Firm's appeal allowed against Section 69A addition for unexplained cash deposits during demonetization period

The ITAT Raipur allowed the assessee firm's appeal against addition under Section 69A for unexplained cash deposits of Rs. 33 lacs in bank account. The tribunal found that cash deposits during demonetization period were sourced from opening cash in hand of Rs. 52.47 lacs as recorded in books. The AO failed to establish that this opening cash was utilized elsewhere or exhausted through expenditure. The tribunal held that depositing available cash during demonetization was prudent conduct and accepted the assessee's explanation regarding source of deposits, vacating the addition made by AO.

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Issues Involved:
1. Addition of Rs. 33,00,000/- as unexplained money under section 69A of the Income-tax Act, 1961.

Summary of Judgment:

Issue 1: Addition of Rs. 33,00,000/- as unexplained money under section 69A of the Income-tax Act, 1961:

The assessee firm appealed against the order of the Commissioner of Income-Tax (Appeals) confirming the addition of Rs. 33,00,000/- made by the Assessing Officer (A.O.) under section 69A of the Income-tax Act, 1961, as unexplained money. The A.O. noted that the assessee had made cash deposits of Rs. 33,00,000/- in its bank account during the year under consideration but had not filed its return of income. Despite multiple notices, the assessee failed to provide a satisfactory explanation for the source of these deposits.

The assessee claimed that the cash deposits were sourced from the opening cash-in-hand (C.I.H) of Rs. 52.47 lacs available in its books on 01.04.2016, which was generated from the sale of agricultural land in the preceding year. The A.O. rejected this explanation due to the significant time gap between the availability of cash and its deposit during the demonetization period, thus treating the cash deposits as unexplained money under section 69A.

The CIT(A) upheld the A.O.'s decision, noting the assessee's non-compliance with notices and failure to provide supporting evidence for its claims. The CIT(A) concluded that the assessee's explanation lacked credibility, especially given the deposits were made during the demonetization period.

Upon appeal, the Tribunal considered the balance sheet of the assessee firm, which showed an opening C.I.H of Rs. 52.47 lacs on 01.04.2016. The Tribunal found that the A.O. did not dispute the availability of this cash and noted that the assessee's return for the preceding year, reflecting this C.I.H, was filed before the A.O.'s inquiry. The Tribunal reasoned that the assessee's explanation was credible and that the deposits during the demonetization period were a prudent action. The Tribunal concluded that there was no justification for rejecting the assessee's explanation and vacated the addition of Rs. 33,00,000/- made by the A.O. under section 69A.

Conclusion:
The Tribunal allowed the appeal, setting aside the order of the CIT(A) and vacating the addition of Rs. 33,00,000/- made by the A.O. under section 69A of the Income-tax Act, 1961. The ground of appeal No. 2 was dismissed as not pressed. The order was pronounced in open court on 20th September 2023.

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