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2025 (6) TMI 1636 - AT - Income TaxAddition u/s 69A r/w/s 115BBE - large cash deposits during demonetization period as compared to returned income - assessee stated that the source was earlier cash withdrawals by him from FYs 2014-15 to 2015-16 and also withdrawals during the year before the demonetization - HELD THAT - Appellant himself submitted that he is a retired person and leads a very simple and frugal life. Hence it is not understood as to why the appellant would keep on withdrawing cash so many occasions if he already had substantial cash-in-hand due to the earlier withdrawals. This is against normal human behaviour. The appellant had also not been able to file any evidence whatsoever before the AO or CIT(A) or the Tribunal that he needed cash to purchase a property at Vishakhapattam. No agreement of sale or evidence of any advance has been filed by the appellant to substantiate such claim. CIT(A) has rightly observed that it is a makebelieve story and feeble attempt by the appellant to explain away the onus of proof regarding the source of cash deposits. Hence explanation of the appellant that the amount of cash withdrawn from 27.06.2014 to 21.10.2016 amounting to Rs. 18, 46, 000/- was used for re-deposit cannot be accepted in toto. Assessee had withdrawn Rs. 6, 00, 000/- on 26.09.2016 and Rs. 3, 00, 000/- on 21.10.2016. These two withdrawals totalling to Rs. 9, 00, 000/- just prior to demonetization period is accepted as part of the explained source of deposits of Rs. 18, 46, 000/-. It is so held because the assessee had also withdrawn of Rs. 49, 000/- each from his three bank accounts (Total Rs. 1, 47, 000/-) on 01.07.2016. This amount of Rs, .1, 47, 000/- was sufficient to take care of his personal and household expenses till the demonetization period. Hence AO is directed to delete Rs. 9, 00, 000/- from the total addition of Rs. 18, 46, 500/- The remaining addition of Rs. 9, 46, 500/- (Rs.18, 46, 500 Rs. 9, 00, 000/-) is upheld. The ground is partly allowed. Applicability of provisions of Sec. 69A to the impugned addition - As per the computation of income filed by the appellant sources of income were interest on SB account pension received interest on FD NSC interest other interests etc. Such income from other sources was Rs. 3, 70, 454/-. The appellant has not been able to establish the nexus of these disclosed sources with the cash deposited in the bank accounts. Hence the impugned amount sustained by us in the preceding para takes the character of unexplained money within the meaning of Section 69A of the Act. The appellant was found to be the owner of such money and he has not been able to offer explanation about the nature and source of acquisition of the said money. As already discussed the explanation offered by him was also not found satisfactory. Therefore mischief of the provisions of Section 69A are clearly attracted in the present case. We do not find any infirmity in the order of lower authorities. Hence this ground of assessee is dismissed. Applicability of Section 115BBE - This is repetitive issue before the Tribunal in many cases. So far as taxing the addition at the enhanced rate of tax u/s 115BBE is concerned we find that Divisions Bench as well as SMC Bench of this Tribunal in a series of case has held that enhanced rate prescribed u/s 115BBE is not applicable for AY 2017-18. Useful reference may be made to the cases of Samir Shantilal Mehta 2023 (5) TMI 1279 - ITAT SURAT Arjunsinh Harisinh Thakor 2023 (6) TMI 770 - ITAT SURAT and Jitendra Nemichand Gupta 2023 (6) TMI 1338 - ITAT SURAT and Punjab Retail Pvt. Ltd 2021 (11) TMI 405 - ITAT INDORE and Sandesh Kumar Jain 2022 (11) TMI 126 - ITAT JABALPUR Accordingly ground raised by the assessee is allowed. Appeal of the assessee is partly allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal in this appeal are:
2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Validity of addition under Section 69A of the Act on unexplained cash deposits Relevant legal framework and precedents: Section 69A of the Act deals with unexplained money, where any sum found deposited in a bank account of the assessee is deemed to be income of the assessee if the assessee fails to satisfactorily explain the nature and source of such money. The burden lies on the assessee to establish the source of deposits. The Tribunal considered precedents where cash deposited shortly after withdrawal was accepted as a reasonable explanation, but also noted that mere assertions without corroborative evidence are insufficient. Court's interpretation and reasoning: The Tribunal acknowledged the undisputed fact that Rs. 18,46,500/- was deposited in the assessee's bank account during the demonetization period. The assessee claimed these deposits originated from cash withdrawals made over the preceding financial years and the current year, which were allegedly intended for purchasing a residential property at Vishakhapattam. However, the Tribunal observed that the withdrawals were made on numerous occasions, even though the assessee claimed to have kept cash in hand, which was inconsistent with normal human behavior. The Tribunal also noted the absence of any documentary evidence such as agreement of sale or advance payment for the house purchase, weakening the assessee's explanation. Key evidence and