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Facts
The assessee filed an ITR for AY 2017-18, and the case was selected for scrutiny due to cash deposits of Rs. 10,28,500/- made during demonetization. The AO allowed Rs. 3,26,500/- as explained and added the balance Rs. 7,08,000/- under Section 69A. The CIT(A) upheld the addition, correcting it to Rs. 7,02,000/-, despite the assessee claiming the source was past savings and accumulated income from prior years with a cash surplus of Rs. 7.44 Lakhs.
Held
The Tribunal acknowledged the assessee's cash flow statement showing a Rs. 7.44 Lakhs surplus from previous years. Considering the specific facts and circumstances, the Tribunal deemed 50% of the unexplained cash deposit (Rs. 7,02,000/-), amounting to Rs. 3,51,000/-, as explained. The AO was directed to reduce the addition under Section 69A to Rs. 3,51,000/-.
Key Issues
Whether cash deposits made during demonetization were adequately explained by the assessee's past savings and accumulated income, and the extent to which the addition under Section 69A for unexplained money should be sustained.
Sections Cited
143(1), 143(3), 69A
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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K, HON’BLE & SHRI S.R. RAGHUNATHA, HON’BLE
आदेश /O R D E R
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), Addl/JCIT(A)-1, Pune, dated 04.10.2024 and pertains to assessment year 2017-18.
:-2-: ITA. No: 3115/Chny/2024 2. The assessee has raised the following grounds of appeal: “1) The impugned Order is bad, erroneous and unsustainable in law. 2) The Learned First Appellate Authority and the Assessing Officer erred in not considering the explanation furnished by the Appellant properly. 3) Without prejudice, the Learned First Appellate Authority and the Assessing Officer erred in not considering and appreciating that the Appellant had sufficient cash in hand forming the source for cash deposits during demonetization period, when details of income levels of the previous years were furnished. 4) Without prejudice, the Learned First Appellate Authority and the Assessing Officer erred in rejecting the plea of sufficiency of cash in hand out of past years savings solely on the ground that the return of income filed for those years did not reflect it, when, admittedly, the return forms filed did not have columns for showing closing cash balance, thereby prejudicing the Appellant for not doing an impossible act. And, for other reasons that may be adduced later, the Appellant humbly prays that the present appeal may be admitted, duly considered and justice be rendered.”
3. Brief facts of the case are that the assessee is an individual and filed his return of income for the A.Y. 2017-18 on 04.08.2017 admitting a total income of Rs.3,07,670/- by showing income from house property and other sources. After processing the return of income u/s.143(1) of the Act, the case was selected for limited scrutiny for the verification of “Cash deposit during the demonetisation period”.
4. During the assessment proceedings the assessee submitted the bank statements and shown the cash deposit made to the bank accounts to the tune of Rs.10,28,500/- during the :-3-: ITA. No: 3115/Chny/2024 demonetisation period. Further, the assessee shown that an amount of Rs.3,26,500/- has been drawn from Indian Overseas bank on 03.11.2016 i.e. before the announcement of demonetisation. The AO completed the assessment based on the said details and information and passed an order u/s.143(3) of the Act dated 04.12.2019 by making an addition of Rs.7,08,000/- (Difference between Rs.10,28,500/- - Rs.3,26,500/- which has been drawn on 03.11.2016) u/s.69A of the Act as unexplained money.
5. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A), NFAC, Delhi. Before the ld.CIT(A) the assessee submitted that the return of income for last 3 Assessment years has been filed by the assessee by declaring the following income and shown the availability of cash in hand after reducing the corresponding year’s drawings as detailed below:
A.Y. 2015-16 Rs.2,38,202/- A.Y. 2016-17 Rs.2,38,430/- A.Y. 2017-18 Rs.2,67,870/- 6. Further, the assessee stated that he has declared interest on loan given under the income from other sources and refund of loan from the borrowers and his accumulated income from past 3 years given as loans is the source for cash deposits. The assessee also filed the copies of bank statements of earlier A.Ys. 2015-16 & 2016- 17 also. On perusal the reply and submissions of documents by the :-4-: ITA. No: 3115/Chny/2024 assessee the Ld.CIT(A) passed an order dated 04.10.2024 by confirming the addition made by the AO by dismissing the appeal of the assessee and reduced the addition to Rs.7,02,000/- as there was a clerical error in the computation of difference in cash deposit and withdrawal shown in the Assessment order.
Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before us.
The ld.AR of the assessee stated that the assessee has been regularly filing income tax returns. As there is no requirement of filing the cash flow and other financial statements along with the return of income for small assessee’s and hence the same is not submitted. However, the assessee has submitted the details of return of income filed from A.Y. 2015-16 to 2017-18 along with statement of cash flow showing the net cash surplus of Rs.7.44 Lakhs before the lower authorities. The assessee has been earning interest from lending money and the same has been realized along with interest income. The source of cash deposit was refund of loan from borrowers along with the accumulated cash from assessee’s own source of income which has been offered to income tax. Therefore, the AO and that of the ld.CIT(A) have erred in making the addition of cash deposit as unexplained money and prayed for deleting the same.
:-5-: ITA. No: 3115/Chny/2024 9. Per contra, the ld.DR supported the orders of the lower authorities.
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, the assessee has filed his return of income and made a cash deposit of Rs.10,28,500/- in his four bank accounts during the demonetisation period. The AO has considered the withdrawal made from the bank account on 03.11.2016 to the tune of Rs.3,26,500/- and considered as explained source for cash deposit. However, the AO has made addition of the balance cash deposit of Rs.7,08,000/- as unexplained as the assessee did not file any evidence in support of the source except the income tax returns of earlier years and stated the source of cash was from past savings. The same has been confirmed by the ld.CIT(A) by reducing the addition to Rs.7,02,000/-.
We note that the assessee has furnished the return of income for the A.Y. 2015-16, 2016-17 and 2017-18 and also filed a Cash flow statement for all the 3 years by considering the Income from house property, other sources and by reducing the drawings and other personal expenses. On perusal of the said cash flow statement for past 3 years shows an accumulated surplus of Rs.7.44 Lakhs. Though the entire amount cannot be considered to be held in the :-6-: ITA. No: 3115/Chny/2024 form of cash, in the peculiar facts and circumstances of the case and in the interest of justice 50% is considered as explained source of cash deposit out of Rs.7,02,000/-.
In the peculiar facts and circumstances of the case, we are of the considered view that the assessee has explained the source to the extent of 50% i.e. Rs.3,51,000/- and direct the AO to reduce the addition made u/s.69A of the Act as unexplained money to Rs.3,51,000/-. We sustain the addition of cash deposit of Rs.3,51,000/- as unexplained money u/s.69A of the Act.