Cash deposits explained through tailoring income and family gift, addition under Section 69A held unsustainable

ITAT Ahmedabad deleted the addition u/s 69A made on cash deposits in the assessee's savings bank account. It held that the assessee's cash book showing daily tailoring receipts was consistent and adequately explained the cash balance used for the deposit of Rs. 4,90,000, and the business activity had been accepted in the return. Regarding Rs. 5,00,000 claimed as a cash gift from the assessee's mother, the affidavit and donor's bank statement established identity and capacity, with no contrary evidence or cross-examination by the Revenue. Having discharged the initial burden, the assessee's explanation was held reasonable and the addition was unsustainable.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether the delay of 599 days in filing the appeal before the Tribunal was liable to be condoned on showing "sufficient cause".

1.2 Whether the cash deposits aggregating to Rs. 9,81,000/- in the assessee's savings bank account during the relevant assessment year were liable to be treated as unexplained money under section 69A.

1.3 Whether the explanation that part of the cash deposits arose from tailoring business receipts and part from a cash gift from the assessee's mother was satisfactorily established through evidences produced before the Tribunal.

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2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of delay in filing appeal

Legal framework (as discussed)

2.1 The Tribunal examined whether the assessee had demonstrated "sufficient cause" for the delay in filing the appeal, applying a pragmatic and justice-oriented approach, especially where delay is attributable to conduct of authorised representatives rather than a deliberate act of the litigant.

Interpretation and reasoning

2.2 The assessee, a lady of modest background with limited awareness of legal processes, had entrusted the matter to her erstwhile tax consultant and remained under the bona fide belief that the appeal was being properly handled.

2.3 The assessee became aware of the dismissal of her appeal only upon initiation of recovery proceedings by the Assessing Officer. On learning this, she engaged a new authorised representative who, on accessing the portal, discovered the order of the first appellate authority and took immediate steps to file the appeal.

2.4 The assessee had paid the appeal fee of Rs. 10,000/- on 12.06.2023 under instructions of her earlier consultant. Despite such payment, the consultant did not file the appeal, which caused the delay. The assessee affirmed lack of knowledge of this omission.

2.5 The challan evidencing payment of appeal fee corroborated the affidavit and showed the assessee's intent to prosecute the matter. The Tribunal held that the delay was caused by circumstances beyond the assessee's control and not by any mala fide or deliberate inaction.

Conclusions

2.6 The Tribunal held that "sufficient cause" was established, the delay was neither intentional nor mala fide, and, in the interest of substantial justice, the delay of 599 days was condoned.

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Issue 2: Taxability of cash deposits under section 69A - tailoring income and cash gift from mother

Legal framework (as discussed)

2.7 The central question was whether the assessee had satisfactorily explained the nature and source of cash deposits of Rs. 9,81,000/- so as to avoid addition as unexplained money under section 69A.

2.8 The Tribunal proceeded on the principle that once the assessee discharges the initial burden by furnishing plausible and supported explanation with evidences, the Revenue must bring material on record to disprove the same; additions cannot rest merely on suspicion.

Interpretation and reasoning - tailoring business receipts (Rs. 4,90,000/-)

2.9 The assessee claimed that Rs. 4,90,000/- deposited on 03.11.2010 was sourced from accumulated receipts of her tailoring business for the current and earlier years.

2.10 Before the Tribunal, the assessee produced a cash book for the relevant year showing daily cash receipts from tailoring activity, a running cash balance, and entries leading to the cash deposit. The entries were found to be consistent and regular.

2.11 The Tribunal observed that the cash balance as on 03.11.2010, as per the cash book, was sufficient to explain the deposit of Rs. 4,90,000/-. There was no material on record to doubt the existence of tailoring business, particularly when the return of income reflecting tailoring receipts had been accepted.

2.12 In absence of any contrary evidence or challenge from the Revenue to the genuineness of the cash book or the tailoring business activity, the Tribunal held that the explanation regarding this part of the deposit was satisfactorily established.

Interpretation and reasoning - cash gift from mother (Rs. 4,91,000/-)

2.13 The assessee claimed that Rs. 4,91,000/- deposited on 20.09.2010 formed part of a cash gift of Rs. 5,00,000/- received on the same date from her mother.

2.14 To substantiate, the assessee produced before the Tribunal: (i) an affidavit of the mother confirming the cash gift of Rs. 5,00,000/-, and (ii) the mother's bank statement indicating sufficient availability of funds to make such a cash gift.

2.15 The Tribunal held that the identity of the donor and the capacity to make the gift were established through the affidavit and bank statement. The genuineness of the transaction stood supported in absence of any adverse material.

2.16 The Department did not seek cross-examination of the donor, nor brought any contrary evidence to discredit the affidavit or the bank statement. No contradiction in the evidences was pointed out.

Burden of proof and evidentiary appreciation

2.17 The Tribunal held that the assessee had discharged the initial burden of proof regarding both sources-tailoring income and gift-by producing contemporaneous books of account, sworn affidavit, and bank statement of the donor.

2.18 Since the Revenue failed to bring on record any cogent material to rebut the evidences or to establish that the cash deposits were from unexplained sources, the Tribunal held that the addition under section 69A could not be sustained merely on the basis that no evidence was produced at earlier stages.

Conclusions

2.19 The Tribunal concluded that (i) the cash deposit of Rs. 4,90,000/- on 03.11.2010 was satisfactorily explained as arising from accumulated tailoring business receipts as per the cash book, and (ii) the cash deposit of Rs. 4,91,000/- on 20.09.2010 was satisfactorily explained as part of a cash gift of Rs. 5,00,000/- from the assessee's mother, whose identity and capacity were established.

2.20 The explanation offered by the assessee was held to be reasonable, verifiable and substantiated, and in the absence of any contrary material from the Revenue, the addition of Rs. 9,81,000/- under section 69A was found unsustainable.

2.21 The Tribunal directed deletion of the entire addition of Rs. 9,81,000/- made under section 69A and allowed the appeal.

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