The Bangalore Bench of Income Tax Appellate Tribunal ( ITAT ) ruled that the addition under section 69A of Income Tax Act,1961 cannot be made solely on the claim that the assessee was not a specified person to accept demonetized currency.
Vikas Co-operative Credit Society,the appellant-assessee,was asked to explain cash deposits of Rs.15,58,500 for the Assessment Year ( AY ) 2017-18. The assessee explained that the deposits came from loan recoveries, pigmy collections, and member contributions and also claimed entitlement to a deduction under section 80P of the Act.
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The Assessing Officer ( AO ) completed the assessment under section 144 on 22.11.2019 and added Rs.9,76,825 as unexplained income under section 69A read with section 115BBE, believing the cash deposit was not valid due to demonetization. The AO also denied the deduction under section 80P and accounted for cash in hand as of 08.11.2016.
The assessee appealed to the First Appellate Authority ( FAA ), but since no documents were submitted, theCommissioner of Income Tax (Appeals) [CIT(A)] passed an ex-parte order. The CIT(A) granted the section 80P deduction based on the Supreme Court ruling in Mavilayi Service Co-operative Bank Ltd. vs. CIT (431 ITR 1) but confirmed the addition under section 69A read with section 115BBE due to lack of evidence.
The assessee appealed to the tribunal, stating they missed the FAA’s notice due to it being in their spam folder and argued that the AO wrongly dismissed their evidence by claiming they were not authorized to accept demonetized currency.
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The Tribunal reviewed the case and decided to give the assessee another opportunity, as the CIT(A)’s order was ex-parte. The issue of the Rs.9,76,825 addition under section 69A read with section 115BBE was sent back to the AO for a proper examination of the cash deposit source.
The AO was instructed not to base the addition on the claim that the assessee was not authorized to accept demonetized currency. If the source is found genuine, the addition should be removed.
The single member bench of George George K ( Vice President ) allowed the appeal filed by the assessee.
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