Cash deposits held explained; addition of Rs. 50 lakhs under Section 69A deleted for realty company

ITAT Raipur-AT allowed the assessee's appeal and deleted the addition of Rs. 50 lakhs made u/s 69A. The assessee, a listed real estate and construction company, had explained that the cash deposits originated from share application money, which the Revenue had not disputed. The Tribunal held that maintaining Rs. 50 lakhs in cash over three years was not unusual for such a business and that the source of funds and business activities were accepted by the department. Consequently, treating the cash deposits as unexplained money was held to be unjustified.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether delay of 69 days in filing the appeal before the Tribunal deserved condonation in view of the reasons advanced and the legal position on "sufficient cause" under limitation law.

1.2 Whether cash deposits of Rs. 50 lakhs made during the demonetization period were liable to be treated as "unexplained money" under section 69A of the Income-tax Act, 1961, despite the assessee's explanation that the source was earlier share application money withdrawn in a prior year and kept in cash.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of delay of 69 days in filing the appeal

Legal framework (as discussed)

2.1 The Tribunal referred to judicial precedents, including decisions of the Supreme Court and a High Court, interpreting section 5 of the Limitation Act, 1963, and emphasizing a justice-oriented and liberal approach in condonation of delay where sufficient cause is shown and substantial justice would otherwise be defeated.

Interpretation and reasoning

2.2 The assessee explained the delay through an affidavit and condonation petition, supported by medical certificates, stating that its director was suffering from high fever and jaundice and was unaware of the ex parte order of the first appellate authority.

2.3 The Court found from the affidavit and medical evidence that the assessee was prevented by reasons beyond its control from filing the appeal within the prescribed period. There was no material to suggest any deliberate or mala fide conduct, and the Revenue did not produce any contrary material.

2.4 Relying on the principles laid down in the cited Supreme Court and High Court decisions, the Court held that a liberal and justice-oriented approach should be adopted, particularly where the merits of the case would otherwise be shut out solely on limitation.

Conclusions

2.5 The delay of 69 days in filing the appeal was held to be satisfactorily explained, and the delay was condoned.

Issue 2: Taxability of cash deposits of Rs. 50 lakhs during demonetization under section 69A

Legal framework (as discussed)

2.6 The addition was made under section 69A of the Income-tax Act, 1961, treating cash deposits during demonetization as unexplained money. The Tribunal also referred to its own earlier decisions where additions under section 69A were deleted when the source of cash deposits was explained and not effectively disputed by the department.

Interpretation and reasoning

2.7 The assessee, engaged in real estate and construction business, had deposited Rs. 50 lakhs in its bank account during the demonetization period. The explanation was that the company had raised Rs. 250 lakhs as share application money in financial year 2013-14 (relevant to assessment year 2014-15), withdrawn that amount in cash in that year, and subsequently deposited part of it (Rs. 50 lakhs) in financial year 2016-17.

2.8 The Court noted that the Revenue had not disputed that the assessee was a registered company listed on the stock exchange, nor had it disputed the fact of the share application money of Rs. 250 lakhs having been raised and recorded. Thus, the primary source of funds stood accepted on the record.

2.9 The Assessing Officer rejected the explanation mainly on the ground that it was improbable for the assessee to keep such cash for about three years and that the assessee was not regularly depositing money in the bank account. The first appellate authority confirmed this view.

2.10 The Court held that, considering the nature and scale of the assessee's business in real estate and construction, retention of Rs. 50 lakhs in cash over the period was not unusual, and the amount could not be considered substantial in the context of a corporate real estate concern. Cash in hand for business functioning was commercially justifiable, and the mere time gap between withdrawal and deposit did not, by itself, render the explanation implausible.

2.11 The Court emphasized that the source of the cash (share application money raised earlier and already on record) was clearly explained and not specifically challenged by the Revenue. In absence of any evidence that such cash had been used elsewhere or that the explanation was false, the presumption of unexplained money under section 69A could not be invoked.

2.12 The Court relied on its earlier coordinate bench decisions where, in similar demonetization-period cash deposit cases, additions under section 69A were deleted when: (i) the business nature and turnover were accepted; (ii) cash-in-hand balances were disclosed in earlier balance sheets; (iii) the department had not shown alternate use or falsity of such cash; and (iv) the only objection was the time gap or the fact of deposit during demonetization.

Conclusions

2.13 The explanation of the assessee regarding the source of Rs. 50 lakhs of cash deposits was accepted as satisfactory and genuine.

2.14 The application of section 69A to treat the said deposits as "unexplained money" was held to be misplaced.

2.15 The order of the first appellate authority sustaining the addition was set aside, and the Assessing Officer was directed to delete the addition of Rs. 50 lakhs. The appeal was allowed in full.

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