Cash Deposits from Medical Practice Not Unexplained; Section 68 Addition and 115BBE Taxation Held Unsustainable

ITAT Kolkata allowed the assessee's appeal, setting aside the order of CIT(A) sustaining addition u/s 68 and taxation u/s 115BBE. The Tribunal held that the cash deposits during the demonetization period represented professional receipts from medical practice, which were duly recorded and partially received in cash, as explained during assessment. The AO had already tabulated cash receipts and corresponding bank deposits, establishing that the funds were accounted money. Consequently, the conditions for invoking s.68 and taxing the amount at 60% u/s 115BBE were not satisfied.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether delay of 473 days in filing the appeal against the order of the appellate authority was liable to be condoned on the facts and circumstances of the case.

1.2 Whether cash deposits made during the demonetisation period, representing duly accounted professional receipts, could be treated as unexplained income under section 68 and taxed under section 115BBE.

1.3 Whether a second, duplicate appeal arising from the same matter was maintainable.

2. ISSUE-WISE DETAILED ANALYSIS

2.1 Condonation of delay in filing appeal

Interpretation and reasoning

2.1.1 The Tribunal noted that the assessee initially filed an appeal against the appeal effect order of the Assessing Officer instead of filing an appeal against the order of the appellate authority. The Bench had earlier indicated that such an appeal was not maintainable and that the correct remedy was to appeal against the appellate authority's order.

2.1.2 The subsequent appeal against the appellate authority's order was therefore filed with a delay of 473/478 days. The Tribunal found that the delay arose due to the assessee having pursued an incorrect remedy and that such delay could not be attributed to any fault or negligence on the part of the assessee.

2.1.3 The Tribunal regarded the reasons furnished as bona fide and genuine.

Conclusions

2.1.4 Delay in filing the appeal was condoned.

2.2 Taxability of cash deposits during demonetisation under sections 68 and 115BBE

Legal framework (as discussed)

2.2.1 The Assessing Officer had invoked section 68 to treat cash deposits of Rs. 28,27,000/- made during 09.11.2016 to 31.12.2016 as unexplained income, and taxed the same at 60% under section 115BBE. The appellate authority upheld both the addition under section 68 and the consequential application of section 115BBE.

Interpretation and reasoning

2.2.2 The Tribunal recorded that the assessee was a medical professional deriving income only from medical practice.

2.2.3 The assessee had explained before the Assessing Officer that approximately one-third of the total professional fees was received in cash and deposited in the bank. Cash receipts and corresponding bank deposits were furnished, which the Assessing Officer himself tabulated in the assessment order.

2.2.4 The appellate authority had observed that: (i) in the earlier year the assessee's receipts were Rs. 6.63 lakhs and cash deposits were Rs. 4,10,000/-, (ii) the assessee had been periodically depositing unutilised cash, and (iii) the reasons for retention of cash and its subsequent deposit post-demonetisation could not conclusively prove that the deposits represented fee receipts, and on that basis treated the deposits as unexplained.

2.2.5 The Tribunal disagreed with this approach and held that, in view of the assessee's explanation and supporting details of cash receipts and bank deposits, the deposits during the demonetisation period represented accounted professional income of the assessee.

2.2.6 On these facts, the Tribunal held that the cash deposits could not be regarded as unexplained income under section 68 and that the consequent application of section 115BBE at 60% was not justified.

Conclusions

2.2.7 The Tribunal set aside the order of the appellate authority on this point and held that section 115BBE was not applicable in the assessee's case to the cash deposits in question.

2.3 Maintainability of duplicate appeal

Interpretation and reasoning

2.3.1 The Tribunal was informed that one of the appeals was a duplication of the other, arising from the same matter, and was not maintainable.

2.3.2 The assessee sought to withdraw the duplicate appeal.

Conclusions

2.3.3 The Tribunal dismissed the duplicate appeal as withdrawn and not maintainable.

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