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Facts
The assessee deposited Rs. 3,75,000/- during the demonetization period. The AO treated this deposit as unexplained income under Section 69A of the Act as it was not commensurate with the income declared in subsequent years. The assessee claimed the deposit was made from her income and savings.
Held
The Tribunal held that the initial basis for scrutiny by the AO was incorrect. While the assessee's declared income in subsequent years was low, it was possible to save Rs. 3.75 lakhs over the years. Therefore, the addition of the deposit as unexplained income was not justified.
Key Issues
Whether the cash deposit made by the assessee during the demonetization period can be treated as unexplained income when the initial information leading to scrutiny was found to be incorrect and there was a possibility of savings from prior income?
Sections Cited
142(1), 69A
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Income Tax Appellate Tribunal, MUMBAI “SMC” BENCH : MUMBAI
Before: SHRI B.R. BASKARAN & SHRI SANDEEP GOSAIN
Date of Hearing : 12-03-2025 Date of Pronouncement : 17-03-2025 ORDER PER B.R. BASKARAN, A.M : The assessee has filed this appeal challenging the order dt. 08-03-2024 passed by the Addl/JCIT (A)-Panaji and it relates to AY. 2017-18. The assessee is aggrieved by the decision rendered by the Addl/JCIT(A) in confirming the addition of cash deposit of Rs.3,75,000/- made by the AO, treating the same as un-explained income of the assessee.
The appeal filed by the assessee is time barred by limitation by 236 days. The assessee has filed an affidavit stating that the assessee was not aware of the provisions of the income tax and her brother was helping her in the income tax matters. Hence, the assessee was not aware of the order passed by the Addl/JCIT(A). Subsequently, when the pending appeal was discussed with the Chartered Accountant, the assessee came to know that the Addl/JCIT(A) has already passed the order. Immediately, the assessee took steps to file the present appeal. Accordingly, it is submitted thatthe delay in filing the appeal was on account of reasonable cause and accordingly, it is prayed that the delay may be condoned.
We heard the Ld.DR on this preliminary issue and perused the record. Having regard to the submissions made by the Ld.AR, we are of the view that there was a reasonable cause for the assessee in filing the appeal belatedly and accordingly, we condone the delay and admit the appeal for hearing.
The facts relating to the case are stated in brief. The AO received information that the assessee has deposited a sum of Rs. 20,70,254/- in the bank account during the demonetization period. The AO noticed that the assessee has not filed the return of income and hence, he issued notice u/s. 142(1) of the Act to the assessee and directed the assessee to file the return of income. However, the assessee did not respond to the same. Hence, the AO called for the details of the bank account from the Vasai Janta Sahakari Bank Ltd. Branch. The Bank Manager reported that the bank account noticed by the AO does not belong to the assessee. However, he furnished the details of the bank accounts held by the assessee with that bank. It was noticed that the assessee was having two bank accounts with the above said branch; wherein the assessee had deposited a sum of Rs. 3,75,000/- during demonetization period.
Hence, the AO issued show cause notice to the assessee asking for details of sources of the above said deposit. The assessee replied to the above said notice; wherein the assessee stated that the deposits were made out of her income and savings. The AO noticed that the assessee had filed return of income for the subsequent assessment year, namely, AYs. 2018-19 and 2019-20; wherein the assessee had declared total income of Rs. 1,45,330/- and Rs. 1,43,680/- respectively. The AO took the view that the deposit of Rs. 3.75 lakhs made by the assessee during the demonetization period was not commensurate to the income declared by the assessee. Hence, the AO treated above amount as „un- explained money‟ and assessed the same as income of the assessee u/s. 69A of the Act. The Addl/JCIT(A) also confirmed the same and hence, the assessee filed this appeal.
We heard the parties and perused the record. We notice that the AOhas taken up the case of the assessee on the reasoning that the assessee has made cash deposit of Rs. 20.70 lakhs in the bank account maintained with Vasai Janta Sahakari Bank Ltd. Branch. However, it turned out to be incorrect on the basis of the letter given by the Bank Manager. Hence, the very basis on which the case was taken up for scrutiny has failed in this case. However, the AO received information from the bank that the assessee has deposited a sum of Rs.3.75 lakhs during the demonetization period. Though the assessee has explained that the said deposit was made out of her earning and saving, yet the AO dis-believed the same and accordingly assessed the above said amount as income of the assessee u/s. 69A of the Act.
6.1. We notice that the assessee has filed return of income in the subsequent years; wherein income of Rs. 1.40 lakhs was reported. This fact would show that the assessee was having income in the earlier years also, though it may be less than the maximum marginal limit. Further, considering the quantum of deposit, we are of the view that there is a possibility of saving a sum of Rs. 3.75 lakhs over the period of years by the assessee.Accordingly, we are of the view that the AO was not justified in assessing the deposit amount of Rs. 3.75 lakhs as un-explained money of the assessee.Accordingly, we set aside the order passed by theAddl/JCIT(A) and direct the AO to delete the addition so made.
In the result, the appeal filed by the assessee is allowed.