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Facts
The assessee, an individual, filed a return of income declaring Rs. 14,14,580. The case was selected for scrutiny due to cash deposits made during the demonetisation period. The Assessing Officer (AO) treated Rs. 16,00,000 as unexplained money under Section 69A of the Income Tax Act and initiated provisions of Section 115BBE.
Held
The CIT(A) dismissed the appeal, agreeing with the AO that the explanation of debt recovery was an afterthought and that the assessee failed to substantiate the claim. The Tribunal noted that the authorities below had not verified documents to explain the cash deposits and that this needed verification in light of CBDT circulars.
Key Issues
Whether the cash deposits made during the demonetisation period are unexplained money and whether the AO and CIT(A) have correctly verified the explanation provided by the assessee.
Sections Cited
69A, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC-‘A’ BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
ORDER PER BEENA PILLAI, JUDICIAL MEMBER Present appeal arises out of order passed by the NFAC, Delhi dated 14.12.2023 for A.Y. 2017-18 on following grounds of appeal:
1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
2. The learned CIT[A] is not justified in sustaining the addition of Rs. 16,00,000/- made as unexplained money u/s.69A of the Act, by unreasonably rejecting the explanation tendered by the appellant for the source of the cash deposits made under the facts and in the circumstances of the appellant's case.
3. The learned CIT[A] is not justified in refusing to admit the additional evidence tendered by the appellant in accordance with Rule 46A of the IT Rules,1962 without appreciating that the appellant was prevented by sufficient cause in producing the said additional evidence before the Assessing Officer under the facts and in the circumstances of the appellant's case. 4.1 The learned CIT[A] ought to have appreciated that the cash deposits made are from known and explainable sources of funds under the facts and in the circumstances of the appellant's case. 4.2 The learned CIT[A] is not justified in sustaining the invocation the provisions of section 115BBE and taxing the aforesaid addition made at the rate of 60% under the facts and in the circumstances of the appellant's case. 5. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
Brief facts of the case are as under: 2.1 Assessee is an individual who derives income from house property, capital gains and other sources. For year under consideration, he filed the return of income on 15.07.2017 declaring total income of Rs.14,14,580/-. The case was selected for scrutiny and various details were called for to investigate the cash deposits made by assessee during the demonetisation period. Assessee filed details through ITBA portal which was Page 3 of Ld.AO. The Ld.AO after verifying the bank accounts was of the opinion that Rs. 16 Lakhs was unexplained money and the same was added u/s. 69A of the act. The Ld.AO also initiated provisions of section 115BBE of the act.
2.2 Aggrieved by the order of the Ld.AO, assessee preferred appeal before the Ld.CIT(A).
2.3 The Ld.CIT(A) dismissed the appeal of the assessee by observing as under: “5.5 I have perused the matter. The appellant has failed to satisfactorily explain the deposits of cash Rs. 16,00,000/- in his bank account during the period of demonetisation inspite of sufficient opportunity being granted for the same. The AO has already accepted the deposits of Rs. 1,36,366/- as being form savings of earlier years. The appellant has shown total income for the earlier two F.Y. as Rs. 3,37,920/- and Rs. 3,02,040/-. Such resources cannot explain deposits of Rs. 16,00,000/-. The Sundry debtors at the end of both years were NIL. The AO has clearly noted this fact in the assessment order:- “On close examination of the returns filed, it is seen that the assessee has never had any Sundry Debtors as claimed by him in his submissions dated 04.11.2019 and also the assessee has been declaring profits only. The same is very much visible in the 1TR filed by the assessee for the assessment year 2016-17 wherein sundry debtors have been declared as zero. The submissions made by him is just an afterthought and hence, the same is not acceptable.” 5.6 Based on the above discussion, I agree with the AO that the explanation of recovery of debts to explain the cash deposits is merely an after thought. The appellant also failed to substantiate this theory at the assessment stage despite sufficient opportunity. Accordingly, I uphold the addition made by the AO and dismiss these grounds of appeal.”
Page 4 of 2.4 Aggrieved by the order of the Ld.CIT(A), assessee is in appeal before this Tribunal.
The Ld.AR submitted that the authorities below has not verified the documents filed by the assessee and the explanations furnished in respect of the deposits made in cash during the demonetisation period. He thus prayed for the issue to be remanded to the Ld.AO for necessary verification. The Ld.DR did not object to the prayer of the assessee. We have perused the submissions advanced by both sides in the light of records placed before us.
On merits of the case, it is noted that assessee had made cash deposits in SBI to the tune of Rs.16,00,000/- during the demonetisation period. The authorities below has not verified any documents that may be available in the possession of the assessee to explain the cash deposits and has made addition u/s. 69A of the act. In our considered opinion, this needs to be verified in the light of the circular issued by the CBDT.
We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017-ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-
Page 5 of ITA.II. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases.
In one of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money.
Instruction 21/02/2017 issued by the CBDT suggests some indicators towards verifying the suspicion of backdating of cash. It also suggests indicators to identify abnormal jump in cash trials on identifiable persons as compared to earlier history in the previous year. Therefore in our opinion it is important to examine whether assessee falls into any of these categories and transfer of deposit of cash is not in line with history of transactions in the preceding assessment years.
The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable
Page 6 of instructions based on the facts in present case. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash.
Assessee is directed to furnish PAN and address details of the depositors from whom loan repayment has been accepted in cash. The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim.
Accordingly, the grounds raised by the assessee stands allowed for statistical purposes. In the result, the appeal filed by the assessee stands allowed for statistical purposes. Order pronounced in the open court on 22nd March, 2024.