Shri Krishnapandian Balaji Vs DCIT (ITAT Chennai)
Introduction: Delve into the intricacies of the case involving Shri Krishnapandian Balaji and the Deputy Commissioner of Income Tax (DCIT) as the Income Tax Appellate Tribunal (ITAT) Chennai addresses the issue of unexplained cash deposits during the demonetization period. The crux of the matter revolves around the assessee justifying the source of cash as rental income generated from various properties. This article provides an in-depth analysis of the proceedings and the tribunal’s decision.
Detailed Analysis: The article presents a comprehensive analysis of the arguments put forth by both parties. The Assessing Officer (AO) raised concerns about the substantial cash deposits made by the assessee during demonetization, especially noting the apparent inconsistency in the cash in hand figures between the income tax return (ITR) and the cash book. The ld. counsel for the assessee clarified that the cash mentioned in the ITR pertains to business cash in hand, not individual cash earned from rental income.
Emphasizing the maintenance of separate personal and business accounts, the counsel argued that the declared ‘nil’ cash in hand in the business account does not negate the existence of individual cash, particularly earned from rental income. The ld. counsel supported the claim with detailed documentation, including statements of income, rental income property-wise, month-wise details of rent received, and cash book extracts.
During the proceedings, the Bench raised specific queries about the AO’s observation of ‘nil’ closing cash as per ITR, and the counsel provided a clear explanation, highlighting the individual capacity in maintaining personal accounts. The Senior DR failed to counter these explanations, and the presented facts remained uncontroverted.
Conclusion: After a thorough examination of the facts, the ITAT Chennai accepted the assessee’s explanation. The tribunal acknowledged that the source of the cash deposits, amounting to Rs.36.73 lakhs during demonetization, was indeed the rental income generated from various properties. The decision emphasizes the importance of understanding the nature of accounts, distinguishing between business and individual capacities, and recognizing the legitimacy of cash earned from specific sources.
In light of the clarified source of the cash, the ITAT Chennai allowed the appeal filed by Shri Krishnapandian Balaji, providing resolution to the cash deposit issue raised by the AO. This decision sets a precedent for cases where individuals demonstrate the legitimate origins of cash deposits during critical periods, ensuring a fair and justified assessment.
When a specific query was raised by the Bench, as regards to noting made by AO as well as CIT(A) that the closing cash as on 31.03.2006 is ‘nil’ as per ITR, the ld.counsel explained that in ITR the assessee is declaring business cash in hand and not the cash in hand kept in individual capacity and earned out of rental income. He explained that the assessee is maintaining personal accounts in his individual capacity and business account in his proprietorship capacity for business purposes in which, the cash in hand is ‘nil’. When these facts were confronted to ld. Senior DR, she could not reply anything about the cash balance available in the cash book and the rental income earned by the assessee month-wise and tenant-wise and rent earned in cash. The complete paper-book was confronted to ld. Senior DR but she could not controvert the above fact situation.
After going through the facts in entirety, we noted that the source of cash is rental income from where the assessee has generated cash to the tune of Rs.36.73 lakhs which was deposited in the bank accounts as mentioned above. Hence, we treat the cash as explained and allow the appeal of the assessee on this issue.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre in Appeal No.CIT(A), Chennai-12/10317/2019-29, order dated 28.07.2021. The assessment was framed by the DCIT, Non-Corporate Circle 19(1), Chennai for the assessment year 2017-18 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 26.12.2019
2. The only issue in this appeal of assessee is against the order of CIT(A) confirming the addition made by the AO on cash deposit of Rs.36.73 lakhs representing Specified Bank Notes (SBNs) deposited into assessee’s savings bank account with Andhra Bank during the demonetization period as unexplained money u/s.69A of the Act. For this, assessee has raised various grounds numbering into 11, which are statement of facts and argumentative in nature. Hence, we need not to reproduce the same.
3. Brief facts are that the AO during the course of assessment proceedings noticed that the assessee has deposited cash in his bank account to the tune of Rs.36.73 lakhs during the demonetization period that represents SBNs and the details are as under:-
