Cash deposited in bank account during demonetisation period can not be taxed on technical ground when it was fully exempt u/s 10(26), assessee being resident of Arunachal Pradesh
In a recent judgment, ITAT has quashed the addition made on technical ground for cash deposited in bank during the demonetisation period despite it was fully exempt u/s 10(26), assessee being resident of Arunachal Pradesh
ABCAUS Case Law Citation:
ABCAUS 3964 (2024) (04) ITAT
Important Case Laws relied upon:
Britannia Industries Ltd. vs. CIT 2005 547 (SC)
In the instant case, the assessee had filed two appeals, first challenging the order passed by the CIT(A) in confirming the addition made by the Assessing Officer (AO) as unexplained money u/s 69A of the Income Tax Act, 1961 (the Act) being the amount of Cash deposits made in bank account during demonetization period and taxing the same u/s 115BBE of the Act at the rate of 60%. In the second appeal, the assessee had opposed the the penalty order passed u/s 271AAC(1) of the Act.
The assessee was a member of scheduled tribe and resident of a Village in Arunachal Pradesh and by profession was dental medical practitioner at a Hospital in the State of Arunachal Pradesh.
Beside the service the assessee was also engaged in private practice as a dental practitioner at Itanagar in the State of Arunachal Pradesh. The assessee earned income year after year and was not required for filing return.
The assessee claimed that the income of the assessee was exempt u/s 10(26) of the Act and assessee was not required to file the return for the impugned assessment year.
During the demonetization period i.e. from 09.11.2016 to 30.12.2016, the assessee deposited cash in the bank account at Itanagar amounting to Rs. 10 Lakhs.
The assessment was made by the AO ex-parte u/s 144 of the Act. The assessee was unable to explain the details before the AO. So, the entire deposit of cash was added back with the total income of the assessee.
Aggrieved assessee filed an appeal before the CIT(A) and submitted that she was a member of Tagin Tribe exempt u/s 10(26) and was engaged in dental practice for which photocopy of daily case register was furnished. Further, it was submitted that she was never assessed in the past and she also relied on case laws in her support.
The CIT(A) called a remand report from the AO. The assessee was unable to appear before the AO during the remand proceeding.
The CIT(A) opined that ‘source’ does not mean unexplained or without any proper clinching supporting evidence. According to him, the daily case register was made in a mechanical manner without any address or mobile number and was thus, unverifiable and it did not even fall under the category of any evidence.
The same was contented by the AO in the remand report that the daily case register cannot be admitted as the appellant was clearly not prevented by any reasonable cause during assessment to furnish any supporting documents to substantiate the claim of source of cash deposits made during demonetization and hence.
Therefore, the CIT(A) rejected the request for admission of additional evidence in the form of daily case register for not fulfilling of any of the clauses under Rule 46A of the Income Tax Rules, 1962.
In view of above, the CIT(A) held that money amount of Rs. 10,00,000/- deposited during demonetization had rightly been added by AO as unexplained money u/s 69A taxable w.r.t. section 115BBE.
Before the Tribunal, the assessee submitted that she was a scheduled tribe and eligible for exemption u/s 10(26) of the Act. The assessee was also staying and practising in Arunachal Pradesh.
It was submitted that the cash under consideration was originated from his practice year after year which was deposited during the demonetization period in the bank account. But in both appeal and assessment proceedings the issue was not discussed. So, the matter should be remanded back to the file of the AO.
The Tribunal observed that the assessee was claiming her a member of scheduled tribe and residing and practising in Arunachal Pradesh. The assessee had a legitimate claim that the assessee was not eligible for filing of income tax return in the power of Section 10(26) of the Act. Being a medical practitioner, the assessee had generated cash and which was deposited in the bank account during the demonetization period.
The Tribunal observed that the CIT(A) rejected the appeal on the ground that Rule 46A of the Income Tax Rules, 1962 was not covered. But the appellate authority had accepted the remand report of AO. Later, the rejection was done for contravening Rule 46A of the Income Tax Rules, 1962 which was unjustified.
The Tribunal noted that the explanation for denial of exemption u/s 10(26) of the Act was not duly explained by any of the Revenue authorities. The assessee was also unable to submit the documents before the assessing authority and during proceeding of the remand report. But the CIT(A) also not discussed the issue factually.
The Tribunal further observed that the Hon’ble Supreme Court had held that it is a well settled principle in law that the Court cannot read anything into a statutory provision which is plain and unambiguous. A statute is an edict of the legislature. The language employed in a statute is the determinative factor of legislative intent. While interpreting a provision the Court only interprets the law cannot legislate it.
In view of the above, the Tribunal opined that the claim u/s 10(26) of the Act if applicable for the assessee should be considered.
Accordingly, the Tribunal remitted back the matter to the file of AO to consider the status of the assessee u/s 10(26) of the Act and the eligibility for filing the return. Accordingly, the addition made of Rs. 10 Lakh was quashed. The appeal order was set aside with a direction that the addition should be reconsidered de novo in set aside proceeding. The penalty proceeding was also dismissed.
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