2025 (1) TMI 168 - AT - Income Tax

Addition u/s 69A - Cash deposited into the Bank accounts during the demonetization - HELD THAT - From the bank statements filed by the assessee, is clear that assessee had withdrawn cash from the banks which was finally deposited when demonetisation was announced. CBDT wide instruction number 3/2017 dated 21/02/2070 announced that, any taxpayers above 70 years of age was allowed to deposit the cash upto ₹ 5 lakh per person and the source of such amount can either be household savings or savings in the past income. Thus to the extent of ₹ 5 lakh the disallowance made is not justified. Women have a tendency of accumulating cash saved from household budgets and from whatever cash they receive from relatives and family members during festivals and occasions. Honourable Prime Minister and also CBDT considering this aspect had announced that a lady assessee is a housewife and do not have any business would not be questioned if the bank deposits during the demonetisation were found to be less than 2.5 lakhs. In the present facts of the case considering the age of the assessee and the tendency to hold onto the cash at that age cannot be overlooked. Assessee has filed bank statements that are self-explanatory regarding the withdrawals which was held by the assessee as on the date of demonetisation being declared. Hence assessee has duly explain the source of balance 5 Lakh cash deposited into the accounts, and therefore no addition can be made u/s 69 unless there is a cogent evidence to prove that the amount deposited in the bank account was undisclosed income that falls outside the bank statements filed by the assessee. Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The legal judgment involves the following core legal questions:

Whether the order passed by the Commissioner of Income Tax (Appeals) [CIT(A)] was contrary to the principles of natural justice due to lack of a proper hearing opportunity for the appellant.
Whether the addition made under Section 69A of the Income Tax Act, 1961, regarding unexplained cash deposits during the demonetization period, was justified.
Whether the initiation of penalty proceedings under Section 271AAC of the Income Tax Act was appropriate.
Whether the imposition of penalties under Sections 234F and 234A of the Income Tax Act was warranted.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Principles of Natural Justice

Relevant Legal Framework and Precedents: The principles of natural justice require that parties be given a fair opportunity to present their case. This includes the right to be heard.
Court's Interpretation and Reasoning: The Tribunal noted that the appellant was not provided a proper hearing due to the sudden demise of her authorized representative, which violated the principles of natural justice.
Key Evidence and Findings: The appellant had requested an adjournment, which was not granted, leading to the dismissal of her appeal on procedural grounds.
Application of Law to Facts: The Tribunal found that the CIT(A) should have considered the appellant's genuine reasons for seeking an adjournment.
Treatment of Competing Arguments: The Tribunal acknowledged the appellant's argument regarding the lack of opportunity to be heard and found it valid.
Conclusions: The Tribunal concluded that the order of the CIT(A) was contrary to law and set aside the procedural dismissal.

Issue 2: Addition under Section 69A

Relevant Legal Framework and Precedents: Section 69A of the Income Tax Act deals with unexplained money, requiring taxpayers to explain the source of cash deposits.
Court's Interpretation and Reasoning: The Tribunal considered the appellant's explanation regarding the source of the cash deposits and the CBDT instructions for senior citizens.
Key Evidence and Findings: The appellant provided bank statements showing cash withdrawals and argued that the deposits were from accumulated savings.
Application of Law to Facts: The Tribunal noted that the appellant, being a senior citizen, was allowed to deposit cash up to Rs. 5 lakh without detailed scrutiny, as per CBDT instructions.
Treatment of Competing Arguments: The Revenue's argument that the deposits were unexplained was not supported by additional evidence.
Conclusions: The Tribunal found the appellant's explanation satisfactory and deleted the addition made under Section 69A.

Issue 3: Penalty Proceedings under Section 271AAC

Relevant Legal Framework and Precedents: Section 271AAC pertains to penalties for unexplained income.
Court's Interpretation and Reasoning: The Tribunal did not find sufficient grounds for initiating penalty proceedings since the primary addition under Section 69A was deleted.
Conclusions: The initiation of penalty proceedings was deemed inappropriate and was set aside.

Issue 4: Penalties under Sections 234F and 234A

Relevant Legal Framework and Precedents: Sections 234F and 234A relate to penalties for late filing and default in furnishing returns.
Court's Interpretation and Reasoning: The Tribunal considered the appellant's circumstances, including age and lack of technical knowledge.
Conclusions: The penalties were not justified given the appellant's situation and were accordingly set aside.

3. SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning: "In the present facts of the case considering the age of the assessee and the tendency to hold onto the cash at that age cannot be overlooked."
Core Principles Established: The principles of natural justice must be upheld, especially in cases involving senior citizens with genuine reasons for procedural delays.
Final Determinations on Each Issue: The Tribunal allowed the appeal, setting aside the CIT(A)'s order, deleting the addition under Section 69A, and nullifying the penalties under Sections 271AAC, 234F, and 234A.

In conclusion, the Tribunal's judgment emphasized the importance of considering the unique circumstances of senior citizens and ensuring adherence to natural justice principles, leading to the allowance of the appellant's appeal.

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