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:-
|Bank Account Number
|Nature of Account
|Cash deposit during Demonetization period
|Total Cash deposit in SBN (demonetized currency)
The AO required the assessee to explain the cash deposit and assessee in reply furnished extract from his cash book as evidence of having received rental income in cash from the tenants. The assessee also produced cash book extracts indicating opening cash in hand as on 01.04.2016 amounting to Rs.53,39,863/- but the AO after perusal of income-tax return for assessment year 2016-17 which show that cash in hand as on 31.03.2016 was only ‘nil’ noted that there is no cash in hand available as on 01.04.2016. Accordingly, he treated the cash deposit in assessee’s bank account during demonetization period in the form of SBNs as unexplained money u/s.69A of the Act and added to the returned income of the assessee. Aggrieved, assessee preferred appeal before CIT(A). The CIT(A) also confirmed the action of AO. Aggrieved, assessee preferred appeal before Tribunal.
4. Before us, the ld.counsel for the assessee Shri T.N. Seetharaman argued on behalf of the assessee and filed paper-book consisting of pages 1 to 24. On the other hand, the Revenue was represented by ld. Senior DR, Ms. Sheila Parthasarathy, Addl.CIT.
5. The ld.counsel for the assessee before us filed paper-book and the relevant documents to prove the cash deposits that cash generated out of rental income of property as under:-
(i) Statement of Income for A.Y. 2017-18
(ii) Rental Income Property Wise for AY 2017-18
(iii) Month wise and Tenant Wise details of rent received
(iv) Balance Sheet and Profit & Loss A/c for the period 01.04.2014 to 31.03.2015
(v) Cash Book for the period 1-Apr-2015 to 31 Mar 2016
(vi) Balance Sheet and Profit & Loss A/c for the period 01.04.2015 to 31.03.2016
(vii) e-Proceedings Response Acknowledgement enclosing Cash Book for the period 01.04.2016 to 31.03.2017
(viii) Details of Amount deposited in Bank during the Demonetization period
(ix) Balance Sheet and Profit & Loss A/c for the period 01.04.2016 to 31.03.2017
The ld.counsel for the assessee before us explained from the statement of income, the number of properties rented out and the rent received by cheque and received in cash. The ld.counsel explained before us from the Paper-book that in the computation of income enclosed, there are many types of income earned by assessee i.e., rental income from various properties out of which some rent is received in cash and part rent is received in cheque. Further, there is profit and gains of business i.e., commission and agency business where the assessee has declared profit of Rs.5,27,325/-. The rental income declared for assessment year 2017-18 after claiming deductions is Rs.34,13,298/- that excludes the municipal taxes, standard deduction u/s.24(a), etc. The ld.counsel for the assessee took us through balance sheet as on 31.03.2015, wherein cash in hand declared is Rs.37,89,080/- and accepted by the Department in scrutiny assessment u/s.143(3) of the Act vide order dated 02.11.2017. The ld.counsel also took us through the balance sheet as on 31.03.2016, wherein cash in hand is at Rs.53,39,863/- and out of the same cash of Rs.36.73 lakhs was deposited during demonetization period in SBNs. The ld.counsel then took us through the cash book balance as on 17.11.2016, wherein cash balance is Rs.60,83,257/- and out of this cash, these cash was deposited on various dates and he correlated these entries with the deposits i.e., 36.73 lakhs. The ld.counsel for the assessee also clarified that in assessee’s case deposits was to the tune of Rs.35.53 lakhs and Rs.1.20 lakhs was in the name of assessee’s son. But, however he explained the entire cash is out of cash generated out of rental income and other incomes.
6. 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.
7. 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.
8. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 15th June, 2022 at Chennai.