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Facts
The assessee, an individual, filed a return of income for A.Y. 2017-18 and was selected for limited scrutiny regarding cash deposits made during demonetization, totaling Rs. 23,65,000/-. The assessee contended that the source of these deposits was gold loans taken in 2015-16 to start a new business, which were later repaid by depositing the cash. The Assessing Officer rejected this explanation, making an addition of Rs. 20,15,000/- under Section 69A, which was upheld by the CIT(A).
Held
The Tribunal found the assessee's explanation of keeping gold loan amounts idle for over 20 months, incurring interest, and then depositing them due to demonetization, to be unacceptable. The Tribunal concluded that no person would incur such costs without utilizing funds for their stated purpose and therefore upheld the addition of Rs. 20,15,000/- by the lower authorities as unexplained cash deposits.
Key Issues
Whether the addition of unexplained cash deposits under Section 69A was justified and whether such addition was correctly subjected to a higher tax rate under Section 115BBE of the Act.
Sections Cited
143(3), 143(2), 142(1), 69A, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, VISAKHAPATNAM “SMC” BENCH, VISAKHAPATNAM
Before: SHRI K. NARASIMHA CHARY, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal centre,
I.T.A.No.294/VIZ/2024 Gottumukkala Dharma Raju Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1066276004(1) dated 30.06.2024 for the A.Y.2017-18 arising out of the order passed under section 143(3) of Income Tax Act, 1961 (in short ‘Act’) dated 13.11.2019.
Briefly stated the facts of the case are, assessee is an individual deriving income from business and other sources filed his return of income for the A.Y.2017-18 on 28.03.2018 admitting a total income of Rs. 5,00,000/- besides agricultural income of Rs. 1,75,000/-. Subsequently, the case has been selected for limited scrutiny through CASS to verify the “cash deposits during demonetization period”. Accordingly statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee. In response to the notices issued, assessee uploaded the information called for by the Ld.Assessing Officer [hereinafter in short “Ld. AO"] through ITBA portal. Assessee also submitted the computation statement and other relevant information. After verification of the information provided by the assessee, the Ld. AO observed that the assessee has made the following cash deposits in specified bank notes [SBN’s] during the demonetization period.
Cash Date of S.No. SB Account No. Name of the Branch Deposited Deposit (in Rs.) 01 9100100015464 Visakhapatnam 10.11.2016 13,40,000 Cooperative Bank Dwarakanagar Branch Vizag
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I.T.A.No.294/VIZ/2024 Gottumukkala Dharma Raju
Cash Date of S.No. SB Account No. Name of the Branch Deposited Deposit (in Rs.) 02 9100100015464 Visakhapatnam 11.11.2016 5,85,000 Cooperative Bank Dwarakanagar Branch Vizag 03 241001000031532 Visakhapatnam 11.11.2016 4,40,000 Cooperative Bank Waltair Branch, Vizag Total 23,65,000/-
The assessee during the assessment proceedings was asked to submit the sources for the above cash deposits for which the assessee submitted that he had taken gold loans from Visakhapatnam Co-Operative Bank Limited Seethamapeta Branch during the year 2015-16. Assessee also submitted that gold loans were taken to start a new business and consequently due to demonetization these loan amounts were repaid by depositing the cash into the bank account. Assessee also submitted the details of gold loan taken by him as follows:
S.No Loan No. Date Amount 01 4400 28.03.2015 9,41,000 02 8765 04.05.2015 5,00,000 03 VSGL-23 27.05.2016 3,50,000
Ld. AO observed that the assessee has taken Rs. 14,41,000/- during the period 28.03.2015 to 04.05.2015 and thereafter issued a show-cause notice for holding huge cash for a period of nearly 20 to 21 months and to show cause why it should not be taxed. Assessee submitted his reply on 04.11.2019
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I.T.A.No.294/VIZ/2024 Gottumukkala Dharma Raju stating that the gold loan was taken with an intention of starting a new business. Ld.AO found the explanation by the assessee is not acceptable thereafter proceeded to make an addition of Rs.20,15,000/- under section 69A of the Act.
On being aggrieved by the order of the Ld. AO, assessee filed an appeal before Ld. CIT(A). Assessee reiterated the same submissions made before Ld.AO. Considering the submissions of the assessee Ld. CIT(A) dismissed the appeal of the assessee.
Aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising following grounds of appeal: -
1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case.
2. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.20,15,000 made by the assessing officer towards unexplained cash deposits in bank account u/s 69A of the Act and in subjecting the above addition to higher rate of tax by applying the provisions of S.115BBE of the Act.
3. Any other ground that may be urged at the time of appeal hearing.”
Ground Nos. 1 & 3 are general in nature and needs no adjudication.
Ground No. 2 is with respect to sustenance of the addition of Rs.20,15,000/- by the Ld. CIT(A) under section 69A r.w.s. 115BBE of the Page No. 4
I.T.A.No.294/VIZ/2024 Gottumukkala Dharma Raju Act. On this issue Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee has taken gold loans during the period 2015-16 and 2016-17 for the purpose of commencing a new business. Ld.AR further submitted that since the new business could not be materialised and consequent announcement of demonetization by the Government of India assessee redeposited the cash into the bank account towards repayment of the gold loan. He therefore pleaded that since the source of the cash deposits have been established no addition can be made under section 69A of the Act.
Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] placed heavy reliance on the orders of the Revenue Authorities and further submitted that assessee has taken gold loan and kept cash in ideal for the period of more than 20 to 21 months. Ld. DR further submitted that no person will keep such huge amounts in cash by making the interest payments thereby incurring cost on holding the cash. She therefore pleaded that order of the Ld. CIT(A) be upheld.
We have heard both the sides and perused the material available on record and orders of the lower authorities. It was the submission of the Ld.AR that the assessee has obtained the cash by availing gold loans on 28.03.2015 for Rs. 9,41,000/-; on 04.05.2015 for Rs.5,00,000/- and again on 27.05.2016 for Rs. 3,50,000/-. It was also submitted by the Ld.AR that the Page No. 5
I.T.A.No.294/VIZ/2024 Gottumukkala Dharma Raju above loan amounts were lying unutilised and was redeposited into the savings account of the assessee for the repayment of the gold loan along with interest. However, we are unable to accept the contention of the Ld.AR that a person availing a gold loan will keep it idle for more than 20 months by incurring interest cost on such loan without utilising the funds for the purpose for which it was taken. The contention of the Ld.AR could not be accepted as no person will incur cost for the holding of cash which was lying unutilised till the announcement of the demonetization. In the light of facts and circumstances of the case as discussed aforesaid, we are inclined to confirm the addition of Rs. 20,15,000/- as we find no infirmity in the order of the Ld.CIT(A). Thus, Grounds raised by the assessee is dismissed.
In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 06th February, 2025.