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2025 (7) TMI 40 - AT - Income TaxUnexplained cash deposit in the bank account - CIT(A) erred in confirming the action of AO invoking section 115BBE and deleted 50% of the total addition - whether assessee has explained the nature and source of the alleged cash deposit? - HELD THAT - Cash in hand as on 01.04.2016 is Rs. 35, 965/- and cash balance as on 24.10.2016 is Rs. 43, 49, 428/-. The said balance appearing in the cash book is part of regular books of account which have not been rejected by the Assessing Officer as he has accepted the book results. The said cash balance has been utilised for depositing in the bank account during the demonetization period. Assessee has claimed that cash withdrawn on 16.09.2016 was for the purpose of purchase of immovable property but the same could not be materialised and the available cash in hand was deposited in the bank account. Even for the sake of argument it is found that assessee has not withdrawn cash for purchase of immovable property even then the withdrawal of cash is from the regular bank account and cash in hand available in the books is sufficient enough to explain the source of alleged cash deposit. CIT(A) has given the relief without discussing the facts in detail. The facts placed before us clearly demonstrate the source of cash deposit made by the assessee through bank account. We are of the considered view that since the assessee has successfully explained the source of alleged cash deposit no addition is called for. Impugned addition stands deleted. Effective grounds of appeal raised on merit are allowed.
1. ISSUES PRESENTED and CONSIDERED
The core legal questions considered by the Tribunal are: (a) Whether the addition of Rs. 30,32,500/- made by the Assessing Officer (AO) on account of unexplained cash deposits in the bank account, based on conjectures and surmises, is justified or whether the assessee has satisfactorily explained the source of such deposits. (b) Whether the First Appellate Authority (CIT(A)) erred in sustaining an addition of Rs. 15,00,000/- out of the total addition made by the AO, without adequately appreciating the explanation and evidence furnished by the assessee. (c) Whether the addition made under section 68 of the Income-tax Act, 1961, treating the cash deposits as unexplained credits, and consequent invocation of section 115BBE for levy of tax at 60%, is legally sustainable, especially considering the effective date of the amendment introducing section 115BBE. (d) Whether the additional ground raised by the assessee regarding the non-applicability of the enhanced tax rate of 60% under section 115BBE, effective from 01.04.2017, is admissible and applicable to the facts of the case. 2. ISSUE-WISE DETAILED ANALYSIS Issue (a) and (b): Justification of Addition on Account of Unexplained Cash Deposits Relevant Legal Framework and Precedents: The provisions of section 68 of the Income-tax Act empower the AO to treat any sum credited in the books of an assessee as unexplained if the assessee fails to satisfactorily explain the nature and source of such credit. The burden lies on the assessee to establish the genuineness of the transaction. Precedents emphasize that mere suspicion or conjecture cannot form the basis of addition. Court's Interpretation and Reasoning: The Tribunal examined the bank statements and the cash book maintained by the assessee. It was observed that the cash withdrawals from the bank account were duly recorded in the cash book and the cash balance as on 01.04.2016 was Rs. 35,965/-. The cash book reflected substantial withdrawals on various dates, including Rs. 5.00 lakh on 20.04.2016, Rs. 2.00 lakh on 04.07.2016, Rs. 3.50 lakh on 14.07.2016, Rs. 12.40 lakh and Rs. 8.10 lakh on 16.09.2016, Rs. 2.40 lakh on 27.09.2016, and Rs. 5.00 lakh on 24.10.2016. The cash balance as on 24.10.2016 was Rs. 43,49,428/-. The Tribunal noted that these withdrawals were from the regular bank account and were utilized for business purposes. The assessee contended that some of the cash withdrawn was intended for purchase of immovable property, which ultimately did not materialize, leading to redeposit of the cash in the bank account during the demonetization period. Even if this contention was not accepted, the Tribunal found that the cash withdrawals were from a regular bank account and the cash in hand recorded in the books was sufficient to explain the source of the alleged cash deposits. Key Evidence and Findings: The cash book and bank statements were accepted as regular books of account, not rejected by the AO. The Tribunal found that the cash balance recorded in the books was consistent and adequate to explain the deposits during the demonetization period. The AO's addition was based on conjecture without disproving the books of account. Application of Law to Facts: Since the assessee satisfactorily explained the source of the cash deposits by reference to withdrawals from the bank account and cash in hand, the addition under section 68 was unwarranted. The Tribunal emphasized that additions cannot be made merely on conjectures and