Tribunal overturns addition under Section 69A, rules in favor of assessee.

The Tribunal allowed the appeal, directing the Assessing Officer to delete the addition made under Section 69A of the Income Tax Act. The Tribunal found that the assessee adequately explained the source of cash deposits through documented evidence, including income tax returns and financial statements. Emphasizing that income from earlier years cannot be taxed again to prevent double taxation, the Tribunal ruled in favor of the assessee, overturning the AO's decision.

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Issues Involved:
1. Addition under Section 69A of the Income Tax Act.
2. Overlooking the return of income filed by the assessee for earlier years.

Summary:

Issue 1: Addition under Section 69A of the Income Tax Act

The assessee, an individual, filed a return of income for the assessment year 2017-18 declaring an income of Rs.4,29,100/-. During scrutiny, the Assessing Officer (AO) noted a cash deposit of Rs.10.75 lakh in old currency notes during the demonetization period. The AO asked for an explanation regarding the source of these deposits. The assessee claimed to have sufficient cash on hand from previous years, showing a cash balance of Rs.4,92,185/- as on 31.03.2014. However, the AO, after verification, concluded that the cash deposits did not align with the assessee's income profile and estimated a reasonable cash-in-hand of Rs.1.00 lakh. The remaining Rs.9.75 lakh was treated as unexplained and added under Section 69A, taxed under Section 115BBE.

Issue 2: Overlooking the return of income filed by the assessee for earlier years

On appeal, the National Faceless Appeal Centre (NFAC) upheld the AO's decision, stating that the assessee did not adequately explain the generation of such cash balances for a salaried person. The assessee argued that the cash deposits were supported by income tax returns (ITRs) filed for the preceding four years, which showed sufficient cash income and withdrawals. The assessee provided detailed cash flow statements, balance sheets, and other financial documents to substantiate the claim.

Tribunal's Decision:

The Tribunal found that the AO and NFAC did not dispute the assessee's ITRs and cash flow statements, which showed consistent cash income and withdrawals over the years. The Tribunal noted that the assessee had sufficiently explained the source of cash deposits through documented evidence, such as profit and loss accounts and computation of income for the preceding years. The Tribunal also observed that the AO's estimation of available cash was not justified, given the evidence provided.

The Tribunal referenced decisions from the Delhi and Ahmedabad Tribunals, supporting the view that once the cash flow statement is not controverted, the source of cash deposits should not be dismissed. Consequently, the Tribunal directed the AO to delete the addition of Rs.9.75 lakh made under Section 69A.

Conclusion:

The appeal of the assessee was allowed, and the addition made by the AO was ordered to be deleted. The Tribunal emphasized that the income of earlier years, duly reflected in the ITRs, cannot be taxed again in the current year, thereby preventing double taxation.

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