R.RAJU,TRICHY vs. INCOME TAX OFFICER, WARD-3(2), TRICHY

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ITA 871/CHNY/2022Status: DisposedITAT Chennai11 January 2023AY 2017-185 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that cash deposits made during the demonetization period can be accepted if the source is explained. Since the assessee provided evidence for the source of the deposits, the remaining addition sustained by the CIT(A) should be deleted.

What were the facts?

The assessee deposited cash during the demonetization period. The Assessing Officer (AO) added a portion of these deposits as unexplained money, as the assessee's explanation was not fully convincing. The CIT(A) partially accepted the assessee's explanation regarding deposits from his wife's account but sustained additions for the remaining amount.

What were the issues?

Whether cash deposits made during demonetization are unexplained if the source is adequately explained with documentary evidence.

Which sections of the Income-tax Act were involved?

Section 69A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MAHAVIR SINGH & SHRI G. MANJUNATHA

Hearing: 09.01.2023Pronounced: 11.01.2023

आदेश /O R D E R

PER G. MANJUNATHA, ACCOUNTANT MEMBER:

1.

This appeal filed by the assessee is directed against the order passed by the learned CIT(A), National Faceless Appeal Centre (NFAC), Delhi, dated 02.09.2022 and pertains to assessment year 2017-18.

2.

The brief facts of the case are that, the assessee is an individual, filed his return of income for the assessment year 2017-18 on 01.08.2017, admitting total income of Rs.

:-2-: ITA. No: 871/Chny/2022 5,12,000/-. The case was selected for limited scrutiny under CASS to verify large value cash deposits during the demonetization period as compared to returned income. During the course of assessment proceedings, the assessee explained before the AO, that source for cash deposits is out of maturity proceeds of fixed deposits in SBI, and also amount withdrawn out of maturity proceeds of insurance policy. The assessee had explained that the account is held with joint name along with his wife and she had deposited a sum of Rs. 7,50,000/- out of her source. The AO, however was not convinced with the explanation furnished by the assessee and according to AO, except to the extent of income returned in the impugned assessment year amounting to Rs. 5,12,000/-, the assessee could not explain source of balance cash deposit. Therefore, the AO addition towards cash deposits as unexplained money u/s 69A of the Income-tax Act, 1961 (hereinafter referred to as “the Act”).

3.

Being aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the ld. CIT(A), the assessee had explained cash deposits out of known source of income, including cash deposits out of his wife income and :-3-: ITA. No: 871/Chny/2022 also cash deposits out of maturity proceeds of fixed deposits. The Ld. CIT(A) accepted explanation furnished by the assessee, in so far as cash deposits out of his wife account amounting to Rs. 7,50,000/- and thus, directed the AO to delete addition made towards cash deposits amounting to Rs. 7,50,000/-. The balance amount of Rs. 3,13,000/- has been sustained on the ground that, the assessee could not file necessary evidences. Being aggrieved by the Ld. CIT(A) order, the assessee is in appeal before us.

4.

The Ld. Counsel for the assessee, submitted that the assessee is having sufficient source of income to explain cash deposits, but the CIT(A) disregarded evidence filed by the assessee and sustained additions.

5.

The Ld. DR, on the other hand supporting the order of the Ld. CIT(A) submitted that, the assessee could not explain source for cash deposits except to the extent relief allowed by the AO as well as the CIT(A), therefore, no reason to give further relief to the assessee.

:-4-: ITA. No: 871/Chny/2022 6. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The assessee has explained cash deposits made during the demonetization period out of amount received from maturity of fixed deposits in SBI and Canara Bank. The assessee had also furnished necessary evidence before the AO and argued that, he had received a sum of Rs. 10,29,337/- towards maturity of insurance policy from Reliance Insurance. He had withdrawn cash out of its known source of income and re-deposited during demonetization period when the old currency notes of Rs. 500 and Rs. 1000 have been withdrawn from circulation. We find that, the AO as well as CIT(A) never disputed fact that the assessee has furnished necessary evidence with regard to maturity proceeds of fixed deposits and insurance policy. However, disregarded evidence filed by the assessee only for the reason that cash has been deposited during demonetization period. In our considered view, even during demonetization period cash deposits can be accepted, if source is explained to cover up said cash deposits. In this case, since the assessee has established source for cash deposits out of known source of income, in our considered view, the CIT(A) ought to have accepted explanation furnished

:-5-: ITA. No: 871/Chny/2022 by the assessee and deleted addition sustained to the extent of Rs. 3,13,000/-. Hence, we direct the AO to delete addition towards cash deposits amounting to Rs. 3,13,000/-, because the assessee has explained source for cash deposits.

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