CHIRAG JAYANTIBHAI PATEL,AHMEDABAD V. THE DY.CIT., CIRCLE-2(1)(2), AHMEDABAD

ITA 199/AHD/2024

AI Insights

The case revolves around an appeal by Chirag Kumar Jayantibhai Patel against the order of the Commissioner of Income Tax (Appeals), which confirmed the addition of Rs. 60,07,000 as unexplained deposit under Section 68 of the Income Tax Act, 1961. The AO had initially made this addition during the assessment year 2017-18, suspecting that the cash deposits were not genuine and were not supported by any credible evidence of the source. The Tribunal examined the submissions, including bank statements and cash books, and noted that the assessee had made regular withdrawals from his bank account, which were used to make the cash deposits in question. The Tribunal criticized the AO's reliance on assumptions and lack of concrete evidence to substantiate the claim that the cash was used elsewhere or that the deposits were from undisclosed sources.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 25158 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Mahendrakumar Prahladbhai Vaghela v ITO, Sudhirbhai Pravinkant Thaker, Ajit Bapu Satam, Jaspal Singh Sehgal, Smt. Krishna Agarwal v. ITO, ITO v. Deepali Sehgal
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B.P. SRIVASTAVA
• Assessee Lawyers: BIREN SHAH
• Keywords: Corroborative evidences; Unexplained cash credit; Income from undisclosed sources
• Section: 68; 69; 69A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE DR. BRR KUMAR, VICE PRESIDENT & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I.T.A. No.199/Ahd/2024 (Assessment Year: 2017-18) Chirag Kumar Jayantibhai Patel, 28, New Arvind Park Society, Opp. Mahalaxmi Diamond Bapunagar, Ahmedabad-380024 Vs. Deputy Commissioner of Income Tax, Circle-2(1)(2), Ahmedabad [PAN No.ALVPP7401N] (Appellant) .. (Respondent) Appellant by : Shri Biren Shah, A.R. Respondent by: Shri B. P. Srivastava, Sr. DR Date of Hearing 24.02.2025 Date of Pronouncement 12.03.2025 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre (in short “NFAC”), Delhi vide order dated 28.12.2023 passed for A.Y. 2017-18. 2. The assessee has taken the following grounds of appeal:- “1. In law and in the facts and circumstances of the appellant’s case, the order of the AO is void ab initio and without jurisdiction. 2. In law and in the facts and circumstances of this case, the Ld. CIT(A) erred n confirming addition of alleged unexplained deposit of Rs.60,07,000/- u/s 68 of the Income Tax Act, 1961. 3. In law and facts and circumstances of the appellant’s case, the Ld. CIT(A) erred in upholding action of Assessing Officer in computing demand pertaining to addition under Section 68 of the Act after applying provisions of Section 115BBe of the Act when such provisions of the Act are not on statute on the date of depositing cash in bank account. Accordingly, Ld. AO has erred in invoking the provisions of ITA No. 199/Ahd/2024 Chirag Kumar Jayantibhai Patel vs. DCIT Asst.Year –2017-18 - 2– section 115BBE as if it is in the statute w.e.f. 01.04.2016 though second amendment Act enhancing rate of income tax and surcharge was dated 15.12.2016. 4. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.” 3. The brief facts of the case are that the assessee filed return of income on 17-03-2018 declaring total income of ₹10,24,660/-. The case of the assessee was selected for limited scrutiny on the issue of “large cash deposits compared to returned income”. The assessee is an individual and is a Director in Jenis Impex Private Limited. During the assessment proceedings, the Assessing Officer observed that assessee had deposited cash amounting to ₹60,07,000/- in his bank account during the impugned year under consideration. The Assessing Officer noted that the assessee had invested a sum of ₹44.50 lakhs in Jenis Impex Private Limited on 19-05-2016. Prior to issuing cheque to Jenis Impex Private Limited, the assessee deposited substantial amount of cash in his bank account. The assessing officer observed that the assessee had furnished cash book from time to time, in which a different opening balance was reflected/declared by the assessee. Accordingly, the AO was of the view that the cash on hand declared by the assessee is not genuine. Further, the AO was of the view that if the assessee was already having substantial cash in hand close to Rs. 60 lakhs approximately, then there is no reason for the assessee to withdraw small amounts of cash from his bank account on a regular basis. The Assessing Officer held that the above facts substantiate that the assessee was not having cash in hand, which he purportedly deposited in his bank account during the impugned year under consideration. The AO also noted that for Financial Years 2015-16 and 2016-17, the assessee has not incurred any cash expenditure in these 2 years and the household expenses incurred by the ITA No. 199/Ahd/2024 Chirag Kumar Jayantibhai Patel vs. DCIT Asst.Year –2017-18 - 3– assessee for whole of