In a recent ruling, the Delhi Bench of the Income Tax Appellate Tribunal (ITAT) chaired by N.K. Balliya, Accountant Member and Kul Bharat, Judicial Member directed the Assessing Officer (AO) to delete the additions made under Section 69A of Income Tax Act, 1961 for the cash deposit of demonetized currency as the advance tax was paid under the Pradhan Mantri Garib Kalyan Yojana (PMGKY) Scheme, 2016
The decision of the Tribunal was above the 24 appeals filed by 8 appellants preferred against 3 sets of orders for the A.Y. 2017-18.
According to an assessment order, the assessees altogether made a total cash deposit of Rs. 32.75 crores during the demonetization period, which was treated as “revenue from other sources” and added back to the taxable income under the Section 69A of the Income Tax Act for the A.Y. 2017–18.
According to the AO, if the assessee is found to be the owner of any unexplained funds and the funds are not recorded in the books of accounts that the assessee retains for any source of income for which the assessee fails to account an explanation or the explanation offered by the assessee is not satisfactory, the assessee may be subjected to under Section 69A of the Income Tax Act.
The income tax return filed by the assessees was chosen for scrutiny assessment. Further, AO instructed assessees to present the certificate issued by the Principal Commissioner of Income Tax (PCIT) for declaration made under PMGKY Scheme..
The assessee was also summoned by the Additional Director of Income Tax (ADIT), Ambala in pursuant of the Section 131 of the Income Tax Act and the statements of the assessee was recorded.
Then, in accordance with Section 199C of the Finance Act of 2016, the assessees submitted a declaration in Form No. 1 on the taxation and investment regime from the PMGKY Scheme, 2016.
The assessees had paid advance tax with cash deposits of Rs. 32.75 crores as their income, which was later declared under the PMGKY Scheme, as determined by the pertinent records.
Additionally, there was no loss to the Revenue because the assessees paid taxes at a rate of 49.9% under the PMGKY Scheme rather than the standard maximum tax rate of 30%.
The Appellate Tribunal observed that the Assessee had presented a legitimate declaration in accordance with the PMGKY Scheme, 2016, and had duly paid penalties and taxes together with the required amount. Added, no stretch of imagination provisions of section 69A of the Income Tax Act can be applied on the mentioned facts.
Further the bench directed the AO to delete the impugned addition made under Section 69A of the Income Tax Act in respect of cash deposited in the bank account during the time of demonetization.
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