Addition u/s 69A unsustainable because cash deposit during demonetization established through bank account

Facts and Issue of the Case

The brief facts of the case is that the assessee is an individual and filed her Return of Income for the Assessment Year 2017-18 admitting a gross total income of Rs. 4,07,922/- which comprises of salary income of Rs. 3,60,000/-, the income from other sources of Rs. 47,922/-. The return of income was selected for scrutiny assessment for cash deposit during the demonetization period.

The assessee deposited in Old currency notes of Rs. 2000 and Rs. 500/- on a sum of Rs. 10,00,000/- on 11.11.2016 and on 15.11.2016 cash of Rs. 2,75,000/-. The assessee was served with a notice u/s. 142(1) asking for the above cash deposits, the assessee furnished copy of cash book and Balance sheet as on 31.03.2017 wherein the opening balance of Rs. 12,98,000/- in the balance sheet. The assessee shown Rs. 50,00,000/- as opening balance from the Financial Year 2015-16 and the same was carried forward. The assessee submitted that the cash deposited during the demonetization period was from the cash withdrawn on 2.01.2014. Since the cash deposited is not explained properly one more show cause notice was issued on 01.12.2019 requesting the assessee to explain the above cash deposits.

In response to the show cause notice, the assessee filed an adjournment letter for one week. As there was no response from the assessee, the assessing officer held that the assessee has no further explanation to offer, regarding the sources of cash deposit amounting to Rs. 12,75,000/- and the same was added as unexplained money u/s. 69A of the Act and the assessed income as Rs. 15,26,590/- and demanded tax thereon. Aggrieved against the same, the assesee filed an appeal before the Ld. CIT(A). The appeal was subsequently migrated to National Faceless Appellate Centre.

In response to the various hearing notices, the assessee filed her written submissions. The assessee claimed that she obtained loan of Rs. 50,00,000/- from her employer M/s. Ramesh Corporation (PAN AACFR1745B) in December, 2013 by RTGS and credited in the bank account. That loan amount of Rs. 50,00,000/- was withdrawn on 02.01.2014 to meet some anticipated family exigencies. Quite a long time, no such exigency materialized or arose and the cash withdrawn remained in the hands of the assessee. Thereafter the assessee deposited cash amounting to Rs. 37,00,000/- in the bank account with Bank of Baroda, Gandhinagar Branch on various dates from November, 2015 to March, 2016. Accordingly, there was a cash balance of Rs. 12,98,000/- available as cash in hand in the cash book as on 31.03.2016 which is the opening cash balance. This cash balance is said to be deposited a sum of Rs. 10,00,000/- on 11.11.2016 and Rs. 2,75,000/- was deposited on 15.11.2016 in Old currency denomination of Rs. 2000/- and Rs. 500/-.

1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts of the case of the Appellant by confirming the addition made by the Ld. Assessing Officer on the ground that amount of cash of Rs. 12,75,000/- deposited in bank account of the Appellant during the demonetization period is unexplained cash credits U/S.69A of the I.T. Act, 1961, made by the Appellant and requires to be added in the income of the Appellant.

2. Your Appellant, therefore, prays that the addition of Rs. 12,75,000/- made by the Ld. Assessing Officer and confirmed by the Ld. Commissioner of Income Tax (Appeals), may kindly be deleted fully.

Observation by the Court

The court held that the issue of huge cash withdrawal in the year 2014 and subsequent deposits in the bank made the whole transactions suspicious in nature. The assessee has neither provided sufficient evidence for justification before the A.O. during the appellate proceeding. In-spite of opportunity given to the assessee, the assessee has failed to discharge the onus of providing justifications in the books of accounts. The assessee being an individual having income from salary and other sources. The nature of activities of the assessee it is hard to understand, need for moving cash from one hand to other hand and movements of the cash from bank to book and vice-versa. Therefore the addition made by the Assessing Officer has been confirmed and dismissed the assessee’s appeal. Per contra the ld. D.R. appearing for the Revenue supported the order passed by the lower authorities and requested to sustain the addition made by the Assessing Officer.

The court have given our thoughtful consideration and perused the materials available on record including Paper Book and the Case Laws filed by the assessee. The cash loan of Rs. 50,00,000/- said to be received by the assessee from Ramesh Corporation is being clearly reflecting in the bank account of the assessee and the assessee had withdrawn Rs. 50,00,000/- on 02.01.2014. The assessee submission of redeposit of a sum of Rs. 37,00,000/- in her bank account of Bank of Baroda is also reflecting in the bank statement. So, the remaining cash in hand of Rs. 12,78,000/- in which the assessee made deposit of Rs. 12,75,000/- during the demonetization period. The assessee’s explanation that the demonetized currency notes of Rs. 500/- and Rs. 2000/- available with the assessee as cash in hand were being deposited during the demonetization period. Thus the same cannot be treated as not properly explained by the assessee. As it can be seen from the bank statement, the source of withdrawal of the money is being clearly demonstrated and their deposit of money on various occasions is also established by the assessee through her bank account. The same cannot be doubted by the Assessing Officer as unexplained money.

Respectfully following the above judicial precedents, the court have no hesitation in allowing the grounds raised by the assessee and the impugned addition made by the Assessing Officer of Rs. 12,75,000/- u/s. 69A is hereby deleted.