surmises. Treatment of Competing Arguments: The AO and CIT(A) sustained the addition partly, but the Tribunal found that the CIT(A) did not discuss the facts in detail and failed to appreciate the evidence adequately. The Departmental Representative supported the lower authorities, but the Tribunal preferred the detailed documentary evidence and explanation furnished by the assessee. Conclusion: The addition of Rs. 15,00,000/- sustained by the CIT(A) was deleted by the Tribunal as the assessee had successfully explained the source of the cash deposits. Issue (c): Legality of Addition under Section 68 and Invocation of Section 115BBE Relevant Legal Framework: Section 68 deals with unexplained cash credits, allowing the AO to add such unexplained amounts to the income of the assessee. Section 115BBE imposes a tax at 60% on income referred to in subclauses (a) and (b), including unexplained cash credits, effective from 01.04.2017. Court's Interpretation and Reasoning: The Tribunal noted that the addition under section 68 was not sustainable as the source of cash deposits was explained. Consequently, the invocation of section 115BBE, which is contingent upon unexplained cash credits, was also unwarranted. The Tribunal further observed that the amendment introducing section 115BBE was effective from 01.04.2017 and the assessment year in question was 2017-18. Key Evidence and Findings: Since the addition under section 68 was deleted, the consequential levy under section 115BBE became academic. Application of Law to Facts: The Tribunal held that since the cash deposits were explained, the provisions of section 115BBE could not be applied. The additional ground raised by the assessee challenging the applicability of section 115BBE was thus rendered infructuous. Treatment of Competing Arguments: The assessee argued that section 115BBE was not applicable as the amendment was introduced subsequently, while the Departmental Representative supported the invocation of section 115BBE. The Tribunal accepted the assessee's argument on the effective date of the amendment but ultimately dismissed the ground as academic. Conclusion: The Tribunal dismissed the invocation of section 115BBE as the addition under section 68 was deleted, and the additional ground was held to be academic. Issue (d): Admissibility and Applicability of Additional Ground Regarding Section 115BBE Relevant Legal Framework: Legal grounds challenging the applicability of statutory amendments can be raised at the appellate stage if they are legal in nature and based on facts already on record. Court's Interpretation and Reasoning: The Tribunal admitted the additional ground raised by the assessee regarding the non-applicability of the enhanced tax rate under section 115BBE. However, since the addition under section 68 was deleted on merits, the Tribunal held the additional ground to be academic and dismissed it accordingly. Key Evidence and Findings: The Tribunal relied on the fact that the amendment to section 115BBE was effective from 01.04.2017 and that the assessment year was 2017-18. However, since no addition stood, the question of levy under section 115BBE did not arise. Application of Law to Facts: The Tribunal applied the principle that legal grounds can be admitted if based on facts on record but held that the ground was academic in light of the deletion of the addition. Treatment of Competing Arguments: The assessee's counsel placed reliance on a High Court judgment supporting the non-applicability of section 115BBE in similar circumstances. The Departmental Representative opposed the ground, but the Tribunal's decision on the merits rendered the issue academic. Conclusion: The additional ground was admitted but dismissed as academic. 3. SIGNIFICANT HOLDINGS "The facts placed before us clearly demonstrate the source of cash deposit of Rs. 30,32,500/- made by the assessee through bank account. Under these given facts and circumstances, we are of the considered view that since the assessee has successfully explained the source of alleged cash deposit, no addition is called for." "The said cash balance has been utilised for depositing in the bank account during the demonetization period. The cash book and bank statements are part of regular books of account which have not been rejected by the Assessing Officer as he has accepted the book results." "Since the addition of Rs. 15.00 lakh has been deleted, additional ground raised by the assessee is merely academic in nature and the same is dismissed as infructuous." Core principles established include:
Final determinations on each issue are: (i) The addition of Rs. 15,00,000/- sustained by the CIT(A) on account of unexplained cash deposits was deleted. (ii) The addition of Rs. 30,32,500/- originally made by the AO was not justified as the source of cash deposits was satisfactorily explained. (iii) The invocation of section 115BBE for levy of tax at 60% was not sustainable and was dismissed as academic. (iv) The additional ground challenging the applicability of section 115BBE was admitted but dismissed as academic.
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