Cash Deposits During Demonetization Explained Through Disclosed Instrument Charges: ITAT deletes Addition u/s 69A [Read Order]

The New Delhi Bench of the Income Tax Appellate Tribunal (ITAT) deleted an income tax addition under Section 69A of the Income Tax Act, 1961 as the cash deposits during demonetization explained through disclosed instrument charges.

The appeal filed by the assessee, Akhil Prakash Hindu Undivided Family (HUF), is directed against the order of the Additional/Joint Commissioner of Income Tax (Appeals), Madurai, for the Assessment Year 2017-18, whereby the addition of Rs. 23,46,000 made under Section 69A of the Income Tax Act, on account of cash deposits made in the assessee’s bank account during the demonetisation period was upheld.

Dr. Akhil Prakash, a neurosurgeon, is the Karta of the assessee HUF. The HUF owned medical equipment leased to Dr. Akhil Prakash (individual) and earned instrument charges, which were received in cash over the years. To substantiate the cash receipts, the assessee placed on record income tax returns, computation statements, capital accounts, and balance sheets for AYs 2015-16 to 2017-18, showing receipt of instrument charges and cash-in-hand of ₹Rs. 2,74,240 as on 31.03.2016 accumulated over time.

It was further submitted that for AYs 2009-10 to 2014-15, no returns were filed as income was below taxable limits. The assessee also relied on the profit and loss accounts of Dr. Akhil Prakash for FYs 2010-11 to 2015-16 to demonstrate that the instrument charges paid were consistently claimed as expenditure by him.

The Counsel for the assessee contended that since the assessee has already offered to tax instrument charges received in cash in each of the assessment years, the same amount cannot be taxed again under Section 69A of the Income Tax Act as unexplained money. The ld. Counsel asserted that the cash deposits made in the month of November, 2016 in three instalments in the bank account of the assessee during demonetization were out of accumulated cash-in-hand. He thus prayed for deletion of the addition.

The counsel representing the Department defending the impugned order submits, that the source of cash deposits as explained by the assessee, i.e., accumulation of instrument charges received by the assessee in cash, is merely an afterthought. Reiterating findings of the AO and CIT(A), he prayed for upholding the impugned order and dismissing the appeal of the assessee.

The Tribunal of Vikas Awasthy, Judicial Member observed that “A perusal of documents available on record reveals that the assessee, in the preceding assessment years, i.e., A.Ys. 2015-16 to 2017-18, had reflected in its books instrument charges received from Dr. Akhil Prakash (Individual). Corresponding expenditure has been claimed by Dr. Akhil Prakash (Individual) in his Profit & Loss Account for the respective assessment years. Further, instrument charges received by the assessee have also been reflected in the assessee's computation of income.”

In conclusion, since the assessee’s balance sheet as on 31.03.2016 reflected an accumulated cash-in-hand of Rs. 22,74,240, the source of cash deposits during the demonetisation period stands satisfactorily explained. Accordingly, the Tribunal held that no addition under Section 69A of the Income Tax Act, is warranted.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates