Tribunal rules in favor of assessee on cash deposits during demonetization

The Tribunal allowed the assessee's appeal against the addition made on cash deposits during demonetization, accepting the explanation that the deposits were from legitimate rental income. The Tribunal overturned the addition, ruling in favor of the assessee on 15th June 2022 in Chennai.

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Issues:
Appeal against addition made on cash deposit during demonetization period as unexplained money under section 69A of the Income Tax Act.

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals) confirming the addition made by the Assessing Officer (AO) on cash deposits during the demonetization period. The AO noted cash deposits of Rs.36.73 lakhs in the assessee's bank account, representing Specified Bank Notes (SBNs), and treated it as unexplained money under section 69A of the Act.

2. The assessee provided evidence of rental income generated from properties to explain the cash deposits. The assessee submitted various documents, including statements of income, rental income details, balance sheets, and cash book extracts. The rental income declared for the assessment year 2017-18 after deductions was Rs.34,13,298. The assessee's cash in hand as per balance sheets indicated a sufficient source for the deposited cash during demonetization.

3. The counsel for the assessee argued that the cash deposits were from rental income and other legitimate sources. The counsel highlighted that the cash in hand as per balance sheets corroborated the cash deposits made during the demonetization period. The counsel clarified that the business cash in hand declared in the Income Tax Return (ITR) did not reflect the individual cash in hand earned from rental income.

4. During the proceedings, the Bench raised queries regarding the closing cash balance as per the ITR and the rental income earned by the assessee. The counsel explained the distinction between business cash in hand and personal cash in hand. The Revenue representative could not counter the explanation provided by the assessee's counsel regarding the source of the cash deposits.

5. Upon review of the facts and evidence presented, the Tribunal concluded that the source of the cash deposits was legitimate, originating from rental income. The Tribunal accepted the explanation provided by the assessee and allowed the appeal, overturning the addition made by the AO and confirmed by the CIT(A).

6. Consequently, the appeal filed by the assessee was allowed, and the Tribunal pronounced the order in favor of the assessee on 15th June 2022 at Chennai.

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