Financial Year 2015-16 was for a sum of ₹2 lakhs only and for Financial Year 2016-17, the assessee incurred household expenditure of ₹2.40 lakhs only, which also shows that the figure of opening cash balance declared by the assessee is not genuine. Accordingly, the assessing officer made addition of ₹60,07,000/- in the hands of the assessee, with the following observations: “4. The above reply of the assessee perused carefully but not found tenable. The assessee has not submitted any documents which substantiate the cash on hand amounting to Rs. 60,07,000/- as on 01.04.2016 and also failed to reconcile cash on hand with bank withdrawai^Jbe argument that assessee was having tendency withdraw in small amount is vague and not acceptable. If at all it was the tendency why it was deposited again in bank. Keeping cash in bank is safer than keeping it at home and that too this big amount. Further the small withdrawal mentioned in above show cause notice is for example only, there are number of small withdrawal done by the assessee. The explanation furnished by the assessee is not acceptable in view of the following facts:  It can be seen that despite there was huge cash balance, assessee has withdrawn small amount of cash, which ultimately proves that assessee was not having any cash on hand. Otherwise there was no necessity to withdraw such small amount of cash that too regularly through out two years. In this regard, assessee has also failed to reconcile its cash on hand with withdrawal from bank account.  The withdrawals are also made continuously in one or two day interval. If at all assessee was having big cash' on hand there was no necessity to withdraw such small amount consecutively. This raises big doubt on the genuineness of opening cash balance.  The assessee has also failed to submit any submission regarding regular household expense and further- reconcile it with bank withdrawal in two consecutive years i.e. F Y 2015-16 and 2016-17. Despite having huge balance assessee has not incurred any cash expense. It appears that assessee has shown all cash withdrawals just to prove the source of huge cash deposited in bank.  It is seen from the cash book furnished for two years that not a single rupee has been paid for house hold requirements. In view of the above it is evident that assessee has failed to prove cash deposit in its. bank account. Therefore, amount of Rs. 60,07,000/- is being disallowed on account of unexplained cash credit and added back to total income. Penalty proceedings are initiated separately u/s 271AAC(1) of the Act in respect of income referred in section 68 of the Act.” ITA No. 199/Ahd/2024 Chirag Kumar Jayantibhai Patel vs. DCIT Asst.Year –2017-18 - 4– 4. In appeal, Ld. CIT(Appeals) dismissed the appeal of the assessee with the following observations: “6. In grounds No. 1, 2, 3, 4, 5 and 6 the appellant has contested the addition of Rs. 60,07,000/- made by the AO. The issue of addition has been examined in detail in the Assessment Order as discussed hereinabove. During appellate proceedings, the appellant submitted copy of Axis bank account statement for the relevant period which I find had already been examined by the AO during assessment proceedings. The appellant had not been able to discharge his onus of explaining the source of the credits to the satisfaction of the AO. The onus lay on the appellant to rebut the conclusion of the AO with credible evidence, which he failed to do even during appellate proceedings despite the lapse of so much time. During appellate proceedings, it is seen that no new fact or evidence has been brought on record by the appellant during appellate proceedings to merit any interference with the Order passed. The appellant has referred to certain judgements of Hon'ble Courts in support of his contentions. However, these decisions are not squarely applicable on the facts and circumstances of the case of the appellant. In the instant case, the AO found discrepancies in the opening cash in hand for the year with three different amounts quoted, which the appellant sought to rectify as per his own admission. The reasons for continuous cash withdrawals in the face of large (albeit varying figures of) cash in hand was not explained satisfactorily by the appellant. Once assessee is confronted with certain information in possession of / noticed by the Department, the onus is on him to explain the same with evidence and rebut the inference drawn with cogent proof. Merely stating that the AO ought to have accepted the returned income in scrutiny proceedings in the face of information in his possession is not logical.” 