Online fund transfer portal's cash deposits during demonetization ruled genuine business operations, section 69A addition deleted

ITAT Jaipur allowed the appeal regarding addition under section 69A. The assessee operated an online fund transfer portal during demonetization, collecting cash from persons for utility bill deposits and bookings, then depositing amounts in bank accounts. AO added the cash deposits as unexplained money since assessee failed to provide details of cash sources. ITAT held that assessee's activities were genuine business operations through Novapay portal, with increased commission during demonetization period. Bank statements showed deposited amounts were transferred to service accounts, not retained personally. Only Rs. 27,500 SBN was deposited from total deposits exceeding Rs. 56 lakhs. Commission income was already taxed based on TDS records. Addition under section 69A was deleted.

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Issues Involved:
1. Addition of Rs. 22,37,511/- as unexplained credits u/s 69A.
2. Initiation of penalty proceedings u/s 271AAC(1) & 271A(1)(d).

Summary:

Issue 1: Addition of Rs. 22,37,511/- as unexplained credits u/s 69A

The assessee, running an E-Mitra Kiosk, filed a return of income for AY 2017-18 declaring a total income of Rs. 4,13,210/-. The case was selected for scrutiny to examine cash deposits during the demonetization period. The assessee explained that the cash deposited in his bank account was collected from customers for payment of utility bills and other services, and provided supporting documents such as bank statements, transaction summaries, and payment sheets. However, the AO found that the assessee failed to provide complete details of the source of Rs. 22,37,511/- deposited in the bank account, treating it as unexplained credits u/s 69A.

Upon appeal, the CIT(A) upheld the AO's decision, noting that the assessee could not provide details of the customers and the purpose of the money deposited. The Tribunal, however, found that the assessee had provided sufficient evidence, including Form 26AS, transaction statements, and bank account statements, showing that the cash deposits were related to his business activities and commissions earned. The Tribunal concluded that the cash deposits could not be taxed u/s 69A and deleted the addition of Rs. 22,37,511/-.

Issue 2: Initiation of penalty proceedings u/s 271AAC(1) & 271A(1)(d)

The initiation of penalty proceedings u/s 271AAC(1) & 271A(1)(d) was related to the addition made u/s 69A. Since the Tribunal deleted the addition of Rs. 22,37,511/-, the grounds for penalty proceedings were also dismissed.

Conclusion:

The appeal of the assessee was allowed, and the addition of Rs. 22,37,511/- made by the AO was deleted. Consequently, the related penalty proceedings were also dismissed.

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