2024 (3) TMI 1432 - AT - Income Tax

Unexplained cash deposit u/s 69A - cash deposited during demonetization period - HELD THAT - Amount of Rs. 50, 000/- was deposited by the assessee out of her tuition fee income. We note that assessee has explained the source of cash deposit in bank account in a satisfactorily manner hence we delete the addition of Rs. 50, 000. Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered in this judgment was whether the addition of Rs. 50,000 as unexplained cash deposit under Section 69A of the Income Tax Act, 1961, was justified. This issue arose from the cash deposits made by the assessee during the demonetization period, which were scrutinized by the tax authorities.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The primary legal framework involved was Section 69A of the Income Tax Act, 1961, which deals with unexplained money, where the assessee is required to satisfactorily explain the nature and source of money found in their possession. The case also referenced government instructions and press releases regarding the treatment of cash deposits during the demonetization period, specifically the blanket exemption of Rs. 2,50,000 for small deposits.

Court's Interpretation and Reasoning

The Tribunal examined the explanation provided by the assessee for the cash deposits, particularly the Rs. 50,000 in question, which was claimed to be from tuition fees. The Tribunal considered the documentary evidence presented by the assessee, including income returns, bank statements, and a cash register of tuition fees, to determine the legitimacy of the claim.

Key Evidence and Findings

The assessee provided several documents to support her claim, including:

• Income tax returns and computation of income for multiple assessment years.
• Bank account statements from Prime Co-Op. Bank for the relevant financial year.
• A cash register detailing tuition fees received from April 1, 2016, to November 21, 2016.

These documents were intended to substantiate the claim that the Rs. 50,000 deposit was derived from legitimate tuition income.

Application of Law to Facts

The Tribunal applied Section 69A to assess whether the cash deposit was unexplained. It considered the exemption announced by the government for small deposits and the evidence provided by the assessee. The Tribunal found the explanation satisfactory, as the evidence supported the claim that the deposit was from tuition income.

Treatment of Competing Arguments

The Tribunal considered the Revenue's argument that the assessee had already received sufficient relief from the lower appellate authority, which had upheld the addition of Rs. 50,000. However, the Tribunal found the assessee's documentary evidence convincing enough to warrant deleting the addition.

Conclusions

The Tribunal concluded that the assessee had satisfactorily explained the source of the Rs. 50,000 deposit, and therefore, the addition under Section 69A was unjustified. Consequently, the Tribunal allowed the appeal, deleting the addition.

SIGNIFICANT HOLDINGS

The Tribunal held that:

• The explanation provided by the assessee regarding the source of the Rs. 50,000 deposit was satisfactory and supported by documentary evidence.
• The addition of Rs. 50,000 under Section 69A was deleted, as the Tribunal was convinced that the deposit was from legitimate tuition income.
• The Tribunal emphasized the importance of considering the government's instructions and press releases during the demonetization period, which provided a blanket exemption for small deposits.

"We note that assessee has explained the source of cash deposit in bank account in a satisfactorily manner, hence we delete the addition of Rs. 50,000."

The Tribunal's decision underscores the necessity for tax authorities to thoroughly evaluate the evidence presented by taxpayers, especially in the context of government policies and exemptions applicable during specific periods, such as demonetization.