5. Before us, the Counsel for the assessee submitted that the addition made by the AO is vague, unjustified, and based on assumptions. The assessee had a sufficient opening cash balance, which was deposited in his bank account for making investment in M/s Jenis Impex. This opening cash balance was utilized within a period of 45-50 days, and not after a long duration, as alleged by the Ld. AO. To substantiate this, the Counsel for the assessee submitted copies of the cash book and bank statements for the Assessment Years 2016-17 and 2017-18 in the paperbook submitted before us. Further, it was submitted that there is no prescribed time limit under any Act for redepositing cash. It was submitted that the onus lies on the Ld. AO to prove that the opening cash in hand was used elsewhere. However, the Ld. ITA No. 199/Ahd/2024 Chirag Kumar Jayantibhai Patel vs. DCIT Asst.Year –2017-18 - 5– AO has failed to bring any evidence on record to substantiate the claim that the cash was utilized elsewhere. Instead, the additions were based merely on a presumption that no one would keep cash for an extended period, and that that the cash was used elsewhere by the assessee and that the deposit in the bank account came from unaccounted sources. Regarding the AO's allegation that the assessee has not incurred any cash expenses, the Counsel for the assessee submitted that this observation was made without proper verification of the records. The Ld. AO did not examine the cash book submitted during the assessment proceedings, which clearly shows cash payments for the assessee's household and personal expenses on the credit side of the cash book. Furthermore, with respect to the discrepancies in the cash book submitted during the assessment proceedings, the Counsel for the assessee submitted that the assessee, being an individual was earning only salary income, and was not required to maintain formal books of accounts and it was only with an effort to cooperate in the assessment proceedings and justify the source of the cash deposit, that the assessee voluntarily prepared a cash book. The Counsel for the assessee acknowledged that corrections were made, and a revised cash book was submitted. However, the revised cash book should not be dismissed as an afterthought without any evidence on record to support such a claim, which the Ld. AO has failed to provide. The Counsel for the assessee submitted that all cash receipts shown in the cash book are from withdrawals made from the assessee’s own bank account. Therefore, the Ld. AO’s treatment of the cash book as an afterthought is without basis. The AO has also failed to bring any evidence to show that the assessee has utilized the cash elsewhere. The assumption that no one would keep cash for an extended period is unfounded, especially considering the ITA No. 199/Ahd/2024 Chirag Kumar Jayantibhai Patel vs. DCIT Asst.Year –2017-18 - 6– fact that the cash was redeposited within a reasonable time frame of 45-50 days from its earlier withdrawal. 6. In response, DR placed reliance on the observations made by Ld. CIT(Appeals) and assessing officer in their respective orders. 7. We have heard the rival contentions and perused the material on record. On going through the records of the case, we observe that the assessee is an individual earning such income. Secondly, we observe that the assessee had produced copies of the bank statements for Financial Year 2015-16 and 2016-17 before the Tax Authorities, from which it has not been disputed that the assessee had made regular withdrawals and the assessee had submitted that the cash deposits in the bank account were sourced out of such withdrawals made by the assessee from his bank account. The fact that the assessee had made withdrawals from his bank account have not been disputed by the Department. The reason for addition made by the Tax Authorities are threefold: firstly, the assessee had submitted cash books, which had to be revised and there was a variation in the opening balance declared by the assessee in such cash book, which raised doubt as regards to the genuineness of such cash book, secondly, if the assessee was having substantial cash in hand amounting to ₹60 lakhs approximately, there was no justification for further/regular cash withdrawals and the burden was on the assessee to substantiate as to why the assessee was regularly withdrawing cash from his bank account when he was having substantial cash in hand and thirdly, the assessee has shown a meagre cash expenditure towards household expenses for Financial Year 2015-16 and 2016-17, which further supports that the cash book furnished by the assessee was non-genuine. However, it may be noted ITA No. 199/Ahd/2024 Chirag Kumar Jayantibhai Patel vs. DCIT Asst.Year –2017-18 - 7– that despite the above points oted by the Department, it has not been disputed that the assessee had made regular withdrawals from his bank account, which as per the assessee was the source of cash deposits in his bank account. As regards the contention of the assessing officer that the assessee had shown a meagre household expenses the Financial Year 2015-16 and 2016-17, the counsel for the assessee pointed out that this is factually incorrect and on this issue, the Tax Authorities have failed to critically analyse the cash book submitted by the assessee which has shown a higher amount of