2025 (2) TMI 1084 - AT - Income Tax

Addition u/s 69A - assessee during the demonetization period deposited cash out of cash balance maintained by him in the regular course - HELD THAT - The assessee during the demonetization period deposited 11 lakh on 15/12/2016 out of cash balance maintained by him in the regular course as per statement of affairs and details are maintained by him in his own handwriting. Entire cash deposit was withdrawal from bank which could be seen from the bank account and statement of affairs already furnished by the assessee and are available on record from the respective financial year 2011 12 to 2016 17. As stated by AR that the members of the HUF are regularly assessed to tax on their separate individual income since last many years prior to the year 1998-99. The copies of Bank accounts in support of withdrawals copies of Balance Sheet and Capital Account maintained by the late Rameshkumar then Karta in his own Hand writing were also furnished during the course of assessment proceedings and are placed on record. CIT(A) was not justified in making addition Total addition made by AO depending upon the past savings and keeping in view the old age of the then Karta of Late Shri Rameshkumar Parasdas HUF and balance 50%of the total addition is added as business income only. Thus the assessee gets part relief of 50%.

Summary

The appeal before the Appellate Tribunal involved the following core legal issues:1. Whether the addition of Rs. 11,00,000 under Section 69A by the Assessing Officer was justified based on the cash deposited during the demonetization period.2. Whether the learned CIT(A) was correct in confirming the assessment order passed by the Assessing Officer.**Issue 1: Addition under Section 69A**The Assessing Officer made an addition of Rs. 11,00,000 under Section 69A based on the demonetization currency notes deposited by the assessee. The Assessing Officer found that the purpose of cash withdrawal was not mentioned and no proper explanation for the source of cash deposited was provided by the assessee. The learned CIT(A) upheld this addition, stating that the appellant failed to explain the large cash amount kept as cash in hand, especially when the appellant's income was significantly lower. The CIT(A) concluded that the amount deposited did not belong to the Hindu undivided family (HUF) and might be undisclosed income. The Tribunal, however, disagreed with this assessment, noting that the assessee had maintained detailed records of assets and liabilities, regularly filed tax returns, and had a history of maintaining bank accounts and financial records. The Tribunal found that the cash deposit was made from the cash balance maintained by the assessee in the regular course, supported by bank statements and financial records. The Tribunal held that the CIT(A) was not justified in making the full addition of Rs. 11,00,000 and instead deleted 50% of the total addition, considering the past savings and the age of the then Karta of the HUF. The remaining 50% of the addition was treated as business income. Thus, the assessee received partial relief of 50%.**Significant Holdings**The Tribunal set aside the CIT(A)'s decision and partially allowed the assessee's appeal by deleting 50% of the total addition made by the Assessing Officer. The Tribunal established the principle that when an assessee can provide documentary evidence and maintain detailed financial records to support cash deposits, the burden of proof shifts back to the tax authorities to justify any additions made under Section 69A. The final determination on this issue was to delete 50% of the addition and treat the remaining 50% as business income.In conclusion, the Tribunal's decision in this case highlights the importance of maintaining proper documentation and financial records to substantiate cash deposits and demonstrates the Tribunal's willingness to consider the overall facts and circumstances before making additions under Section 69A.