Appeal allowed deleting s.69A addition on demonetization cash deposits recorded as business receipts, avoiding double taxation

ITAT Kolkata allowed the assessee's appeal and deleted the addition made u/s 69A for cash deposits during the demonetization period. It held that the cash deposits were already recorded as business receipts in the regular books of account, which had been accepted by the AO and CIT(A) without rejection. Since the corresponding profit had been offered to tax, treating the same cash as unexplained money u/s 69A resulted in impermissible double taxation. The Tribunal further held that s. 69A applies only to unexplained assets not recorded in the books, which was not the case here. The order of CIT(A) was set aside.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether cash deposits made during the demonetization period, which were recorded as business receipts in the regularly maintained and audited books of account, could be taxed as "unexplained money" under section 69A of the Income-tax Act, 1961.

1.2 Whether the addition of the entire amount of such recorded cash deposits, in addition to taxing the business profits already computed from those very receipts, resulted in impermissible double taxation of the same income.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Applicability of section 69A to cash deposits recorded in books as business receipts

(a) Legal framework (as discussed)

2.1 The Court reproduced section 69A, noting that it applies where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article which is not recorded in the books of account (if any) maintained for any source of income, and for which no satisfactory explanation is offered; in such cases, the money or value of such assets may be deemed as income of the financial year.

(b) Interpretation and reasoning

2.2 The assessee had treated and recorded the cash deposits made during the demonetization period as business receipts from tour and travel business in its audited books of account.

2.3 The profit and loss account and balance sheet, along with the return and computation, were furnished; the books of account were audited and no adverse remark was made by the auditor.

2.4 The Assessing Officer, while completing the assessment under section 143(3), examined these books and financials and did not reject the books of account, nor did he disbelieve the operational results or the recorded sales.

2.5 Both the Assessing Officer and the appellate authority accepted the net profit as per the profit and loss account and treated the cash deposits as business receipts, yet the Assessing Officer separately invoked section 69A on the entire amount of cash deposited.

2.6 The Tribunal held that section 69A is confined to money etc. not recorded in the books of account; where the receipts are duly entered in the books and form part of the regular business turnover, section 69A cannot be invoked.

2.7 Reliance was placed on the coordinate bench decision holding that cash deposits, when shown as sales/business receipts in books not rejected by the Assessing Officer, cannot simultaneously be treated as unexplained money under section 69A.

(c) Conclusions

2.8 Section 69A has no application to cash deposits which are already recorded as business receipts in the regularly maintained and accepted books of account.

2.9 The addition of Rs. 69,57,500/- under section 69A, in respect of such recorded receipts, was unjustified in law and unsustainable.

Issue 2: Double taxation arising from separate addition of recorded business receipts

(a) Interpretation and reasoning

2.10 The Tribunal found that the cash deposits during demonetization were treated as business receipts and included in the turnover; profits therefrom were offered to tax and accepted by the Assessing Officer without rejection of books.

2.11 By further adding the entire cash deposits under section 69A, the Assessing Officer effectively taxed the same amount twice: once as part of business income and again as unexplained money.

2.12 The Tribunal observed that such duplication amounts to "double taxation of the same amount," which is impermissible when the receipts stand fully accounted for and have already contributed to taxable profits.

2.13 The appellate authority had confirmed the addition without cogent reasoning on this aspect, rendering its order unsustainable.

(b) Conclusions

2.14 Since the cash deposits formed part of recorded business turnover and the resultant profit was already taxed, a further addition of the same amount under section 69A resulted in impermissible double taxation.

2.15 The appellate order sustaining the addition was set aside, and the Assessing Officer was directed to delete the addition of Rs. 69,57,500/-.

2.16 The appeal was allowed in full.

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