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2025 (9) TMI 305
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....2. The aforesaid appeal was admitted for hearing by this Court on 5-2-2024 by formulating the following substantial question of law:- "Whether the assessment in respect of the closing balance of cash-in-hand, shown in balance sheet of the preceding year which was brought down as an opening balance of the succeeding year, whether it can be an unexplained money under Section 69 A of Income Tax Act, 1961 of succeeding year and can be charged to tax under Section 115BBE of Income Tax Act?" 3. The original assessee late Smt. Kalawati Agrawal filed her return of income in respect of assessment year 2017-18 on 9-1-2018 declaring a total income of Rs. 12,83,090/-. In the relevant assessment year (demonetization announced by the Central Government on 8-11-2016), the assessee had deposited a sum of Rs. 23,00,000/- in Specified Bank Notes (SBN) in her bank account in Bank of Baroda on 1-12-2016 and reflected the said cash deposits at Part-E - Other Information Column D14(a) of return of income filed in ITR-1S. The case of the assessee was accepted for scrutiny assessment by the Assessing Officer by issuance of notice under Section 143(2) of the IT Act seeking requisite information....
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....t of persons to whom money was given and interest earned was not furnished. 4. Return of income for the assessment year 2016-17 showing sufficient cash balance filed on 2-12-2016 i.e. subsequent to making of cash deposit during demonetization period on 1-12-2016. 5. Intention of the assessee was to deposit her unaccounted money in the bank account and by using ITR-4S form to declare the cash balance of Rs. 23,45,301/- therein and treating interest income differently is just an afterthought to show the cash balance in the return of income to merely cover up the cash deposit during demonetization period. 5. Feeling aggrieved and dissatisfied with the order of the Assessing Officer, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) to which the learned CIT (Appeals) primarily concurred with the findings of the Assessing Officer and dismissed the appeal by order dated 23-3-2023. 6. Questioning the order passed by the CIT (Appeals) affirming the order passed by the Assessing Officer, the appellant herein preferred appeal before the Income Tax Appellate Tribunal (ITAT) which the ITAT by the order impugned dated 1-11-2023 partly allow....
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....ther submit that the income, whether unexplained or undisclosed, of relevant financial year alone can be assessed to tax in the same assessment year and not of the preceding assessment year and as such, Section 69A of the IT Act is not attracted. He would rely upon the decision of the M.P. High Court in the matter of Harlal Mannulal v. Commissioner of Income-tax, M.P.-I (1984) 147 ITR 11 (MP) to support his contention. 9. Mr. Ajay Kumrani, learned counsel appearing on behalf of the respondent herein/Revenue, would support the impugned order and submit that the ITAT has recorded well-reasoned findings of fact, which have not been shown to be perverse or unsupported by record. He would further submit that the ITAT has rightly held that a heavy burden lies upon the assessee to prove the source and availability of Rs. 23,00,000/- on 1-12-2016 and mere presence of a closing cash balance in the balance sheet, unsupported by corroborative cash flow or recovery details, cannot ipso facto prove the availability of that cash as a source for subsequent cash deposit, particularly where the assessee admits to having deployed that cash for lending activities. Therefore, the appeal deserves to....
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.... "69A. Unexplained money, etc.-Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year." 13. A focused perusal of the provisions contained in Section 69A of the IT Act would show that this provision is in the nature of deeming fiction engrafted under the IT Act which deems the money, bullion, jewellery or other valuable article to be income of the assessee for the financial year in which the assessee is found to be the owner of such money, bullion, jewellery or valuable article if the stipulated conditions are satisfied necessitating the invocation of the deeming fiction. 14. The p....
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....be the income of the financial year;" 15. Having noticed the provisions contained in Section 69A of the IT Act read with the principles of law laid down by their Lordships of the Supreme Court in D.N. Singh (supra) for invoking Section 69A of the IT Act, if the facts of the present case are examined, it would clearly emerge that the source of cash deposits made during the demonetization period pertains to and has its immediate inextricable nexus with cash withdrawals made by the assessee from regular disclosed bank account in the assessment year 2015-16 relevant to financial year 2014-15, which were thereafter advanced to various persons as short term loans and advances on which interest income was earned in the assessment year 2016-17 relevant to financial year 2015-16 and which were thereafter returned/refunded and consequently, lying with the assessee as closing cash-in-hand as on 31-3-2016 in the balance sheet drawn for the financial year 2015-16 and thereafter was carried out to the next financial year viz., financial year 2016-17 relevant to assessment year 2017-18 as opening balance and pursuant to demonetization announced by the Government, the same was deposited in SBN ....
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....turn filed by him has become final and no scrutiny proceedings are to be started in respect of that return. 19. Similarly, in the matter of Principal Commissioner of Income Tax, Central-3 v. Abhisar Buildwell Private Limited (2024) 2 SCC 433, on the aspect of the return attaining finality when accepted in an assessment undertaken under Section 143(1)(a) of the IT Act and mandatory scrutiny notice under Section 143(2) not issued by the stipulated time limit and the same being treated as a case of completed/unabated assessment in the context of provisions of Section 153A assessments in cases of search and seizure, it was held by their Lordships of the Supreme Court that the completed/ unabated assessments can be re-opened by the AO in exercise of powers under Sections 147/148, subject to fulfillment of the conditions as envisaged/mentioned under Sections 147/148 and those powers are saved. 20. Not only this, the provisions of Section 69A of the IT Act contemplate that the 'money' (cash deposit in the present case) could be deemed to be in the nature of income only in the financial year in respect of which the assessee is found to be the owner and in the instant case, by offerin....
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....herefore, open to the Tribunal to accept the genuineness of these books of account and accept the explanation of the appellant in part as to Rs. 1,50,000 and reject the same in regard to the sum of Rs. 1,41,000. (ii) that the circumstances relied on by the Income-tax Officer were matters of pure conjecture, suspicion and surmises: the notoriety for smuggling foodgrains was merely a background of suspicion and the appellant could not be held to have indulged in smuggling without any evidence; the cancellation of the foodgrain licence and the prosecution of the appellant were of no consequence inasmuch as the licence was was restored and the appellant was acquitted of the offence with which it was charged; the mere possibility of the appellant earning considerable amounts in the account year was a matter of pure conjecture; and the fact that the appellant indulged in speculation did not legitimately lead to the inference that the profits in speculative transactions could exceed the value of the notes; (iii) that the Appellate Tribunal could not have come to the conclusion that the sum of Rs.1,41,000 comprising 141 high denomination note was not satisfactorily explai....