The Chandigarh Bench of the Income Tax Appellate Tribunal (ITAT) upheld the addition of cash deposits made by a jewellery business owner during the demonetization period citing the rejection of the late Income Tax Return (ITR) filing and lack of satisfactory justification
Varun Kumar Jain, the assessee is a small trader operating under the name Varun Jewellery. During the demonetization period, the assessee deposited Rs. 12,34,000 in cash into his bank account.
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Despite the cash deposits, the assessee did not voluntarily file his income tax return within the stipulated time under Section 139(1) of the Income Tax Act, 1961. The Assessing Officer (AO) issued notices under Section 142(1) on 08.02.2018 and directed the assessee to file his income tax return by 31.03.2018.
The assessee did not respond to these notices or provide any valid explanation for the cash deposits during the assessment proceedings. On 23.09.2019, the assessee filed his income tax return well beyond the statutory deadline for the financial year 2016-17.
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The AO found that the late filing of the income tax return rendered it invalid and completed the assessment proceedings under Section 144 of the Income Tax Act. The AO treated the cash deposits of Rs. 12,34,000 as unexplained income under Section 69A of the Income Tax Act due to the lack of any evidence or documentation justifying the source of funds.
The AO included ₹2,98,080 in the taxable income as per the assessee’s computation of income, which was filed with the late return. On appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the additions.
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The assessee appealed before ITAT challenging the addition of Rs. 12,34,000 and the procedural deficiencies in the assessment proceedings. The assessee’s counsel argued that the cash deposits were sale proceeds from his jewelry business and that the delay in filing the return was due to unavoidable circumstances.
The revenue counsel countered that the late return was invalid and that the assessee had failed to substantiate his claims regarding the source of the cash deposits during the assessment.
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The two-member bench comprising A.D. Jain (Vice President) and Krinwant Sahay (Accountant Member) observed that the income tax return filed on 23.09.2019 was invalid and could not form the basis of the assessee’s appeal.
The tribunal dismissed the assessee’s appeal, upholding the addition of Rs. 12,34,000 as unexplained money under Section 69A due to the lack of a valid return and satisfactory explanation.
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