ROHIT KUMAR DILIP JAIN,VIJAYAWADA vs. INCOME TAX OFFICER, WARD-2(1), VIJAYAWADA

The Ld. AR of the appellant before the bench stated that the Assessing Officer [hereinafter in short “A.O.”] is not correct in making an addition of Rs.8,00,000/- towards unexplained money under section 69A of the Income Tax Act, 1961 [hereinafter in short “the Act”]. From the assessment order, it is observed that the assessee deposited an amount of Rs.12,50,000/- during the demonetization period on various dates as mentioned below: -

The appellant was asked to explain the sources of these cash deposits and the assessee explained the sources of deposit as realization of advances of Rs.9,40,000/- from his debtors and also certain interest receipts, LIC refund and salary cash receipts. The Ld. A.O. was not satisfied with the explanation given by the appellant and held that if the appellant is having this amount, he would have deposited the entire amount into the bank account immediately after the Government of India banned the currency notes of Rs.500/- and Rs.1000/- w.e.f. 08.11.2016. The appellant has deposited Rs.2,25,000/- on 12.11.2026 and Rs.2,25,000/- on 13.11.2016 and an amount of Rs.8,00,000/- [Rs.5,00,000/- + Rs.3,00,000/-] was deposited in the month of December 2016. The Ld.A.O. observed that there is a closing cash balance of Rs.11,01,056/- on 07.11.2016 but he gave credit of Rs.4,50,000/- which was deposited immediately after the announcement of ban by the Government of India. The assessee version was disbelieved for the remaining amounts deposited in the month of December 2016 stating that if the amount was available with the appellant in the month of November 2016 itself, then he would have deposited the entire amount. As the amount of Rs.8,00,000/- was deposited on 19.12.2016 and 23.12.2016, the Ld.A.O. presumed that the cash balance which was shown in the cash book to the Department as an evidence was paper balance only. As the appellant has deposited Rs.8,00,000/- after more than one month of ban by the Government to India, the version of assessee was disbelieved and held the same as unexplained money under section 69 of the Act. Accordingly, this amount was added to the returned income of Rs.5,15,000/- while completing the assessment.

Aggrieved by the order of the Ld. A.O., an appeal was filed by the assessee before the Ld. CIT(A). Before Ld. CIT(A), it was stated that the assessee has maintained books of account and declared a cash balance of Rs.11,01,056/- as on 07.11.2016 and the same amount was deposited into his Savings Bank Account and relied on certain cases law for the proposition that where the appellant has got sources to explain, no addition can be made under section 69A of the Act. After perusing the explanation of the appellant, the Ld. CIT(A) held that the addition under section 69A of the Act made by the Ld. A.O. is correct as there is considerable gap between the date of announcement of ban of Rs.500/- and Rs.1000/- and the deposit of cash into his bank account, the action of the A.O. was upheld. Ld. CIT(A) had also stated that if the amount is available with the assessee on the date of ban by the Government of India, he would have deposited the entire amount into his saving bank account immediately after the ban. As the appellant took more than a month, the Ld. A.O. was correct in coming to the conclusion that the unexplained money of appellant was deposited in his SB Account and hence properly brought to tax. Thus, Ld. CIT(A) concurred with the view of the Ld.A.O. and upheld the addition made by the Ld.A.O.

Aggrieved by the addition of Rs.8,00,000/- as mentioned above, the assessee filed the appeal before the ITAT with the following grounds of appeal:-

During the hearing before ITAT, the Ld. AR of the appellant has stated that the assessee is having cash balance of Rs.11,01,056/- as on 07.11.2016 and the sources of the amount was also explained to the Ld.A.O. Moreover, these amounts were part of his regular books of account. The Ld.A.O. made an addition only on the basis of assumptions and surmises instead of disproving the sources of cash as explained by the appellant. The Ld. A.O. did not conduct any enquiries nor gave any show cause notice to the appellant to explain the sources of cash deposits of Rs.8,00,000/- before making the addition. On the one hand, the Ld.A.O. has accepted the closing cash balance of Rs.11,01,056/- as on 07.11.2016 to be correct and merely due to the reason that the amount which was recorded in the books of account was deposited into the bank account after a month cannot be treated as unexplained money under section 69A of the Act. Since the sources of money were explained and A.O. did not disprove the contents of cash book, the addition by the A.O. should be deleted.

Ld. Departmental Representative [hereinafter in short “Ld.DR”] relied on the orders of the lower authorities and stated that based on human probability theory, any person would deposit the entire cash into his bank amount immediately after announcement the ban of Rs.500/- and Rs.1000/- currency notes. Instead, the assessee has deposited Rs.8,00,000/- after a month of announcement of ban shows that the appellant does not have Rs.8,00,000/- in his possession and this money might have been from the unexplained sources. Accordingly, the logic of A.O. and Ld. CIT(A) is correct and hence the additions made should be sustained, concluded the Ld.DR.

Heard rival submissions. After hearing the arguments of both the parties, the Bench observes that, the only reason for making addition of Rs.8,00,000/- is that the appellant has deposited this amount after a month of banning the high value currency notes. When the appellant is showing certain receipts as advance from debtors and also cash book shows that there is sufficient cash balance to deposit the same into the bank account, the explanation of assessee should be accepted. The Ld. A.O. did not point out any mistake or defect in the cash book filed by the appellant nor conducted any enquiries to disprove the explanation of assessee that the amount of Rs.11,01,056/- was not available to the assessee as on 07.11.2016. The Ld. A.O. cannot come to the conclusion that a part of the amount of Rs.11,01,056/- i.e., Rs.8,00,000/- cannot be held has unaccounted / unexplained as the appellant has filed a cash book showing a cash balance out of which the amount was deposited into the bank account and also where no enquires were caused by the Department to disprove the contentions of assessee, no addition can be made merely because the cash available with the appellant was deposited after a gap of one month of banning the high currency notes. The Government of India has given a window of approximately 45 days to deposit their high value currency notes into their bank account and within the due date, the appellant has deposited and explained that the receipts were out of the explained sources and in proof of the same the cash book was filed. The sources mentioned in the cash book were not disproved by conducting any enquiry. The mere fact that the amount was deposited after a month cannot be the reason to treat the same as unexplained money. In view of the same, the addition made by the A.O. is deleted.

In the result, appeal filed by the Assessee is allowed.