2025 (12) TMI 354 - AT - Income Tax

Cash deposit addition under s. 69A deleted as business cash deposits accepted as explained, appeal allowed

Kirankumar Amrutlal Shah Versus The Income Tax Officer Ward 4, Palanpur

ITAT Ahmedabad allowed the assessee's appeal and deleted the addition made u/s 69A towards cash deposits in the bank account. The Tribunal noted that, as ... Addition u/s. 69A - Cash deposited in bank account of appellant - HELD THAT:- From the perusal of the submissions from Page 4 till 7 of the order of CIT(A), it can be seen that the assessee is regularly depositing the cash in his bank as the assessee receives cash on daily basis. This fact was not disputed either by the AO as well as CIT(A). The remand report also categorically mentions that the assessee furnished the details but as not pointed out as of further explanation is required from the assessee. The assessee has demonstrated before both the authorities related to cash deposits in his bank account and, therefore, CIT(A) as well as the AO was not right in making the addition. Appeal of the assessee is allowed. 1. ISSUES PRESENTED AND CONSIDERED 1.1 Whether cash deposits of Rs. 10,09,000/- made during the demonetization period in the assessee's bank accounts could be treated as unexplained money under section 69A of the Act, notwithstanding that the assessee was a cash-based trader and had furnished supporting records. 1.2 Whether, upon deletion of the addition under section 69A, the levy of tax under section 115BBE of the Act could survive. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Addition of Rs. 10,09,000/- as unexplained money under section 69A Legal framework (as discussed) 2.1 The assessment was made by treating cash deposits of Rs. 10,09,000/- in two bank accounts during the demonetization period as unexplained money under section 69A of the Act. The appellate authority confirmed the addition after obtaining a remand report. Interpretation and reasoning 2.2 The Tribunal noted that the assessee was a 'Kariyana Trader' dealing in consumer goods and regularly dealing in cash, with daily cash receipts deposited into bank accounts. This pattern of regular cash deposits was recorded in the order of the appellate authority and was not disputed by either the Assessing Officer or the appellate authority. 2.3 The Tribunal took into account that for the relevant financial year, as recorded on page 2 of the appellate order, the assessee had shown sales of Rs. 48,31,861/- with total income of Rs. 2,33,612/-, which was stated to be below the taxable limit. This was the assessee's explanation for not filing the return of income for the year in question. 2.4 From the submissions reproduced in the appellate order (pages 4 to 7), the Tribunal observed that the assessee had furnished VAT returns, income-tax returns of earlier years, bank statements, and cash deposit slips, and demonstrated a consistent pattern of cash deposits in earlier years as well (including cash deposits of Rs. 30,18,110/- in an earlier assessment year). 2.5 The Tribunal noted that the remand report 'categorically mentions that the assessee furnished the details,' and there was no finding that further explanation was required or that the explanation was disproved. Despite this, the authorities proceeded to sustain the addition under section 69A. 2.6 On these facts, the Tribunal concluded that the cash deposits were linked to the assessee's regular cash-based trading activity and had been adequately explained through the records produced. The approach of the Assessing Officer and the appellate authority in ignoring this material and still treating the deposits as unexplained was held to be unjustified. Conclusions 2.7 The Tribunal held that, in view of the established fact of the assessee's cash-based business, regular pattern of cash deposits, and the documentary evidence furnished (VAT returns, bank statements, cash deposit slips, and earlier years' returns), the addition of Rs. 10,09,000/- as unexplained money under section 69A was not sustainable. The addition was deleted. Issue 2: Levy of tax under section 115BBE on the said addition Interpretation and reasoning 2.8 The levy of tax under section 115BBE was entirely consequential to the addition made under section 69A. No independent reasoning was recorded justifying its application apart from the existence of that addition. Conclusions 2.9 Upon deletion of the addition under section 69A, the foundation for charging tax under section 115BBE ceased to exist. Consequently, the levy under section 115BBE could not be sustained and stood vacated as a corollary to the deletion of the substantive addition.