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Facts
The assessee, engaged in a rice mill business, filed its return for AY 2017-18. During the demonetization period, the assessee deposited cash, including Specified Bank Notes (SBNs), into their bank accounts. The Assessing Officer (AO) proposed to add back a portion of these deposits as unexplained income.
Held
The Tribunal held that the assessee had adequately explained the source of the deposited cash as their cash-on-hand as of November 8, 2016, supported by the cash book and audited accounts. The AO's doubt based solely on the timing of the deposit was not sufficient to disallow the claim.
Key Issues
Whether cash deposits made during the demonetization period, which are claimed to be from prior cash holdings, can be treated as unexplained income solely based on the timing of the deposit.
Sections Cited
69A, 147, 148, 143(3)
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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI ABY T. VARKEY & SHRI JAGADISH
आदेश / O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)/Addl./JCIT, (hereinafter- referred to as “the Ld.CIT(A)”), Bhubaneswar, dated 27.08.2024 for the Assessment Year (hereinafter referred to as "AY”) 2017-18.
None appeared for the assessee. However, we note that the main grievance of the assessee is against the action of the Ld.CIT(A)
1. confirming the addition of Rs.8,61,000/- u/s.69A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act‘).
The brief facts are that the assessee derives income from business in the name and style of M/s.Thirumurugan Modern Rice Mill and filed its return of income (RoI) on 01.10.2017 for AY 2017-18 declaring total income at Rs.10,06,500/-. The RoI was selected for complete scrutiny through CASS; and the AO acknowledges that pursuant to statutory notices issued by him, the assessee duly filed P&L A/c, balance-sheet, income computation statement, copy of bank account statements & details of cash deposits made in the account, etc. The AO is noted to have called for bank account details of the assessee from the State Bank of India wherein assessee had two bank accounts and noted from the bank statements that assessee has made deposit in specified bank notes [SBNs] of Rs.1000/- & Rs.500/- which were demonetized from 09.11.2016 to 30.12.2016 to the tune of Rs.22,07,500/- in bank account number ending with 296 and the other account number ending into 466 to the tune of Rs.3,53,500/- [total Rs.25,61,000/-]. The AO also noted that assessee had deposited non-SBNs as well as SBNs totaling Rs.39,81,500/-. Therefore, he issued notice proposing addition of entire amount. The assessee filed reply explaining that assessee’s cash on hand as on 08.11.2016 was Rs.25,02,586/- and produced/submitted the cash book to corroborate the same. The AO acknowledged that the assessee had also filed copy of VAT return, retail sale details, etc. The AO noted that the assessee has deposited cash during demonetization period totaling Rs.39,81,500/- which includes both SBNs & non-SBNs and the SBNs were to the tune of Rs.25,61,000/-. The AO noted that the assessee has deposited Rs.17,00,000/- on 10.11.2016, which he accepted as genuine, but since assessee deposited Rs.8,61,000/- after 11.11.2016 to 20.12.2016, he treated it as unexplained credit u/s.69A of the Act. On appeal, the Ld CIT(A) has confirmed the action of AO. Aggrieved by the action of the Ld.CIT(A), the assessee is in appeal before us.
We have heard the Ld.DR and perused the records. We note that the assessee runs a Modern Rice Mill and filed its RoI for AY 2017-18 on 01.10.2017 declaring total income at Rs.10,06,500/-. The RoI was selected for complete scrutiny and the AO noted that the assessee had two bank accounts maintained with SBI and also noted that during the demonetization period, the assessee had deposited total cash of Rs.39,81,500/- [including SBNs as well as non-SBNs], and out of this amount, the AO noted that the SBNs were to the tune of Rs.25,61,000/-.
The AO noted that the assessee had deposited Rs.17 lakhs on 10.11.2016 and deposited the balance of Rs.8,61,000/- on different dates between 11.11.2016 to 20.12.2016; and asked the assessee to prove the nature and source of cash deposits of SBNs, for which, assessee brought to his notice that as on 08.11.2016 [before demonetization period], the assessee had cash on hand at Rs.25,02,586/- and corroborated the same by submitting the cash book as well as the audited books of accounts.
Thus, the assessee explained to the AO the source of SBNs as the cash- on-hand as on 08.11.2016, which according to him covers the SBNs deposited. It is noted that the AO has not found any infirmity in the cash- book, which showed the availability of sufficient cash-on-hand in the cash-book to cover up Rs.25,61,000/-. But, he is noted to have wondered the conduct of assessee i.e. ‘as to why’ he didn’t deposit the entire amount in ‘one go’ at the earliest, when he deposited Rs.17 lakhs on 10.11.2016, rather than splitting it and depositing it after 11 November i.e. Rs 8,61,000/-. Thus, the AO questioned the action of assessee depositing SBN’s to the tune of Rs.8,61,000/- after 11.11.2016, despite claiming to have cash/SBN’s available in hand as per books as on 08.11.2016. Therefore, he doubted the claim made by the assessee that he had cash in hand of Rs.8,61,000/- as on 08.11.2016, and made addition to that extent u/s.69A of the Act. So, the addition has been made on the suspicion that if assessee had the amount of Rs.25,02,586/- before demonetization, then he ought to have deposited the same on 10.11.2016 along with Rs.17 Lakhs, rather than deferring to deposit the balance [Rs.8,61,000/-] after 11.11.2016. Such a reason for drawing adverse inference against assessee cannot be accepted. According to us, merely because the assessee deposited cash later in its bank account, can’t be the sole reason to doubt the genuineness of the claim made by the assessee that it had cash on hand as on 08.11.2016 to the tune of Rs.25,02,586/- [out of it, the AO has accepted Rs.17 lakhs and the balance amount of Rs.8,61,000/- has been only brought to tax u/s.69A of the Act]. The assessee in support of its claim that it had sufficient cash balance to cover up the SBNs deposited to the tune of Rs. Rs.25,61,000/- during demonetization period had produced the cash book for the year and the AO has not disputed the availability of sufficient cash on-hand in the cash book to cover up Rs.25,61,000/-. Thus, the assessee is noted to have explained the source of SBNs as the cash-on-hand as on 08.11.2016, which according to us covers the SBNs deposited. Therefore, the addition made of Rs.8,61,000/- can’t be accepted. For such a view of ours, we take support from the recent order of ours in the case of Vimalabai v. ITO [ITA No.2599/Chny/2024] for AY 2017-18, date4d 22.01.2025, wherein, the Tribunal on similar issue based on similar facts held asunder:
We have heard the rival submissions, and perused the materials available on record. The assessee has submitted a copy of ITR from 2005-06 onwards, where she has been regularly showing income from money lending business. The assessee has also furnished the cash book in which the opening cash balance as on 01.04.2016 is Rs.12,57,297/- and cash balance as on 01.11.2016 is Rs.13,73,547/-. The cash deposit in the bank account during demonetization period is out of the above cash balance which is duly recorded in the books of account. We are therefore of the opinion that the cash deposit is duly explained and delete the addition made by the AO accordingly. In view of the above, the appeal filed the assessee is allowed.
(AY 2017-18) Palanysamy Vinayagamoorthy 5. Respectfully following the decision of the Tribunal in the case of Vimalabai (supra), we direct the AO to delete the addition of Rs.8,61,000/- u/s.69A of the Act.
6. In the result, appeal filed by the assessee is allowed.