2024 (8) TMI 738 - AT - Income Tax

Addition u/s. 69A - deposits during the post-demonetization period - assessee ought not to have accepted SBN s which were no longer a legal tender - HELD THAT - Instruction 21/02/2017 issued by the CBDT suggests some indicators towards verifying the suspicion of backdating of cash. It also suggests indicators to identify abnormal jump in cash trials on identifiable persons as compared to earlier history in the previous year. Therefore in our opinion it is important to examine whether assessee falls into any of these categories and transfer of deposit of cash is not in line with history of transactions in the preceding assessment years. The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions based on the facts in present case. We are aware of the fact that not every deposit during the demonetisation 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. Assessee is directed to furnish PAN and address details of the depositors from whom loan repayment has been accepted in cash. AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Appeal filed by the assessee stands partly allowed for statistical purposes.

Summary

Issues:
1. Treatment of cash deposit as unexplained income under section 69A of the Income Tax Act.
2. Adequacy of evidence provided by the assessee to substantiate the source of cash deposits.
3. Consideration of submissions by the assessing officer and the Commissioner of Income Tax (Appeals).
4. Application of relevant instructions issued by the Central Board of Direct Taxes in assessing cases involving cash deposits during the demonetization period.

Issue 1: Treatment of Cash Deposit as Unexplained Income:
The appellant's case revolved around the contention that the cash deposited in the account was inherited from the father and, therefore, exempt under section 56 of the Income Tax Act. However, the Assessing Officer (AO) considered it unexplained income under section 69A due to lack of documentary evidence regarding the source of the cash withdrawn from the father's account. The Commissioner of Income Tax (Appeals) upheld the AO's decision, emphasizing the failure to prove sole inheritance, nominee status, or the existence of a will. Consequently, the additions made by the AO were confirmed.

Issue 2: Adequacy of Evidence Provided by the Assessee:
The appellant failed to provide conclusive evidence to substantiate the claim that the cash deposited was inherited from the father. Despite submitting various documents, such as cash book, income statement, and death certificate, the appellant could not establish the trail of cash withdrawn by the father and deposited into the account. The absence of critical evidence led to the AO treating the cash deposit as unexplained money under section 69A.

Issue 3: Consideration of Submissions by Authorities:
The appellant raised concerns regarding the time given by the AO and the alleged non-consideration of submissions. However, the Tribunal reviewed the contentions and noted the necessity for the cash book and confirmations from depositors to be filed and verified by the AO. The Tribunal emphasized the importance of providing all relevant details as per applicable instructions and directed the AO to verify the evidence submitted by the appellant.

Issue 4: Application of Relevant Instructions by CBDT:
The Tribunal referred to various instructions issued by the Central Board of Direct Taxes concerning investigations into cases involving cash deposits during the demonetization period. Emphasis was placed on the need to analyze cash deposits, sales, and historical transactions to identify unaccounted money. The Tribunal directed the appellant to establish the genuineness of the deposits and furnish details of depositors for verification.

In conclusion, the Tribunal partly allowed the appeal for statistical purposes, directing the AO to verify all details and evidence provided by the appellant in accordance with the applicable instructions. The appellant was granted a physical hearing to justify the claim, emphasizing the burden on the assessee to substantiate the source of cash deposits during the demonetization period.