Unexplained cash deposits addition under Section 69A deleted after assessee proves source through bank withdrawal records

The ITAT Bangalore allowed the assessee's appeal against addition under Section 69A for unexplained cash deposits during demonetization. The assessee had withdrawn Rs. 32 lakhs from bank for purchasing agricultural land which did not materialize. Rs. 10 lakhs was redeposited earlier, leaving Rs. 21 lakhs available for deposit during demonetization period. The AO's disbelief of the source was based on conjectures without evidence. The tribunal held that holding cash is not prohibited by law, and the AO failed to prove cash was utilized for other purposes. The source of deposits was adequately explained through bank withdrawal records, warranting deletion of the addition.

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Issues Involved:

1. Confirmation of the order passed by the Assessing Officer.
2. Addition of Rs. 21,00,000/- as unexplained money u/s 69A of the Act.
3. Reflection of cash deposits in the cash book and their explanation.
4. Alleged double addition of business receipts.
5. Applicability of Section 115BBE of the I.T. Act.
6. Liability to pay interest u/s 234B and 234C of the I.T. Act.

Summary:

Issue 1: Confirmation of the order passed by the Assessing Officer

The learned Commissioner of Income-Tax (Appeals) confirmed the Assessing Officer's order, which was challenged by the assessee on grounds of being erroneous and bad in law.

Issue 2: Addition of Rs. 21,00,000/- as unexplained money u/s 69A of the Act

The Assessing Officer added Rs. 21,00,000/- deposited during the demonetization period as unexplained money u/s 69A, despite the assessee's explanation that the cash was withdrawn from his bank account for purchasing agricultural land. The AO was not convinced by the explanation and applied the special rate of taxation as per Section 115BBE of the Act. The CIT(A) upheld this addition, stating that the appellant failed to provide satisfactory evidence for keeping such a large cash balance.

Issue 3: Reflection of cash deposits in the cash book and their explanation

The assessee argued that the cash deposits were duly reflected in the cash book and adequately explained. The AO and CIT(A) did not accept this explanation, citing a lack of evidence and logical reasoning for holding such a large amount of cash.

Issue 4: Alleged double addition of business receipts

The assessee contended that the addition of cash deposits resulted in double addition as these were part of business receipts already considered for computing taxable income. This argument was not accepted by the authorities.

Issue 5: Applicability of Section 115BBE of the I.T. Act

The CIT(A) confirmed the applicability of Section 115BBE for taxing the unexplained cash deposits at a higher rate. The assessee argued that this section was not applicable to their case, but the authorities did not agree.

Issue 6: Liability to pay interest u/s 234B and 234C of the I.T. Act

The assessee denied the liability to pay interest u/s 234B and 234C, arguing that it was wrongly levied. However, this contention was also dismissed by the authorities.

Tribunal's Decision:

The Tribunal held that the source of cash deposits was adequately explained by the assessee, who had withdrawn Rs. 32 lakhs from the bank, out of which Rs. 21 lakhs were available for deposit during the demonetization period. The AO's statement that the cash was used for other purposes was based on conjectures and surmises without any evidence. The Tribunal noted that there is no prohibition in law against holding cash in hand and that the AO failed to prove that the cash was utilized for other purposes. Consequently, the addition u/s 69A was deleted, and the appeal filed by the assessee was allowed.

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