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Facts
The assessee deposited Rs. 13,71,000 in her bank accounts during demonetization, claiming it was from past savings, rental income, and agriculture income. The Assessing Officer and CIT(A) added the entire amount as unexplained income under Section 69A read with Section 115BBE.
Held
The Tribunal held that while the grounds regarding the assessing officer's hospitalization and the validity of the assessment order were not elaborated, the assessee was entitled to a benefit of Rs. 2,50,000 as per CBDT Circular No. 3 of 2017 and an additional Rs. 50,000. Therefore, Rs. 3,00,000 was deleted from the addition.
Key Issues
Whether the cash deposits made during demonetization were unexplained and whether the addition under Section 115BBE was justified.
Sections Cited
69A, 115BBE, 143(3)
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PER PAWAN SINGH, JUDICIAL MEMBER;
This appeal by assessee is directed against the order of CIT(A) dated 25.06.2024 for assessment year 2017-18. The assessee has raised following grounds of appeal
1 Ground 1 Addition made u/s 69A on account of Cash Deposit of Rs 13,71,500/- The Hon. CIT(A) erred in confirming the addition of Rs. 13,71,500/-, made u/s 69A r.w.s. 115BBE of the IT Act 1961, as unexplained money on account of cash deposited in the State Bank of India, Axis Bank and Bank of Baroda, where the source of such cash deposit was from opening cash in hand, Rent Incorne and Agriculture Income of the appellant, all of which stood well explained with supporting evidences and therefore the addition as unexplained money was not justified and bears to be deleted.
2 GROUND 2 Order u/s 143(3) of the Act is bad in Law On the facts and in the circumstances of the case and in law, the learned assessing officer was Hospitalized during the assessment proceeding and the same can be evident from the Daily Attendance register maintained by the Department and Yashoda Suresh Jadhav (A.Y. 2017-18) therefore the assessment order passed by the learned assessing officer was bad-in-law, as the learned officer was not in possession to verify the submission made by the assessee and to pass the Assessment order. The learned assessing officer at the time of passing of assessment order was in ICU in Hospital, so how can he has passed the assessment order in such critical conditions.
Rival submissions of both the parties have been heard and record perused.
The ld. Authorized Representative (AR) of the assessee submits that during the relevant to the assessment year under consideration, the assessee made cash deposit of Rs.13,71,000/- in her three bank accounts during demonetization period. The cash deposit was out of past savings, rental income received in cash and agriculture income. The assessee furnish complete details during assessment as well as before CIT(A). The lower authorities disregarded the submissions of assessee and added entire cash deposit and tax with the same under section 115 BBE of the income Tax Act. The ld. AR of the assessee submits that assessee was also having sufficient cash in hand out of his past savings. Therefore, no addition is to be sustained. In alternative submissions, the ld. AR of the assessee submits that Assessing Officer has not allowed the benefit of CBDT circular no.3 of 2017, wherein it was directed to accept cash deposit during demonetization up to 2,50,000/-. The enhanced rate of tax under section 115BBE is also not applicable for the year under consideration as has been held by Tribunal in series of decision including in Dheeraj Lal T. Bhai vs. 2023 dated 03.10.2024.
On the other hand, the ld. Senior departmental representative (Sr. DR) for the revenue submits that assessee failed to substantiate the source of cash Yashoda Suresh Jadhav (A.Y. 2017-18) deposit during assessment. The assessee was not maintaining cash flow statement. The assessee took plea before the lower authorities that part of cash deposit was out of cash rent received by the assessee as well as from agriculture activities. The ld. CIT(A) in para 5.5 of his finding clearly held that the assessee was not having absolute owner of the rented premises. Moreover, rent agreement contains the reference of payment by way of cheque however; the assessee claimed that rent was received in cash. No evidence of agriculture holding was provided. The ld. Sr. DR prayed that assessee is not eligible for any relief.
We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We have also deliberated on various evidences and the case was relied by ld. AR of the assessee. We find that assessee while filing return of income has declared income of Rs. 5,67,520/-. Case was selected for limited scrutiny to verify cash deposit during demonetization. The assessing officer find that assessee has made cash deposit in three bank account as recorded in Para 4 of assessment order. On show cause, the assessee explained that out of total cash deposit of Rs.13,71,000/-, a sum of Rs.3,05,100/- is from agriculture income and sum of Rs.71,82,000/- on account of rent received in cash from Keshav Dingor and remaining from other cash available. The assessee furnished ledger of cash amount. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer recorded that no cash in hand was shown in return of income for AY 2016-17. The assessee has Yashoda Suresh Jadhav (A.Y. 2017-18) shown rental income but not furnished any documentary evidence. The assessee furnished only first and last on the page of leaves and license agreement. Similarly, the agriculture income received also disregarded as the assessee has not furnished any receipt of agriculture produce marketing committee (APMC) or 7/12 extract or expenses on agriculture activities. The entire deposit was added under section 69A and taxed under section 115BBE. The Ld. CIT(A) also confirmed the action of Assessing Officer the ld. CIT(A) in Para 5.4 of his order recorded that assessee is residing in Bandra east Mumbai and claiming agriculture activities in Malegaon Nasik which is not possible and the assessee also failed to prove agriculture activities with verifiable expenditure. The rental income was also discarded by taking with it rent agreement contained the reference of ownership of two different persons the assessee as well as Suresh Jadhav HUF. Moreover, the agreement contained the reference that rent is payable by way of cheque however, the assessee is claiming rental and agriculture income in cash.
We find that Central Board of Direct Taxes (CBDT) in its Circular No. 3 of 2017 directed to accept cash deposit to the extent of 2.50 lakh in case of individual. We find that even such benefit is not allowed to the assessee.
Therefore, the assessee is allowed to benefit of Rs. 2.50 lakhs. We further find it assessee is regularly filing return of income from last several years and further, benefit of Rs.50,000/- (fifty thousand) is also allowed thus, out Yashoda Suresh Jadhav (A.Y. 2017-18) of total addition of Rs.13,71,000/-, the Rs.3,00,000/- is deleted and remaining amount of Rs.10,71,000/- is confirmed.
So far as the taxability of addition under section 115BBE is considered, we find that recently Hon’ble Madras High Court in case of SMILE Micro Finance Ltd. vs ACIT reported that is (2025) 179 taxmann.com 65 (Madras) held that amendment to section 115BBE of increasing rate of tax is not applicable for transaction prior to 01.04.2017. Thus, assessing Officer is directed to tax the remaining addition at normal provision of rate of tax applicable in case of individual in the corresponding assessment year.
In the result appeal of the assessee is partly allowed.