Tribunal allows appeal, directs deletion of additions under section 69A of Income Tax Act

The Tribunal allowed the appeal by the assessee, directing the deletion of additions made under section 69A of the Income Tax Act for both issues.

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Issues Involved:
1. Addition of Rs. 22,00,000/- as unexplained money under section 69A of the Income Tax Act.
2. Addition of Rs. 25,00,000/- as unexplained money under section 69A of the Income Tax Act due to cash deposited in the bank account of M/s Nivara Builders & Developers.

Issue-wise Detailed Analysis:

1. Addition of Rs. 22,00,000/- as unexplained money under section 69A of the Income Tax Act:

The primary issue in ground No. 1 pertains to the addition of Rs. 22,00,000/- on account of cash deposited in the assessee's HDFC bank account. The assessee argued that the cash deposited during the demonetisation period was withdrawn from the same bank account between 28/07/2016 and 04/11/2016. The Assessing Officer (AO) rejected this explanation, stating that it was improbable for the assessee to withdraw cash and keep it at home without any specific purpose. The AO treated the cash deposit as unexplained money and added it to the total income under section 69A of the Act. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, emphasizing that the assessee did not provide a valid reason for withdrawing and redepositing the cash.

During the hearing, the assessee's counsel referred to the HDFC bank account statement to corroborate the withdrawals and subsequent deposit. The Tribunal noted that the cash withdrawals were substantiated by the bank statement and that the total withdrawals exceeded the deposited amount. The Tribunal found that the Revenue did not provide evidence showing the cash was used elsewhere. Citing precedents, the Tribunal concluded that the AO should give the benefit of cash withdrawn against the amount deposited unless contrary evidence is presented. Consequently, the Tribunal directed the AO to delete the addition of Rs. 22,00,000/- under section 69A, allowing ground No. 1 in favor of the assessee.

2. Addition of Rs. 25,00,000/- as unexplained money under section 69A of the Income Tax Act:

The second issue in ground No. 2 concerns the addition of Rs. 25,00,000/- on account of cash deposited in the bank account of M/s Nivara Builders and Developers, where the assessee was a partner. The AO observed that the cash was deposited in the firm's account during the demonetisation period and subsequently transferred to the assessee. The AO treated this as unexplained money of the assessee. The CIT(A) upheld this addition, noting the close association between the assessee and the firm and the lack of explanation for the cash deposit.

The Tribunal examined the bank statement of the firm, which showed the cash deposit and subsequent transfer to the assessee. The Tribunal noted that the firm is a separate assessable entity, and the transaction should be examined in the firm's hands rather than the assessee's. The Tribunal found no evidence from the Revenue to support the presumption that the cash belonged to the assessee. Additionally, there was no examination of the firm's financials or business activities. The Tribunal concluded that the addition in the hands of the assessee was unwarranted and directed the AO to delete the addition of Rs. 25,00,000/- under section 69A, allowing ground No. 2 in favor of the assessee.

Conclusion:

The Tribunal allowed the appeal by the assessee, directing the deletion of additions made under section 69A of the Income Tax Act for both issues. The order was pronounced in the open Court on 29/08/2022.

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