The present appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, for Assessment Year 2017-18, confirming an addition of ₹10,05,000 made under Section 69A of the Income Tax Act, 1961 on account of alleged unexplained cash deposits.

The assessment was completed under Section 144, wherein the Assessing Officer treated cash deposits and credits in the assessee’s bank account as unexplained money taxable under Section 69A read with Section 115BBE. The assessee, a housewife, had not furnished explanations during assessment proceedings, leading to a best-judgment assessment.

During appellate proceedings, the assessee furnished detailed explanations and documentary evidence explaining the source of cash deposits. It was submitted that the assessee was earning tuition income by conducting classes from her residence and had also received management consultancy fees on which tax was deducted at source, duly reflected in Form 26AS. It was further explained that the assessee had accumulated cash from tuition receipts over the years and had also made periodic cash withdrawals from her bank accounts during Financial Years 2015-16 and 2016-17.

The assessee demonstrated that as on 08.11.2016, she had sufficient cash in hand arising from opening cash balance, tuition income received in cash, and earlier bank withdrawals. It was explained that cash was withdrawn in small tranches for the purpose of construction of a residential house at her native village, where cash payments to labourers and vendors were customary. Due to a local dispute, the construction was delayed and, in the intervening period, demonetisation was announced, compelling the assessee to deposit the accumulated cash into her bank account. Subsequent utilisation of cash for construction was also supported by bills, vouchers, and expenditure details.

The CIT(A), however, rejected the explanation primarily on the ground that the assessee failed to justify why cash withdrawals and tuition receipts were retained in cash for a prolonged period and confirmed the addition under Section 69A.

On further appeal, the Tribunal observed that the assessee had furnished complete details of cash withdrawals, tuition income, bank statements, and corroborative evidence relating to construction expenditure. The Tribunal noted that the CIT(A) had not disputed the factum or quantum of withdrawals and receipts but had rejected the explanation merely on perceived improbability of human conduct.

Relying on the principle laid down by the Delhi High Court in Jaya Aggarwal v. ITO, the Tribunal held that human behaviour varies and plausible explanations supported by evidence cannot be discarded solely on the basis of assumptions. Considering the facts and circumstances, the Tribunal accepted the assessee’s explanation as reasonable and deleted the addition made under Section 69A.

Accordingly, the appeal of the assessee was allowed.

SOURCE LINK:    https://itat.gov.in/public/files/upload/1767607914-aRXSsN-1-TO.pdf

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