Demonetization period in the Indian economy is considered as one of the most significant event since government had undertaken an important step in curbing out the black money from the Indian market. The demonetization decision came with certain challenges for many people as a large portion of society dealing in cash business was asked to submit the source of cash that they were about to deposit. Many people received notices asking for clarification from people regarding the sources of their deposited cash.
The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) heard the Amikrupa Education Trust case where assessing officer had added the entire amount of cash deposits of assesee to income invoking provisions of Section 69A of the Income Tax Act, 1961.
What does Section 69A provides?
Section 69A talks about persons holding certain assets that are not recorded in the books of accounts and no source of income or explanation is given for the same.
If in any financial year the assessee is found to be the owner of any money, bullion, jewellery or any other valuable article and the same is not recorded in the books of accounts, if any maintained by him for any source of income and assessee does not offer explanation about the nature and source of acquisition of the above mentioned assets or the explantion is not satisfactory in the opinion of A.O., then the money and the value of all other assets and articles may be deemed to be income of the assessee for that particular financial year.
Issues Involved:
The assessee trust filed its return of income for assessment year 2017-18 on 07-11-2017 declaring total income at Rs. nil. The case was selected for complete scrutiny and notice u/s. 143(2) was issued on 24-09-2018 and the same was communicated to the assessee.
According to the cash book provided by assessee, total cash on hand as on 01-11-2016 is of Rs. 51,33,134/-. Out of this cash balance on hand, the assessee has shown cash deposit into bank account with Kotak Mahindra Bank amounting to Rs. 49,80,000/-. The A.O. after taking cognizance of the assessee’s submission made addition of Rs. 49,80,000/- under Section 69A on account of unexplained money.
However, The assessee submitted that the transactions are duly recorded in audit books of accounts of the assessee and thus it cannot be treated as unexplained money under Section 69A of the Income Tax Act.
Facts Explained:
In the return of income, the trust has shown gross receipts of Rs. 1,42,83,126/- and has applied income of Rs. 1,73,98,907/- for revenue expenditure towards objects of trust. The Assessing Officer observed that on 01-11-2016 the assessee has shown accumulated cash on hand of Rs. 10,09,134/- thereby showing cash receipt of Rs. 22,04,000/- towards study tour expense of Rs. 18,30,000/- Building Event
Fund on 01-11-2016.
Aggrieved by the assessment order, assessee had appealed before CIT(A) , but CIT(A) dismissed the appeal. A.R. submitted that the study tour fund, Buildthon event fund as well as the cash in hand was properly shown in the books of accounts including the other related cash received by the assessee.
A.R submitted that A.O. refused to accept the assessee’s contention with respect to the cash deposited during the period 09-11-2016 to 31-12- 2016 nearly on the pretext that the same was deposited during the demonetization period and hence was suspicious in nature.
It is pertinent to note from the submissions made that the books of accounts of the assessee trust were never rejected at any point of time by the Assessing Officer. Besides this, the evidences produced by the assessee before the Assessing Officer as well as before the CIT(A) clearly shows that the assessee has received fees from students related to the event as well as study tour including the buildthon event fund. The assessee has given the cash bills as evidences from bank from 01-04-2016 to 08-11-2016. Hence, the assessee has given the expenses for the said period. Thus, the assessee has given all the details as to how the assessee has that much cash in hand during the demonetization period. This was never doubted by the Revenue.
Conclusion:
A.O. and CIT(A) invoked provisions of Section 69A merely on the grounds that the volume of cash deposits made by assessee during the demonetization period were reasons for suspicious transactions. However, assessee had presented all the cash receipts transactions and expenses in fron of A.O. and CIT(A). Neither A.O. nor CIT(A) ever rejected books of accounts of assessee and assessee had shown everything in its audit books as well. Thus, A.O. and CIT(A) was not right in making the addition of cash deposits amounting to Rs. 49,80,000/- in bank account during the demonetization period by invoking section 69A as the assessee has fully explained the cash deposits and thus the same cannot be treated as unexplained money. Thus, the appeal of the assessee was allowed.
About Author:
CA Chinmay Shirish Agate
Chinmay Agate is a Practicing Chartered Accountant having 4+ years of experience and expertise in the field of Direct Taxation and Auditing compliances. In the past, he worked in various CA firms and comes with wide industry experience from services, retail to manufacturing to trading where he has handled various complex assignments. He has keen interest in Forex and Derivative knowledge as well as fundamental analysis.