2024 (7) TMI 776 - AT - Income Tax

Unexplained money u/s. 69A r.w.s.115BBE(1) - no explanation as regards source of cash deposit made by him in his savings bank account - case of the assessee was selected for limited scrutiny , therefore, the recharacterization of his income as unexplained money u/s. 69A of the Act, i.e., an issue which did not form the basis for picking up the case for scrutiny assessment could not be sustained and was liable to be struck down Scope of limited scrutiny - HELD THAT - As the case of the assessee was, inter alia, selected for verifying the cash deposits made by him during demonetization period, therefore, the view taken by the A.O that the cash deposits made in the assessee s bank account during demonetization period in absence of any explanation as regards the source of the same was to be held as his unexplained money u/s. 69A of the Act was clearly an exercise carried out as per the jurisdiction that was validly assumed by him. We, thus, finding no infirmity in the assumption of jurisdiction by the A.O qua, the aforesaid issue, reject the claim of the assessee to the said effect. Cash deposits made by the assessee in the month of November, 2016 would be governed by pre-amended provisions of Section 115BBE - We are afraid that the same does not find favour with us. We, say so, for the reason that a bare perusal of Section 115BBE of the Act reveals that the same is effective from 01.04.2017, i.e. A.Y. 2017-18. In fact, a reference to the Taxation Laws (2nd amendment) Bill 2016 clearly reveals that sub-section (1) of Section 115BBE had been substituted w.e.f. 1st April, 2017. We, thus, in terms of our aforesaid observations, are unable to concur with the claim of the Ld. AR that the provisions of Section 115BBE of the Act (post amended) would not be applicable to the case of the assessee for the year under consideration i.e. A.Y.2017-18. Cash deposit in the assessee s savings bank account was sourced out of his income disclosed under the head income from other sources in his return of income for the year under consideration - On a careful perusal of Section 69A of the Act, it transpires that where an assessee who is, inter alia, found to be owner of any money which is not recorded in the books of account fails to offer any explanation about the nature and source of acquisition of the same; or explanation offered by him is not, in the opinion of the A.O, satisfactory, then such money may be deemed to be the income of the assessee for such financial year. Admittedly, the assessee is found to be the owner of money amounting to Rs. 65 lacs (as on the date of deposit of the same in his bank account) which is not found to be recorded in the books of accounts. On being queried by the A.O about the nature and source of acquisition of the said amount the assessee had failed to come forth with any explanation as regards the same. Based on the aforesaid facts, we find no infirmity in the view taken by the lower authorities who had rightly held the above-mentioned amount of Rs. 65 lacs as the unexplained money of the assessee u/s. 69A of the Act. Levying tax u/s.115BBE(1) @ 60% on alleged unexplained money - Now when the assessee had in his return of income disclosed his income of Rs. 65 lacs, which, in turn had soured the cash deposit in his bank account, therefore, the same could not have been held as his unexplained money u/s. 69A of the Act, we are unable to persuade ourselves to subscribe to the same. As the case of the assessee clearly falls within the realm of Clause (a) of sub-section (1) of Section 115BBE of the Act (applicable w.e.f. 01.04.2017), therefore, the aforesaid claim of the assessee does not merit acceptance. Appeal of assessee dismissed.

Issues Involved:
1. Jurisdiction of the Assessing Officer (AO) in limited scrutiny cases.
2. Addition under Section 69A without providing proper opportunity of being heard.
3. Applicability of Section 69A to cash deposits already recorded in books of account.
4. Validity of addition under Section 69A for cash deposited during demonetization.
5. Applicability of amended Section 115BBE(1) retrospectively.

Issue-wise Detailed Analysis:

1. Jurisdiction of the Assessing Officer (AO) in limited scrutiny cases
The appellant contended that the AO erred by expanding the scope of the limited scrutiny beyond the issues for which the case was flagged, specifically examining sources of income under "Income from other sources" instead of focusing solely on the cash deposited during the demonetization period. The Tribunal held that the AO acted within jurisdiction, as verifying cash deposits during demonetization was within the scope of limited scrutiny. The AO's action of treating the cash deposits as unexplained money under Section 69A was thus upheld.

2. Addition under Section 69A without providing proper opportunity of being heard
The appellant argued that the AO made an addition of Rs. 65,00,000 under Section 69A without providing a reasonable opportunity to be heard, violating the principles of natural justice. The Tribunal did not find merit in this argument, as the appellant had been given opportunities to explain the source of the cash deposits but failed to provide satisfactory evidence.

3. Applicability of Section 69A to cash deposits already recorded in books of account
The appellant claimed that the cash deposits were already recorded in the books of account and thus should not be treated as unexplained money under Section 69A. The Tribunal noted that the appellant did not maintain proper books of accounts or provide substantial evidence to support the claim that the cash deposits were from income already disclosed. The Tribunal referenced Section 69A, which deems money as unexplained if it is not satisfactorily explained and not recorded in the books of account. Thus, the addition under Section 69A was justified.

4. Validity of addition under Section 69A for cash deposited during demonetization
The appellant argued that the cash deposits during the demonetization period were from income already offered for taxation. The Tribunal found that the appellant failed to substantiate the source of the cash deposits with documentary evidence. The Tribunal upheld the AO's decision to treat the cash deposits as unexplained money under Section 69A, as the appellant could not provide a satisfactory explanation for the source of the cash.

5. Applicability of amended Section 115BBE(1) retrospectively
The appellant contended that the amended Section 115BBE(1), which increased the tax rate to 60%, should not apply retrospectively to transactions made before the amendment date. The Tribunal clarified that Section 115BBE, effective from 01.04.2017, applied to the assessment year 2017-18, and thus the amended provisions were applicable. The Tribunal rejected the appellant's claim that the pre-amended provisions should apply.

Conclusion:
The Tribunal dismissed the appeal, upholding the AO's actions and decisions. The AO's jurisdiction in limited scrutiny was validated, the addition under Section 69A was justified due to the lack of satisfactory explanation and proper documentation, and the applicability of the amended Section 115BBE was confirmed for the assessment year 2017-18. The principles of natural justice were deemed to have been followed, and the appellant's contentions were not accepted. The order was pronounced on 24th January 2024.

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