findings: The assessee submitted details of multiple withdrawals amounting to Rs. 18,46,000/- from 2014-15 to 2016, including Rs. 6,00,000/- and Rs. 3,00,000/- withdrawn shortly before demonetization. The assessee also withdrew Rs. 49,000/- on multiple occasions for household expenses. On the same day as the large deposit, the assessee transferred Rs. 18,00,000/- and Rs. 1,00,000/- to unknown accounts, which remained unexplained. Application of law to facts: The Tribunal partially accepted the explanation for Rs. 9,00,000/- withdrawn shortly before demonetization as genuine source of deposits, given the proximity and consistency with the claimed purpose. However, it rejected the remainder of the withdrawals as unsubstantiated and inconsistent with the assessee's lifestyle and behavior. The unexplained transfers on the day of deposit further cast doubt on the genuineness of the source. Treatment of competing arguments: The assessee argued that the deposits were legitimate, arising from accumulated savings and withdrawals for a house purchase. The Revenue contended that the explanation was a "make-believe story" lacking evidentiary support. The Tribunal sided with the Revenue on most of the amount, except the Rs. 9,00,000/- withdrawn shortly before demonetization. Conclusions: The Tribunal upheld addition of Rs. 9,46,500/- (Rs. 18,46,500/- less Rs. 9,00,000/-) under Section 69A as unexplained money, confirming the onus on the assessee to explain the source was not discharged fully. Issue 2: Applicability of Section 69A to the unexplained deposits Relevant legal framework and precedents: Section 69A applies when the assessee fails to explain the nature and source of money found deposited in bank accounts. The unexplained sum is deemed income and taxable accordingly. Court's interpretation and reasoning: The Tribunal noted that the assessee's disclosed sources of income (interest on SB accounts, pension, FD interest, NSC interest, etc.) totaling Rs. 3,70,454/- were insufficient and unrelated to the cash deposits. The assessee failed to establish any nexus between these disclosed incomes and the impugned deposits. Since the assessee was the owner of the money and failed to explain its source satisfactorily, the provisions of Section 69A were attracted. Key evidence and findings: The assessee's income sources were documented but did not explain the large cash deposits. The unexplained portion of Rs. 9,46,500/- was thus rightly treated as unexplained money. Application of law to facts: The Tribunal applied Section 69A to the unexplained portion of the deposits, as the assessee failed to discharge the burden of proof. Treatment of competing arguments: The assessee's contention that the deposits were from known sources was rejected due to lack of evidence. The Revenue's stand was upheld. Conclusions: The Tribunal dismissed the ground challenging applicability of Section 69A and upheld the addition under this provision. Issue 3: Applicability of Section 115BBE of the Act for enhanced tax rate on unexplained income Relevant legal framework and precedents: Section 115BBE prescribes a higher tax rate (60%) on unexplained income or investment. However, its applicability to AY 2017-18 was under scrutiny in various Tribunal decisions. Court's interpretation and reasoning: The Tribunal referred to a series of decisions by Division and Single Member Benches of the Tribunal holding that Section 115BBE was not applicable for AY 2017-18. The Tribunal relied on these precedents to conclude that the enhanced rate of tax under Section 115BBE should not be levied for the year in question. Key evidence and findings: The Tribunal noted consistent judicial pronouncements supporting non-applicability of Section 115BBE for AY 2017-18. Application of law to facts: The addition was to be taxed as income but not at the enhanced rate prescribed by Section 115BBE. Treatment of competing arguments: The assessee's argument against applicability of Section 115BBE was accepted. The Revenue did not contest this point vigorously. Conclusions: The Tribunal allowed the ground raised by the assessee and disallowed levy of tax under Section 115BBE for AY 2017-18. 3. SIGNIFICANT HOLDINGS The Tribunal made the following crucial determinations: "The explanation of the appellant that the amount of cash withdrawn from 27.06.2014 to 21.10.2016 amounting to Rs. 18,46,000/- was used for re-deposit cannot be accepted in toto... However, we find that assessee had withdrawn Rs. 6,00,000/- on 26.09.2016 and Rs. 3,00,000/- on 21.10.2016. These two withdrawals totalling to Rs. 9,00,000/- just prior to demonetization period is accepted as part of the explained source of deposits... The remaining addition of Rs. 9,46,500/- is upheld." "The appellant was found to be the owner of such money and he has not been able to offer explanation about the nature and source of acquisition of the said money. As already discussed, the explanation offered by him was also not found satisfactory. Therefore, mischief of the provisions of Section 69A are clearly attracted in the present case." "So far as taxing the addition at the enhanced rate of tax u/s 115BBE is concerned... enhanced rate prescribed u/s 115BBE is not applicable for AY 2017-18." The core principles established include:
Final determinations on each issue:
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