The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) remanded the matter for re-examination due to the assessing officer’s failure to apply CBDT’s (Central Board of direct taxes) instructions on cash deposits during the demonetization period.
Gowdara Mahalingappa (assessee), a partner in M/s Gowdara Jayadevappa Silks & Sarees deposited Rs.58,40,000 in a joint savings bank account with IDBI Bank during the demonetization period. A show cause notice was issued to the assessee in this regard. In response, the assessee filed a detailed written statement that the funds were from the firm’s cash reserves intended for a property purchase in Bengaluru.
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The assessee claimed that the cash was withdrawn from the firm’s accounts and later deposited in the personal account due to difficulties with the firm’s bank during the demonetization period. The assessing officer was not satisfied with the responses and completed the assessment treating the entire cash as unexplained income under Section 69A of the Income Tax Act, 1961.
The assessee appealed against the order of the assessing officer before the Commissioner of Income Tax (Appeals). The CIT(A) relied on various rulings and dismissed the assessee’s appeal. Aggrieved by this decision, the assessee appealed before the ITAT, Bangalore.
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The assessee’s counsel argued that the deposited amount belonged to the firm, not the individual, and it was intended for the purchase of a property for business expansion. The counsel argued that the funds were already accounted for in the firm’s books, and thus, it was not unexplained income, not liable for tax.
On the other hand, the revenue counsel representative V. Parithivel supported the lower authorities’ order.
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The two-member bench comprising Laxmi Prasad Sahu (Accountant Member) and Keshav Dubey (Judicial Member) heard both sides’ arguments. The tribunal observed that CBDT had issued instructions for examining the cases regarding the cash deposits during the demonetization period.
The tribunal noted that the lower authorities failed to follow those instructions. The tribunal referred the co-ordinate bench in the case of M/s. Bhoopalam Marketing Services Pvt. Ltd. vs ACIT in ITA NO. 375/Bang/2022 where cash deposits during demonetization were remanded for re-examination based on CBDT instructions.
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The tribunal directed the AO to verify the cash deposits during the demonetization period following the CBDT’s instructions. Therefore, the appeal of the assessee was allowed.
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