Unexplained cash deposits under section 69A reduced from Rs.32 lakhs to Rs.18.50 lakhs due to rectification error

ITAT Ahmedabad partially allowed assessee's appeal regarding unexplained cash deposits under section 69A. The tribunal reduced the addition from Rs.32 lakhs to Rs.18.50 lakhs, noting that AO had already reduced it by Rs.13.50 lakhs through rectification order under section 154 due to incorrect quantum initially recorded. CIT(A) erred in confirming full Rs.32 lakhs addition despite AO's reduction. However, tribunal upheld remaining Rs.18.50 lakhs addition as assessee failed to provide reasonable explanation for cash deposits, only furnishing unsubstantiated book entries and claiming source from cash withdrawn four years earlier without justification for holding such amount.

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Issues:
Addition to income on account of unexplained cash deposits during demonetization period.

Analysis:
The appeal was filed against the order passed by the Ld. Commissioner of Income-Tax(Appeals) pertaining to the addition of Rs.32,00,000 to the income of the assessee on account of unexplained cash deposits during demonetization. The main contention raised by the assessee was that the addition made by the assessing officer was unjustified and should have been restricted to Rs.18.50 lakhs based on rectification made by the AO. The assessee argued that the Ld. CIT(A) confirmed the addition without proper justification and without considering the rectification made by the AO.

The Ld. Counsel for the assessee pointed out that a rectification application had been filed to correct the amount of cash deposited in one of the bank accounts, which was initially noted as Rs.15 lakhs but was actually Rs.1.50 lakhs. The AO rectified this mistake and reduced the addition to Rs.18.50 lakhs. However, the Ld. CIT(A) ignored this rectification and confirmed the addition of Rs.32 lakhs. The Ld. Counsel argued that the addition was not justified as the cash book presented by the assessee explaining the source of cash deposits was rejected without proper reasoning.

On the other hand, the Ld. DR contended that the evidence provided by the assessee for the source of cash deposits was unsubstantiated and unreliable. The Ld. CIT(A) noted discrepancies in the cash book and found that the cash withdrawals made in previous years were used to explain the cash deposits during the demonetization period. The Ld. CIT(A) also questioned why such a large amount of cash was kept idle for a long period instead of being used in business transactions when banking facilities were available.

The Tribunal held that the Ld. CIT(A) erred in confirming the addition of Rs.32 lakhs when the rectification by the AO had reduced it to Rs.18.50 lakhs. However, the Tribunal found no merit in the contentions of the assessee regarding the source of cash deposits. The Tribunal agreed with the Ld. CIT(A) that the explanations provided by the assessee were insufficient and improbable, considering the long period of holding such a large amount of cash without reasonable cause. Therefore, the Tribunal confirmed the addition of Rs.18.50 lakhs to the income of the assessee.

In conclusion, the appeal of the assessee was partly allowed, and the addition to the income was confirmed to the extent of Rs.18.50 lakhs.

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