2024 (7) TMI 876 - AT - Income Tax

Unexplained cash deposits during demonetization period u/s 68 - Addition u/s 115BBE - HELD THAT - We are aware of the fact that not every deposit during the demonetization period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. If it is found to be business receipts and is explained by assessee to that extent, the amount to be considered @ 8% as income of the assessee and the balance to be treated as unexplained u/s 68 - On the other hand if entire amount is found to be unexplained credits which is, not from the business income the sec.68 of the Act to be invoked on the total amount. AO shall verify all the details/evidences filed by the assessee based on the above direction and applicable instructions to the facts and circumstances of the present assessee and to consider the claim in accordance with law. Presumptive tax levied on the entire cash deposit by the AO @ 8% - As we note that the Ld.AO already invoked the provisions of sec. 68 of the Act. The said issue has already been remitted by us to the file of the Ld.AO for fresh consideration. Hence this issue has been becomes infructuous otherwise it will amount to double addition which cannot be sustained.

Summary

Issues:
1. Addition of unexplained cash deposits during demonetization period under section 68 of the Act.
2. Presumptive tax levied on business credits by the Assessing Officer at 8%.

Analysis:
1. The case involved the assessment of an individual with various sources of income, including rental, agricultural, and other income, who deposited a significant amount during the demonetization period. The Assessing Officer (AO) treated the cash deposits as unexplained money under section 68 of the Act and taxed it under section 115BBE. Additionally, the AO presumed 8% income on total bank credits in two accounts and added it as business income. The Commissioner of Income Tax (Appeals) upheld the AO's decision in an ex-parte order due to the assessee's non-response to notices. The Tribunal considered the grounds related to cash deposits during demonetization and the presumptive tax levied by the AO.

2. The Tribunal referred to CBDT instructions emphasizing the need for verification in cases of substantial cash deposits or sales. It highlighted indicators of suspicious activities like backdating of cash or fictitious sales during the demonetization period. The Tribunal directed the assessee to provide necessary details to substantiate the claim and establish the genuineness of the deposits. If proven as business receipts, 8% would be considered as income, with the balance treated as unexplained under section 68. The AO was instructed to verify all details and evidence submitted by the assessee in line with the applicable instructions.

3. Regarding the presumptive tax issue, the Tribunal noted that the AO had already invoked section 68 for the unexplained cash deposits. As the issue was remanded for fresh consideration, levying presumptive tax on the entire cash deposit would result in double addition. Therefore, the Tribunal decided in favor of the assessee, sending the appeal back to the AO for reevaluation of the cash deposits during demonetization as per the directions provided.

In conclusion, the Tribunal partially allowed the appeal for statistical purposes, emphasizing the need for proper verification and consideration of the relevant instructions in assessing the unexplained cash deposits and business income.