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Facts
The assessee's appeal was filed with a significant delay, which was condoned by the tribunal. The case involved a scrutiny assessment regarding large cash deposits during the demonetization period. The Assessing Officer added an amount for unexplained money, which was confirmed by the CIT(A).
Held
The Tribunal held that the assessee's explanation for the cash deposits, sourced from rental income and money lending business, was credible and supported by past filings. The CIT(A)'s order confirming the addition was found to be unjustified and was quashed.
Key Issues
Whether the addition made on account of unexplained money for cash deposits during demonetization, sourced from rental and money lending income, is justified.
Sections Cited
69A
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Before: Shri S.S. Viswanethra Ravi&
Year: 2017-18 Parthasarathy Gajendran, Vs. The Income Tax Officer, No. 15, Long Bazaar, Near Market, Ward 1, Vellore 632 004. Vellore. [PAN:AAEPP4858R] (अपीलाथ"/Appellant) (""थ"/Respondent) अपीलाथ" की ओर से / Appellant by : Shri Abhishek Murali, CA ""थ" की ओर से/Respondent by : Shri R.V. Aroon Prasad, Addl. CIT सुनवाई की तारीख/ Date of hearing : 13.11.2025 घोषणा की तारीख /Date of Pronouncement : 14.11.2025 आदेश /O R D E R
PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER:
This appeal filed by the assessee is directed against the order dated 26.07.2024 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi for the assessment year 2016-17.
We find that this appeal is filed with a delay of 310 days. The assessee filed an affidavit for condonation of delay stating the reasons. Upon hearing both the parties and on examination of the said affidavit, in 2 the interest of justice, we condone the delay of 310 days by imposing cost of ₹.5,000/- payable in favour of the State Legal Aid Authority, Hon’ble Madras High Court within 30 days from the date of receipt of this order and admitted the appeal for adjudication.
The assessee raised 7 grounds of appeal amongst which, the only issue emanates for our consideration as to whether the ld. CIT(A) is justified in confirming the addition made by the Assessing officer on account of unexplained money under section 69A of the Income Tax Act, 1961 [“Act” in short].
4. It is noted that the case of the assessee was selected for scrutiny to verify large value of cash deposited during demonetization period. The Assessing Officer asked the assessee to explain the source for the said deposits. The assessee explained that the cash deposit made out of rental receipt and accounts receivable collected before the demonetization period along with interest earned for the period which formed part of cash in hand. Further, the assessee also filed return of income for AY 2015-16 showing cash in hand of ₹.8,71,843/- and sundry debtors of ₹.12,25,000/- along with balance sheet and Profit & Loss account. The Assessing Officer doubted filing of return of income after demonetization period and held the same as an afterthought, did not 3 accept the explanation offered by the assessee. He added an amount of ₹.26,50,000/- on account of unexplained money under section 69A of the Act. The ld. CIT(A) confirmed the same by recording his reasons vide para 6.3 & 6.4 of the impugned order.
Before us, the ld. AR Shri Abhishek Murali, CA argued that the assessee receives rental income and interest income on money lending business. The assessee is from interior place and not supposes to maintain balance sheet and books of account. The assessee for earlier assessment years and subsequent years to demonetization period filed return of income and all were accepted through intimation. The Assessing officer did not doubt the earning of income from rent and interest on loans, but, however, doubted filing of return of income as an afterthought since the assessee filed the return after demonetization period. He prayed to allow the grounds of appeal and to delete the addition made by the Assessing Officer and as confirmed by the ld. CIT(A).
The ld. DR Shri R.V. Aroon Prasad, Addl. CIT supported the order of the ld. CIT(A) and drew our attention to the relevant parts of the impugned order. He prayed to dismiss the ground raised by the assessee.
Heard both the parties and perused the material available on record. We find no dispute with regard to filing of return of income for earlier assessment years as well as subsequent assessment years to demonetization period AY 2017-18 by the assessee and there was no scrutiny assessment in earlier years as well as subsequent years to the year under consideration. The case of the assessee is selected for scrutiny only for the reason to verify high volume of cash deposits found during demonetization period in the accounts of the assessee, which is clear from page 1 of the assessment order. The assessee also explained that the said deposits are out of rental income as well as interest earned for the period under consideration on money lending business. The written submissions of the assessee are reproduced by the Assessing Officer in para 4 of the assessment order. On perusal of the same, it is noted that the assessee vehemently contended that the said cash deposits are germane money lending receipts, accounts receivable. Further, vide para 5 of the assessment order, the assessee also contending availability of cash in hand of ₹.8,71,843/- and sundry debtors of ₹.12,25,000/- supported by balance sheet and Profit & Loss account to that effect. The Assessing Officer held the same is not acceptable since no cash in hand shown as on 07.11.2016 for AY 2016-17. The vehement contention of the ld. AR is that there is no requirement of law for the case of the assessee to maintain balance sheet and Profit & Loss account as the return of income is only ₹.7,00,000/-. Further, it is noted that all along the assessee was contending that the source for cash deposits are out of rental receipts and collection out of loans and advances, which is not at all disputed by the Assessing Officer or no adverse inference drawn by the Assessing Officer in order to counter the business activity of the assessee. Therefore, we find force in the arguments of the ld. AR that cash deposits were out of rental receipts and out of money lending business. Therefore, we accept the explanation offered by the assessee, which is recoded in para 4 & 5 of the assessment order and page 4 to 6 of the impugned order. Thus, the order of the ld. CIT(A) is not justified and it is quashed. Thus, ground Nos. 1 to 7 raised by the assessee are allowed.