2024 (12) TMI 1374 - AT - Income Tax

Unexplained cash credits to bank u/s.68 r.w.s.115BBE - cash deposits made during the demonetization period maintained by Mulagumoodu Branch solely on the ground that the appellant could not bifurcate the deposits made in SBNs and non SBNs in the said branch - HELD THAT -The assessee has demonstrated the source for such deposits emanating from the fees collected prior to 08.11.2016 as the total deposits made in SBNs in both the branches was only Rs. 16,92,000/-. It is also demonstrated by the assessee that the consistent cash deposits in all the months. AO has not rejected the books of account maintained by the assessee. We are of considered view that in this case AO had not brought on record any concrete evidence to reject the explanation of the appellant. Hence, we delete the addition sustained by the ld.CIT(A). Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions in this judgment are:

Whether the addition of Rs. 41,16,520/- as unexplained cash credits under Section 68 read with Section 115BBE of the Income Tax Act, 1961, was justified.
Whether the evidence provided by the assessee regarding the source of cash deposits during the demonetization period was sufficient and credible.
Whether the lower authorities erred in their assessment and confirmation of the addition made by the Assessing Officer.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Addition as Unexplained Cash Credits

Relevant Legal Framework and Precedents: The legal framework involves Section 68 of the Income Tax Act, which deals with unexplained cash credits, and Section 115BBE, which prescribes tax on income referred to in Section 68.
Court's Interpretation and Reasoning: The Tribunal examined whether the addition made by the Assessing Officer was based on sufficient evidence and whether the assessee had adequately explained the source of cash deposits.
Key Evidence and Findings: The assessee provided a certificate from the Mulagumoodu Branch bank, detailing the breakup of deposits in Specified Bank Notes (SBNs) and non-SBNs. The certificate indicated that only Rs. 6,66,500/- were in SBNs. The closing cash balance as of 08.11.2016 was Rs. 17,82,947/-, and the total SBN deposits were Rs. 16,92,000/-.
Application of Law to Facts: The Tribunal found that the assessee had demonstrated the source of the deposits from fees collected before 08.11.2016 and that the consistent cash deposits negated any presumption of abnormality.
Treatment of Competing Arguments: The Tribunal considered the arguments of the Departmental Representative, who supported the lower authorities' decisions, but found no concrete evidence to reject the assessee's explanations.
Conclusions: The Tribunal concluded that the addition made by the Assessing Officer and sustained by the CIT(A) was not justified and deleted the addition.

Issue 2: Sufficiency and Credibility of Evidence Provided by Assessee

Relevant Legal Framework and Precedents: The burden of proof lies on the assessee to substantiate the source of cash deposits, especially during the demonetization period.
Court's Interpretation and Reasoning: The Tribunal assessed the credibility of the evidence provided by the assessee, including bank certificates and cash balance records.
Key Evidence and Findings: The Tribunal noted the consistency of cash deposits and the absence of any adverse findings regarding the books of accounts.
Application of Law to Facts: The Tribunal found that the assessee had adequately explained the source of deposits and that the evidence provided was credible.
Treatment of Competing Arguments: The Tribunal dismissed the Departmental Representative's support for the lower authorities' findings due to the lack of concrete evidence against the assessee's claims.
Conclusions: The Tribunal determined that the evidence provided by the assessee was sufficient and credible, leading to the deletion of the addition.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "We are of considered view that in this case AO had not brought on record any concrete evidence to reject the explanation of the appellant."
Core Principles Established: The burden of proof regarding the source of cash deposits lies with the assessee, but the authorities must provide concrete evidence to reject credible explanations.
Final Determinations on Each Issue: The Tribunal allowed the appeal, deleting the addition of Rs. 41,16,520/- as unexplained cash credits, and upheld the credibility of the evidence provided by the assessee.

The judgment emphasizes the necessity for tax authorities to rely on concrete evidence when challenging the explanations provided by taxpayers, especially in cases involving cash deposits during the demonetization period.

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