2024 (10) TMI 1683 - AT - Income Tax

Unexplained money u/s 69A - cash deposit made during demonetization period - HELD THAT - AO doubted the source of cash deposit. On considering all the facts assessee miserably failed to substantiate the entire cash deposit during the demonetization period. Central Board of Direct Tax (CBDT) in its Circular No. 3 of 2017 on the issue of cash deposit during demonetization directed to accept the cash deposit up to Rs.2, 50, 000/ -. Thus keeping in view the CBDT Instruction out of total addition of Rs.10, 50, 000/- Rs.2, 50, 000/-is allowed. Assessee is regularly filing return of income and shown gross total income of more than Rs.6, 00, 000/- in proceeding assessment years and the income from other sources on account of brokerage income is accepted. Therefore the assessee is also given benefit of availability of Rs.1, 50, 00/- thus out of total addition of Rs. 10.50 lacs Rs.4.00 lacs is deleted and remaining Rs.6, 50, 000/- is sustained. In the result ground no. 1 of appeal is partly allowed.

Summary

ISSUES:

1. Whether the addition of cash deposit of ? 10,50,000/- as unexplained money under section 69A of the Income Tax Act, 1961, is justified where the assessee failed to satisfactorily substantiate the source of such deposit.
2. Whether the provisions of section 115BBE of the Income Tax Act, 1961, are applicable for taxing the addition arising from unexplained cash deposits for the Assessment Year 2017-18.

RULINGS / HOLDINGS:

1. The addition of ? 10,50,000/- as unexplained money under section 69A was partly sustained, with ? 4,00,000/- deleted considering CBDT Circular No. 3 of 2017 allowing cash deposits up to ? 2,50,000/- and additional benefit of ? 1,50,000/- due to accepted income sources; the assessee failed to provide plausible explanation or evidence substantiating the entire cash deposit.
2. The provisions of section 115BBE of the Act are not applicable for the Assessment Year 2017-18; therefore, the addition cannot be taxed under section 115BBE and the appeal on this ground is allowed.

RATIONALE:

1. The legal framework applied includes section 69A of the Income Tax Act, 1961, which permits addition of unexplained cash deposits where the assessee fails to satisfactorily explain the source; the CBDT Circular No. 3 of 2017 guides acceptance of cash deposits up to ? 2,50,000/- during demonetization without adverse inference.
2. Section 115BBE prescribes special tax rates on unexplained income but was held inapplicable for AY 2017-18 by the Division Bench of the Tribunal, representing a binding precedent and doctrinal interpretation limiting the retrospective application of this provision.
3. The court emphasized the necessity of credible evidence to substantiate cash balances and income sources, noting absence of documentary proof such as ownership or bank reflection of rental income, and rejected "explanation beyond human probability."