cash expenses towards household expenses. Thirdly, we observe that the Department has not brought anything on record to demonstrate that the cash so withdrawn by the assessee from his bank account, had been utilised by the assessee somewhere else. Unless, the Department gives a specific finding on how the cash withdrawals made by the assessee from his bank account were not available with him for redeposit, then, in our considered view, no addition can be made by the Tax Authorities on the assumption/presumption that the same could have been utilised for household expenditures. It would be useful to reproduce the relevant extracts of the decision Ahmedabad Tribunal in the case of Mahendrakumar Prahladbhai Vaghela v ITO in ITA Number 1297/Ahd /2024 vide order dated 05-12-2024: “…Accordingly, in our considered view, the assessee has submitted substantial details/plausible explanation in support of the source of cash deposit made during the demonetization period. Further, we observe that Department while making this addition of Rs. 15.15 lakhs has not conducted any inquiry from the lenders, to verify the facts presented by the assessee and nor has pointed of any specific defects in the details submitted by the assessee. The primary reason why Ld. CIT(Appeals) confirmed the additions was on the foundation that cash withdrawn in the previous several years could not have been kept unused for such a long period of time. In the case of Sudhirbhai Pravinkant Thaker 88 taxmann.com 382 (Ahmedabad - Trib.), the ITAT held that when assessee had demonstrated that he had withdrawn cash from bank and there was no finding by authorities below that this cash available with assessee was invested or utilized for any other purpose, it was not open to authority to make addition ITA No. 199/Ahd/2024 Chirag Kumar Jayantibhai Patel vs. DCIT Asst.Year –2017-18 - 8– on basis that assessee failed to explain source of deposits. In the case of Ajit Bapu Satam 147 taxnianii.com 222 (Mumbai - Trib.), the ITAT held that where Assessee contended that cash which was withdrawn by assessee from bank was deposited in very same bank account and he provided details of cash withdrawal from bank account and cash so withdrawn was lying with him and was not used anywhere else, since both cash withdrawal and deposit were duly substantiated from bank statement of very same branch of bank and there was no findings by lower authorities that cash available with assessee was invested or utilised for any other purpose, cash so deposited could not be treated as unexplained money under section 69A of the Act. In the case of Jaspal Singh Sehgal 83 taxniann.com 246 (Mumbai - Trib.), where the assessee submitted detailed cash summary showing inflow and outflow of cash for relevant year, in absence of any materials to show that cash withdrawn was utilised elsewhere by assessee, benefit of cash withdrawn by assessee from bank account against amount of cash deposit into bank should be given. In the case of Smt. Krishna Agarwal v. ITO in IT A. No. the ITAT held that mere time gap between withdrawals and deposits cannot be the reason for alleging undisclosed income. In the case of ITO v. Deepali Sehgal I.T.A .No.-5660/Del/2012 it was held that merely because there was a time gap between withdrawal of cash and its further deposit to the bank account, the amount can not be treated as income from undisclosed sources u/s 69 of the Act in the hands of the assessee. 7. Accordingly, looking into the instant facts and the explanation provided by the assessee, along-with supporting evidences/ Affidavits etc. we are of the considered view that no addition is called for the instant facts. 8. In the result, appeal of the assessee is allowed.” 8. In view of the above discussion, in our considered view, the assessee has been able to explain the source of cash deposits in his bank account and accordingly, the appeal of the assessee is allowed. 9. In the result, the appeal of the assessee is allowed. This Order is pronounced in the Open Court on 12/03/2025 Sd/- Sd/- (DR. BRR KUMAR) (SIDDHARTHA NAUTIYAL) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 12/03/2025 TANMAY, Sr. PS TRUE COPY ITA No. 199/Ahd/2024 Chirag Kumar Jayantibhai Patel vs. DCIT Asst.Year –2017-18 - 9– आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 3. संबंिधत आयकर आयुƅ / Concerned CIT 4. आयकर आयुƅ(अपील) / The CIT(A)- 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 10.03.2025(Dictated over dragon software by Hon’ble Member) 2. Date on which the typed draft is placed before the Dictating Member 10.03.2025 3. Other Member………………… 4. Date on which the approved draft comes to the Sr.P.S./P.S 11.03.2025 5. Date on which the fair order is placed before the Dictating Member for pronouncement 12.03.2025 6. Date on which the fair order comes back to the Sr.P.S./P.S 12.03.2025 7. Date on which the file goes to the Bench Clerk 12.03.2025 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Dispatch of the Order…………………………………… "