional income. The CIT(A) considered the cash deposit pattern and concluded that the assessee habitually maintained a cash balance of around Rs. 19 lakhs. The remaining Rs. 80,96,000/- was treated as unexplained income. The assessee contested this, arguing that the income was already reflected in the books and taxed, and thus could not be added again under section 68.

3. Non-disposal of Ground Regarding Levy of Special Rate of Tax:
The assessee raised a ground regarding the levy of a special rate of tax under section 115BBE on the deposits, arguing that the receipts from professional income were accepted as genuine. The CIT(A) did not dispose of this ground, which was contested by the assessee. The assessee argued that the explained currency notes deposited in the bank during the demonetization period could not be treated as unexplained under section 68 when cash deposited in the remaining period was found to be from explained sources.

Judgment Analysis:
The Tribunal noted that the AO accepted the book results and the source of cash deposits as professional income. The AO did not reject the books of accounts, and the CIT(A) invoked section 145(3) without pointing out specific defects or issuing a show-cause notice. The Tribunal found that the assessee's income and cash deposits were consistent with the previous year, and the cash book and patient register were not found defective. The Tribunal held that the cash deposits were explained and could not be treated as unexplained income under section 68. Consequently, the Tribunal allowed the appeal, deleting the addition of Rs. 80,96,000/- and finding the ground regarding the levy of a special rate of tax as infructuous.

Conclusion:
The Tribunal allowed the appeal, holding that the cash deposits were explained and could not be treated as unexplained income under section 68. The addition of Rs. 80,96,000/- was deleted, and the ground regarding the levy of a special rate of tax was found to be infructuous.

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