Assessee gets partial relief on unexplained cash deposits during demonetization under Section 69A

ITAT Surat ruled on unexplained money under Section 69A regarding cash deposits during demonetization. The assessee failed to substantiate the source of Rs.10,50,000 cash deposit. Following CBDT Circular No. 3 of 2017, the tribunal allowed Rs.2,50,000 as per demonetization guidelines. Additionally, considering the assessee's regular income tax filings showing gross income exceeding Rs.6,00,000 in preceding years and accepted brokerage income, the tribunal granted benefit of Rs.1,50,000. Out of the total addition of Rs.10,50,000, Rs.4,00,000 was deleted and Rs.6,50,000 was sustained. The appeal was partly allowed.

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ISSUES:

1. Whether the addition of cash deposit of ? 10,50,000/- as unexplained money under section 69A of the Income Tax Act, 1961, is justified where the assessee failed to satisfactorily substantiate the source of such deposit.
2. Whether the provisions of section 115BBE of the Income Tax Act, 1961, are applicable for taxing the addition arising from unexplained cash deposits for the Assessment Year 2017-18.

RULINGS / HOLDINGS:

1. The addition of ? 10,50,000/- as unexplained money under section 69A was partly sustained, with ? 4,00,000/- deleted considering CBDT Circular No. 3 of 2017 allowing cash deposits up to ? 2,50,000/- and additional benefit of ? 1,50,000/- due to accepted income sources; the assessee failed to provide plausible explanation or evidence substantiating the entire cash deposit.
2. The provisions of section 115BBE of the Act are not applicable for the Assessment Year 2017-18; therefore, the addition cannot be taxed under section 115BBE and the appeal on this ground is allowed.

RATIONALE:

1. The legal framework applied includes section 69A of the Income Tax Act, 1961, which permits addition of unexplained cash deposits where the assessee fails to satisfactorily explain the source; the CBDT Circular No. 3 of 2017 guides acceptance of cash deposits up to ? 2,50,000/- during demonetization without adverse inference.
2. Section 115BBE prescribes special tax rates on unexplained income but was held inapplicable for AY 2017-18 by the Division Bench of the Tribunal, representing a binding precedent and doctrinal interpretation limiting the retrospective application of this provision.
3. The court emphasized the necessity of credible evidence to substantiate cash balances and income sources, noting absence of documentary proof such as ownership or bank reflection of rental income, and rejected "explanation beyond human probability."

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