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Facts
The assessee, an individual, filed a return for AY 2017-18 declaring an income of Rs. 5,41,110. The case was selected for limited scrutiny regarding cash deposits during demonetization. The AO made additions of Rs. 13,11,500 as unexplained money u/s 69A and Rs. 11,00,000 as cash credits u/s 68. The CIT(A) confirmed these additions.
Held
The Tribunal held that the issue of cash deposits amounting to Rs. 13,11,500 needed to be examined afresh, and accordingly restored it to the AO for fresh consideration. Regarding the addition of Rs. 11,00,000 as unexplained cash credit, the Tribunal found that the loans and their repayment were through banking channels and deleted the addition.
Key Issues
Whether the additions made by the AO and confirmed by CIT(A) for unexplained cash deposits and cash credits are sustainable. Whether the grounds raised by the assessee have been properly adjudicated.
Sections Cited
250, 143(2), 143(3), 69A, 68, 234B, 46A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R This appeal filed at the instance of the assessee is directed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 14.01.2025, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
The grounds raised by the assessee read as follows:-
2 -:
1. 1. The order of the Learned Commissioner of Income Tax (Appeals ("CIT(A)") is contrary to the law, facts and circumstances of the case.
2. For that the Learned Commissioner of Income Tax (Appeals) had erred in confirming the addition of Rs. 13,11,500/- as 'unexplained money' u/s 69A of the Act towards cash deposits made during demonetization period into multiple bank accounts without appreciating the explanation offered/submission made to substantiate the source for such cash deposits (Tax effect - Rs. 10,13,134/-).
3. For that the Learned Commissioner of Income Tax (Appeals) had erred in failing to adjudicate the Ground no. 3 raised in the appeal memorandum filed before the CIT(A) and thereby indirectly confirming the addition of Rs. 11,00,000/- made uls 68 of the Act (Tax effect - Rs. 8,49,750/-).
4. For that the Learned Commissioner of Income Tax (Appeals) had erred in failing to adjudicate the Ground no. 4 raised in the appeal memorandum filed before the CIT(A) and thereby indirectly confirming the levy of interest u/s 234B of the Act.
Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2017-18, the return of income was filed on 01.08.2017 declaring total income of Rs.5,41,110/-. The case was selected for limited scrutiny under CASS on the issue of cash deposits made during the demonetization period and notice u/s.143(2) of the Act was issued on 16.08.2019. The details called by the AO was furnished by the assessee from time to time. The assessment was completed u/s.143(3) of the Act vide order dated 06.02.2019 assessing the total income of the assessee at Rs.29,52,610/-. In the assessment completed, the AO made addition of Rs.13,11,500/- as unexplained money u/s.69A of the Act and
Aggrieved by the assessment completed u/s.143(3) of the Act, the assessee preferred appeal before the First Appellate Authority (FAA). Before the FAA, the assessee filed petition under Rule 46A of the Income Tax Rules, 1962 for furnishing bank statements. Before the FAA, it was submitted that addition of Rs.11,00,000/- as unexplained cash credits u/s.68 of the Act has been made by the AO without proposing the said addition in the show-cause notice issued and by stating in the order that there is no documentary evidence supporting the assessee’s contention. The FAA however did not adjudicate the grounds raised with regard to the addition u/s.68 of the Act amounting to Rs.11,00,000/-. As regards the issue of cash deposits amounting to Rs.13,11,500/- added u/s.69A of the Act, the FAA confirmed the view of the AO by stating that assessee has been taking inconsistent stands as regards the source of cash deposits.
Aggrieved by the order of the FAA, the assessee has filed the present appeal before the Tribunal. The Ld.AR has placed on record the documents/evidences filed before the FAA such as 4 -: bank statements, written submissions filed before the FAA, additional evidences filed and the case laws relied on, etc., The Ld.AR submitted as regards the addition of cash deposits amounting to Rs.13,11,500/-, assessee has got sufficient withdrawals immediately preceding the dates on which cash deposits were made. It was submitted by the Ld.AR that in the interest of justice and equity, this issue may be restored to the files of the AO so that assessee can prove with necessary evidences the cash deposits are out of cash withdrawals.
As regards the addition of Rs.11,00,000/- u/s.68 of the Act, the Ld.AR submitted that AO without proposing the said addition in the show-cause notice had made the addition by stating that assessee has not furnished the requisite details, which is legally untenable. It was stated by the Ld.AR that assessee had filed the necessary evidences before the FAA to prove that the amount of Rs.11,00,000/- has been paid through banking channels as unsecured loans in the earlier assessment years and the same was received back during the relevant assessment year through banking channels from the creditors. However, the FAA has not adjudicated the issue raised.
I have heard rival submissions and perused the material on record. The assessee had made cash deposit to the extent of Rs.13,11,500/- in various bank accounts of the assessee during the relevant assessment year 2017-18. The assessee before the AO had taken inconsistent stands for explaining the source of cash deposits. Since the explanation of the assessee was contradictory, the AO made addition u/s.69A of the Act in respect of cash deposits in various bank accounts of the assessee. Before the FAA, the assessee submitted that the cash deposits are out of cash withdrawals for explaining the source. The FAA however confirmed the addition made by the AO on account of contradictory stand taken by the assessee before the AO. On examination of material on record, the assessee now tries to explain the source of cash deposits with the cash withdrawals. The assessee at page 4 of the written submission given before the FAA had tabulated the cash withdrawals and the cash deposits chronologically. The Ld.AR before me also submitted that assessee has submitted the cash flow statements. Since the assessee pleas that cash deposits are out of cash withdrawals has not been properly examined either by the AO or by the FAA, I’m 6 -: of the view that this issue needs to be examined afresh taking into consideration the assessee’s stand before the FAA and the Tribunal. Accordingly, this issue is restored to the files of the AO for fresh consideration. The assessee is directed to place on record, the cash flow statement and details of cash withdrawals and how the same can be linked with the cash deposits made on various dates. It is ordered accordingly. In the result, the relevant Ground No.2 raised in Form No.36 is allowed for statistical purposes.
As regards the addition of Rs.11,00,000/- is concerned, from the material on record, I find that assessee had advanced loans to M/s. Praveen Traders on 04.08.2015 and Shri Haroon Imran on 13.06.2016 amounting to Rs.8,00,000/- and Rs.3,00,000/- respectively. The relevant extracts of the bank statement showing the payment made by the assessee to the aforesaid persons were filed before the FAA. Further on perusal of the bank statement for the relevant assessment year, it can be clearly seen that loans advanced to M/s. Praveen Traders and Shri Harron Imran were returned by M/s. Praveen Traders on 23.03.2017 and Shri Haroon Imran on 14.07.2016. Copies of the aforesaid bank statements are also on record. The amounts paid 7 -: as unsecured loans and return of the same to the assessee are through banking channels. In light of the evidence on record, I’m of the view that addition made as unexplained cash credit u/s.68 of the Act amounting to Rs.11,00,000/- is uncalled for and I, delete the same. Therefore, I allow the Ground No.3 raised in Form No.36.
In the result, the appeal filed by the assessee is partly-allowed.
Order pronounced in the open court on 1st July, 2025 at Chennai.