2025 (7) TMI 864 - AT - Income Tax

Unexplained money u/s. 69A - taxing the income u/s. 115BBE @ 77.25% in a retroactive manner - onus to prove - HELD THAT - We observe that the assessee has furnished various corroborative evidences like Agricultural Income account Agricultural Expenses account Sales bills of agricultural produce Form 7 and 12 of agricultural land (showing crop harvested with details of area of land holding) day to day Cash Book establishing the source of cash on hand as on 10.11.16 before deposit thereof into the bank account. Assessee also submitted that he had withdrawn cash of Rs. 1, 00, 000/- from HDFC Bank account on 04.07.2016 which is also one of the sources of cash on hand of Rs. 3, 45, 000/- along with agricultural income receipts. CIT (Appeals) dismissed the evidences furnished by the assessee stating that the evidences produced by the assessee are in the nature of self-serving documents. CIT(Appeals) did not even grant credit of cash withdrawal of Rs. 1 lakhs from HDFC Bank account on 04.07.2016 held by the assessee without assigning any specific reason. Accordingly in our considered view this is a fit case where the primary onus of proving the source of cash deposit has been established by the assessee and the addition made by the AO is liable to be deleted.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal were:

(a) Whether the addition of Rs. 3,45,000/- on account of unexplained money under section 69A of the Income Tax Act was justified, given the assessee's claim that the amount represented agricultural income and related cash withdrawals.

(b) Whether the retrospective application of the amended section 115BBE, which imposed a higher tax rate of 77.25% on unexplained income instead of the earlier rate of 35.54%, was correctly applied by the Assessing Officer in taxing the Rs. 3,45,000/-.

(c) Whether the evidence submitted by the assessee, including agricultural income accounts, sales bills, land records (Forms 7 and 12), and cash book entries, sufficed to discharge the onus of proving the source of the cash deposits.

2. ISSUE-WISE DETAILED ANALYSIS

Issue (a): Justification of addition under section 69A for unexplained money

The relevant legal framework involves section 69A of the Income Tax Act, which mandates addition to income where any sum is found credited in the books of the assessee and the assessee fails to satisfactorily explain the source of such sum.

Precedents cited by the authorities included decisions emphasizing that the burden of proof lies on the assessee to explain the source of unexplained money. In particular, the Tribunal referred to Supreme Court rulings in Roshan Di Hatti Vs CIT and Kale Khan Mohammad Hanif Vs CIT, which held that the onus to prove the source of money found with the assessee rests on the assessee.

The Assessing Officer observed that the assessee had deposited Rs. 3,45,000/- in two bank accounts during the demonetization period but had not declared any agricultural income in the return for AY 2017-18. Consequently, the AO treated the deposits as unexplained and added the amount under section 69A.

On appeal, the assessee submitted detailed documents: agricultural income and expense accounts, sales bills for agricultural produce, Form 7 and 12 extracts indicating crop details and land area, and a day-to-day cash book. The assessee also pointed to a cash withdrawal of Rs. 1,00,000/- from the HDFC Bank account prior to the deposits, which contributed to the cash on hand.

The CIT(A) rejected these documents as self-serving and unverifiable, noting the absence of third-party confirmation and the joint ownership of the agricultural land by multiple individuals without clarity on the assessee's share or attributable income. The CIT(A) also observed that the assessee had not declared agricultural income in subsequent years and had not produced new evidence to counter the AO's findings.

The Tribunal, however, found that the assessee had furnished multiple corroborative evidences which collectively established the source of cash. The Tribunal criticized the CIT(A) for dismissing the cash withdrawal of Rs. 1,00,000/- without assigning any specific reason and for not granting due credit to the documents. The Tribunal held that the primary onus of proving the source of the cash deposit had been discharged by the assessee.

Thus, the Tribunal applied the law to the facts by recognizing the sufficiency of the evidence submitted, and concluded that the addition under section 69A was not justified.

Issue (b): Application of retrospective amendment to section 115BBE for higher tax rate

The appellant raised a ground challenging the retrospective application of the amended section 115BBE, which imposed a higher tax rate of 77.25% on unexplained income, instead of the earlier rate of 35.54%.

However, the Tribunal's order did not expressly address this issue in detail, as the primary dispute resolved was the addition of Rs. 3,45,000/- itself under section 69A. Since the Tribunal deleted the addition on the basis that the source of cash was satisfactorily explained, the question of applying section 115BBE retrospectively became moot.

Hence, the Tribunal implicitly negated the retrospective application issue by allowing the appeal on the foundational question of addition under section 69A.

Issue (c): Sufficiency and credibility of the evidence submitted by the assessee

The legal principle requires the assessee to provide credible and verifiable evidence to establish the source of unexplained cash deposits. The AO and CIT(A) doubted the credibility of the documents submitted, labeling them as self-serving and lacking third-party verification.

The Tribunal analyzed the nature of the evidence: agricultural income and expense accounts, sales bills, land records (Forms 7 and 12), and a detailed cash book. The Tribunal noted that the documents were not disputed by the Revenue during the hearing. It also emphasized that the CIT(A) failed to provide specific reasons for rejecting the cash withdrawal evidence and did not consider the cumulative effect of the documents.

Accordingly, the Tribunal found the evidence sufficient and credible to establish the source of cash. This led to the conclusion that the primary onus was discharged by the assessee, and the addition under section 69A was not sustainable.

3. SIGNIFICANT HOLDINGS

The Tribunal held:

"In our considered view, this is a fit case where the primary onus of proving the source of cash deposit has been established by the assessee and the addition of Rs. 3,45,000/- made by the Assessing Officer is liable to be deleted."

The Tribunal established the principle that when an assessee furnishes corroborative and credible evidence, including detailed accounts, land records, and cash books, the burden of proof under section 69A can be discharged, and unexplained money additions cannot be sustained.

The Tribunal also implicitly held that the retrospective application of higher tax rates under amended section 115BBE is not relevant if the foundational addition under section 69A is deleted.

Final determination: The appeal was allowed, the addition of Rs. 3,45,000/- under section 69A was deleted, and the retrospective tax application issue was rendered academic.