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Facts
The assessee, who had deposited a significant amount of cash during the demonetization period, failed to file income tax returns for AY 2015-16, 2016-17, and 2017-18. The Assessing Officer (AO) noted large cash deposits in the assessee's bank accounts and treated the cash deposited during demonetization as unexplained investments under Section 69A of the Act.
Held
The Tribunal held that the assessee was unable to substantiate the source of cash deposits. While the AO estimated business income at 8% of the deposits, the CIT(A) reduced it to 5%. The Tribunal found this estimation reasonable and directed the AO to apply the same 5% estimation to the demonetization deposits as well, considering the transactions occurred throughout the year and were similar in nature.
Key Issues
Whether the entire cash deposit during demonetization period can be treated as unexplained investment and taxed accordingly, or if a presumptive income estimation is more appropriate.
Sections Cited
144, 69A, 115BBE
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Income Tax Appellate Tribunal, ‘C’ BENCH, CHENNAI
Before: HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM & HON’BLE SHRI MANU KUMAR GIRI, JM
आदेश / O R D E R PER MANU KUMAR GIRI (Judicial Member)
This appeal by the assessee is directed against the order No.ITBA/NFAC/S/250/2023-2024/1062618166 (1) dated 14.03.2024 of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi. The assessment was framed by the Income Tax Officer, Ward 1(2), Salem for the assessment year 2017-18 passed u/s.144 of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 28.10.2019 2. Brief facts of the case are that the ld. Assessing Officer had received information that the assessee has deposited huge cash in the bank account during the demonetization period. On examination of the database related to the assessee, the AO noticed that the assessee had not filed any return of income for the A.Y.s 2015-16, 2016-17 and 2017-18. During the assessment proceedings, the assessee was asked to explain the reasons for not filing returns of income. In response, the authorized representative of the assessee stated that, due to his preoccupations with the family affairs he could not prepare and file his return of income for the A.Ys 2015-16, 2016-17 and 2017-18 in time. As the present scheme of Income Tax Act is not allowing assessee to file the returns belatedly he could not file his return of income belatedly. As regards, the source of cash deposited in the bank account during demonetization period, the assessee inter-alia had submitted as under: -
Sl.No Nature of Sources Amount 1 Op. Cash Balance (1.04.2016) 1,36,538 2 Rentals received 2,82,000 3 Sale of gold jewellery 6,85,984 4 Cash Withdrawals from TMB-SB a/c. 5,38,300 028100050046320 5 Coriander Processing Job works 1,74,000 6 Gift from mother in law 1,20,000 7 Income tr. from HUF u/s 10(2) 1,00,000 Total 20,36,822 The ld. Assessing Officer found that assessee maintained two account bearing numbers 028100050080118 and 0371500508000275 with Tamil Nadu Mercantile Bank, during the period from 01.04.2016 to 31.03.2017. The details of deposits for the period from 01.04.2016 to 31.03.2017 in the bank accounts were summarized as under.
Sl.No Account No. Total cash & Other Cash deposit credits other than during demonetization demonetization period 1 028100050080118 3,29,059/- 2,00,000/- (SB Account) 2 0371500508000275 2,06,06,303/- 11,63,500/- (Current Account) Total 2,09,35,362/- 13,63,500/- Since the assessee did not render any explanation for the above transactions of Rs.2,09,35,362/- i.e., the cash and other transactions related to the period other than demonetization period, the ld. Assessing Officer assessed the same on presumptive basis at the rate of 8% and estimated income of Rs.16,74,829/-. However, the entire cash deposit during demonetization period was added as unexplained investments u/s.69A of the Act which would be taxed at the rates specified u/s.115BBE of the Act. Finally, the assessment was framed. Aggrieved, assessee preferred an appeal before the ld. Commissioner of Income Tax (Appeals).
The ld. CIT(A) confirmed the addition of Rs.13,63,500/-, being cash deposited during demonetization period.
On estimate addition, the assessee argued before ld. CIT(A) that ld. Assessing Officer had estimated the business income @8% of total cash of Rs.2,09,35,362/- deposited during the period, whereas all the major transactions were related to the assessee’s current account and same were received on transfer through banking channels and subsequently transferred to other concerns and accordingly, prayed for deletion of addition. The ld. CIT(A) vide letter dated 12.09.2019 requested the assessee to explain the cash and other banking transactions during the period from 01.04.2016 to 31.03.2017 which assessee failed to do so. In the absence of any credible supporting documentary evidences forthcoming from the assessee, the ld. CIT(A) estimated the business income @5% of the total cash deposit of Rs.2,09,35,362/- as against estimation of 8% as made by Ld. AO. Aggrieved, the assessee is in further appeal before us.
It is clear that the assessee is unable to adduce any records to substantiate the source of cash deposit. Considering the conduct of the assessee, Ld. AO estimated business income of 8% against normal deposits which was reduced to 5% by Ld. CIT(A). This estimation, in our considered opinion, is quite reasonable and the same, therefore, would not require any interference on our part. At the same time, artificial distinction created in deposits made during demonetization period is not correct. The transactions have happened throughout the year and the nature of transaction is similar. Therefore, similar estimation could be made against demonetization deposit of Rs.13,63,500/-. The Ld. AO is directed to adopt similar estimation of 5% against these deposits. No other ground has been urged in the appeal.
The appeal stand partly allowed. Order pronounced on 27th day of November, 2024 at Chennai.