Assessee wins appeal against Section 69A addition for demonetization cash deposits from loan repayment

ITAT Visakhapatnam allowed the assessee's appeal against addition under Section 69A read with Section 115BBE for cash deposits during demonetization. The AO had treated entire cash deposits as unexplained money and made assessment under Section 144. ITAT held that cash deposits were from sale proceeds and loan repayment from joint account with another holder. The assessee and joint holder had availed short-term loan jointly from Karur Vysya Bank, used account as conduit for loan funds, and repaid after liquidating cashew nut stocks. Source of deposits was properly explained as loan repayment, making the addition unwarranted.

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Issues:
Assessment based on unexplained cash deposits during demonetization period, invocation of sections 69A and 115BBE of the Income Tax Act, 1961, appeal against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre.

Analysis:
The appeal was filed against an order passed under Section 144 of the Income Tax Act, 1961, for the assessment year 2017-18. The case involved the assessee, an individual deriving income from business and other sources, who had made cash deposits during the demonetization period. The Assessing Officer (AO) proceeded ex-parte under Section 144(1)(b) as the assessee did not respond to notices or provide explanations for the cash deposits. The AO treated the cash deposits as undisclosed income and added it to the assessed income under Section 69A, charging tax under Section 115BBE. The assessment order was dated 25/12/2019. The assessee appealed the order before the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre.

The Learned CIT(A)-NFAC upheld the addition made by the AO under Section 69A and invoked Section 115BBE. The assessee then appealed to the Tribunal, challenging the addition of Rs. 41,46,000 as unexplained cash deposits and contending that Section 115BBE was not applicable to the case. The assessee argued that the cash deposits were repayment of a joint loan taken for purchasing raw cashew nuts, supported by loan account details indicating a joint account.

During the Tribunal hearing, it was established that the cash deposits were made from the sale proceeds of raw cashew nuts, as the assessee and a joint holder had availed separate loans and repaid them after liquidating the stocks. The joint account was used as a conduit for loan funds and sale proceeds. The Tribunal concluded that the AO should have assessed the joint holders separately and not solely attributed the transactions to the assessee. The Tribunal found that the cash deposits were explained as loan repayment and set aside the orders of the Revenue Authorities, allowing the assessee's appeal.

The Tribunal's decision was based on the proper appreciation of facts, concluding that the cash deposits were not unexplained income but loan repayment. The Tribunal's ruling set aside the addition made by the AO under Section 69A and confirmed the assessee's explanation regarding the source of the cash deposits. The appeal of the assessee was allowed, overturning the orders of the Revenue Authorities.

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