Muthusamy Mudaliar Prakasam Vs ACIT (ITAT Chennai)
Conclusion: Mere act of depositing cash into a bank account, even during demonetization, was not conclusive proof of unexplained income under Section 69A especially for a business operating under a presumptive tax scheme.
Held: Assessee was an individual running a jewellery shop in a rural area, deposited cash of ₹73.66 lakhs into their bank account during the 2016 demonetization period. He was covered by the presumptive taxation scheme under Section 44AD, which did not require the mandatory maintenance of detailed books of account. AO disregarded assessee’s explanation that the money came from regular business sales. Citing the lack of formal books, AO treated the entire deposit as unexplained money under Section 69A and applied the higher tax rate under Section 115BBE. Assessee submitted evidence like cash flow statements and comparative business data. This data showed that the cash deposits were supported by corresponding sales, and the growth in sales during that period was not abnormal or disproportionate to past business trends. Revenue department failed to bring any specific evidence on record to contradict the assessee’s explanation. It was held that nature of the assessee’s business (jewellery in a rural/agricultural area) inherently involved a high volume of cash transactions. Tribunal found assessee’s explanation, which was supported by a plausible cash trail and consistent business data, to be credible. An addition could not be sustained solely on the basis of cash deposits in a bank account, especially when the revenue did not provide any specific material to disprove the assessee’s explanation of the source.
