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2025 (5) TMI 25 - AT - Income TaxAddition u/s 69A/115BBE - cash deposited in bank account during the demonetization period - as argued the said amount was duly recorded in the books of account and source of such amount was fully explained hence addition is against the specific provision of the Act - HELD THAT - Chennai Bench of the Tribunal in the case of PCIT Vs. M.C. Hospital 2022 (8) TMI 1483 - ITAT CHENNAI held that it is a settled principle of law that entries recorded in the books of account cannot be brought to tax u/s 69A. Since the assessee has recorded the transactions of cash deposits sales purchases stock etc. in the books of account the addition cannot be made u/s 69A of the Act. Decided in favour of assessee.
The core legal questions considered by the Tribunal in this appeal revolve around the applicability of section 69A of the Income Tax Act to cash deposits made during the demonetization period, specifically:
Issue-wise Detailed Analysis: 1. Applicability of Section 69A to cash deposits recorded in books of accounts Relevant legal framework and precedents: Section 69A of the Income Tax Act provides for deeming unexplained money, bullion, jewellery, or other valuables as income of the assessee if such assets are not recorded in the books of account and the assessee fails to satisfactorily explain their nature and source. The provision is triggered only when the assessee is found to be the owner of unrecorded assets. Several judicial pronouncements were relied upon by the assessee, including decisions from the Delhi High Court and various Tribunals, which have consistently held that additions under section 69A cannot be made in respect of amounts recorded in the books of accounts. Notable among these are:
Court's interpretation and reasoning: The Tribunal observed that the assessee had maintained audited books of accounts, duly filed tax audit reports, and had recorded the cash deposits in the bank account in the books. The source of the cash deposits was explained as being from cash sales, supported by invoices, stock registers, and bank statements. The assessee's business transactions were consistent over subsequent years, further corroborating the genuineness of the cash deposits. The Tribunal noted that the Assessing Officer (AO) failed to justify the application of section 69A to the case, as the cash deposits were not unexplained or unrecorded but were part of the declared income. The Tribunal relied on the plain language of section 69A and relevant judicial precedents to conclude that the provision is not applicable where the money is recorded and the source is satisfactorily explained. Key evidence and findings: The assessee produced purchase and sales invoices, stock registers, bank statements showing payments through banking instruments, agricultural income receipts, and tax audit reports. The AO did not dispute the genuineness of sales and purchases but sustained the addition based on suspicion and conjecture. Application of law to facts: Since the cash deposits were recorded in books and audited, and the source was satisfactorily explained with documentary evidence, the Tribunal held that section 69A could not be invoked. The addition was therefore unsustainable. Treatment of competing arguments: The AO and CIT(A) relied on suspicion and the theory of probability to sustain the addition, alleging that the cash deposits were unexplained. The assessee contested that these were baseless and contrary to the evidence on record. The Tribunal found the AO's objections to be flimsy and unsupported by material evidence. Conclusion: The addition under section 69A was deleted as the cash deposits were recorded in the books of accounts and the source was adequately explained. 2. Allegation of double taxation due to addition of declared income Relevant legal framework and precedents: The principle against double taxation prohibits taxing the same income twice. The assessee argued that since the sales and income were declared and taxed, addition of the same amount again under section 69A would amount to double taxation. Court's interpretation and reasoning: The Tribunal observed that the AO and CIT(A) did not provide any substantive basis for the addition beyond mere suspicion. The assessee's income was declared and accepted in the return of income, and the transactions were supported by documents. Therefore, adding the same amount again would violate the basic tenets of law. Key evidence and findings: The assessee's books and returns showed declared income corresponding to the cash deposits. The AO did not challenge the declared income substantively. Application of law to facts: Since the income was already declared and taxed, the addition under section 69A was inappropriate and tantamount to double taxation. Treatment of competing arguments: The revenue did not provide evidence to counter the claim of double taxation effectively. Conclusion: The Tribunal agreed with the assessee that addition of declared income under section 69A is not permissible. 3. Reliance on surmises and conjectures versus concrete evidence Relevant legal framework and precedents: Additions to income must be based on tangible evidence or material and not on mere suspicion or conjecture. Court's interpretation and reasoning: The Tribunal noted that the AO and CIT(A) sustained the addition based on doubts and probability theory, without any concrete material or evidence. The assessee had furnished detailed documentary evidence supporting the genuineness of transactions and cash deposits. Key evidence and findings: The assessee submitted invoices, bank statements, stock registers, and agricultural income receipts, none of which were disproved or disbelieved by the authorities on record. Application of law to facts: The Tribunal held that additions cannot be sustained on mere surmises when the assessee has furnished credible evidence. Treatment of competing arguments: The revenue's reliance on conjectures was rejected as contrary to the evidentiary record. Conclusion: The addition was not sustainable on the basis of surmises and conjectures. Significant Holdings: "Section 69A of the Act is applicable only where the assessee is found to be the owner of any money, bullion, jewellery or other valuable article which is not recorded in the books of account and the assessee fails to provide a satisfactory explanation about the nature and source of acquisition of such money or valuables." "Entries recorded in the books of account cannot be brought to tax under section 69A of the Act." "Addition under section 69A cannot be sustained merely on the basis of surmises and conjectures in the absence of any material or evidence against the assessee." "Where the income has been declared and accepted, addition of the same amount under section 69A amounts to double taxation and is not permissible." "The Tribunal finds that the Assessing Officer has failed to justify the application of section 69A to the case of the assessee when the cash deposits were duly recorded in the books of account and declared as income in the return of income." Accordingly, the Tribunal allowed the appeal on the legal ground that section 69A cannot be invoked in respect of cash deposits recorded in the books of account and for which the source has been satisfactorily explained. The other grounds relating to merits were left open as academic in nature following the deletion of the addition.
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