ISHWARBHAI KARSANBHAI PATEL,SURAT V. INCOME TAX OFFICER, WARD-3(3)(1), SURAT

ITA 385/SRT/2024

AI Insights

The case involves Ishwarbhai Karsanbhai Patel, an agriculturist, who appealed against the order of the National Faceless Appeal Centre, Delhi, which confirmed the addition of Rs. 20,80,000 under Section 69A of the Income Tax Act for the Assessment Year 2017-18. The addition was based on unexplained cash deposits made during the demonetization period. The assessee argued that the deposits were from cash accumulated over the years for emergency medical needs, supported by a cash book and bank statements. However, the Assessing Officer and CIT(A) were not convinced by the explanations provided, leading to the appeal before the Tribunal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 470571 (ITAT-SURAT)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 21-10-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 08-04-2024
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Section: 68; 69A

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 385/Srt/2024 (Assessment Year 2017-18) (Physical hearing) Ishwarbhai Karsanbhai Patel, Satyam Shivam Sundaram, Luhar Faliyu, Nana Varachha, Surat, PAN No. AMNPP 1334K Vs. I.T.O., Ward-3(3)(2), Surat, Now ITO Ward-3(3)(1), Room No.421, Aayakar Bhawan, Majura Gate, Surat-395001 Appellant/ assessee Respondent/ revenue Assessee represented by Shri Hiren M Diwan CA/ A.R. Department represented by Shri Mukesh Jain, Sr.DR Date of Institution of Appeal 08/04/2024 Date of hearing 21/10/2024 Date of pronouncement 04/11/2024 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC/learned Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 10/02/2024 for the Assessment Year (AY) 2017-18. Following grounds of appeal have been raised by the assessee. “1. The ld CIT(A) has erred in law and on facts in confirming the action of the ld AO of making addition u/s 69A of the Act to the tune of Rs. 20,80,000/-. 2. The appellant craves leave to add, amend alter, modify, substitute, delete, change or very as all or any of the ground or grounds of appeal.” 2. Facts of the case in brief are that the assessee is an individual, filed its return of income for A.Y. 2017-18 on 08/01/2018 declaring income of Rs. 98,250/-. The case was selected for scrutiny on the issue of cash deposit during demonetization period. During the assessment, the Assessing Officer ITA No. 385/Srt/2024 Ishwarbhai Karsanbhai Patel Vs ITO 2 noted that the assessee has made a cash deposit of Rs. 20,80,000/- during demonetization period in his bank account in various bank accounts. The assessee was asked to explain the source of such deposit. The assessee filed its reply and submitted that cash deposit during demonetization period is out of opening cash in hand of Rs.43,78,731/-. The assessee also stated that he is regularly withdrawing and depositing cash in his bank accounts. The assessee also furnished cash book from FY 2012-13 to 2015-16 with copy of computation of income to justify the cash in hand. On perusal of return of income for A.Y. 2015-16, the Assessing Officer was of the view that found that the no cash in hand as on 31.03.2015, which was filed on 06.02.2016. The Assessing Officer issued fresh show cause notice dated 01.02.2029 to substantiate the cash deposit and to furnish rely by 04.12.2019. The AO noted that the assessee filed his reply through e- proceedings, but nothing new was filed. The AO held that the assessee failed to file details and explanation to substantiate such cash deposits. The AO treated the entire cash deposit as unexplained money under section 69A and initiated penalty while passing assessment order on 16.12.2029. 3. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee reiterated its earlier stand and stated that cash deposit is out of cash accumulated in earlier years. The assessee specifically stated that he is and his wife are Senior Citizen and his mother is almost eighty years old and cash was kept for emergent medical need. The AO while making addition has not pointed ITA No. 385/Srt/2024 Ishwarbhai Karsanbhai Patel Vs ITO 3 out any defect in the books of account nor rejected cash book. Entire cash is reflected in the cash book. In support of his submissions, the assessee relied on various case laws. All case laws relied by the assessee are duly recorded by ld CIT(A) in his order. 4. The ld. CIT(A) on considering the submission of assessee noted that the assessees primary contention is that the AO overlooked the fact that cash deposits during demonetization was out of the cash in hand. It was also contended that he is and his wife are Senior Citizen and his mother is almost eighty years old and cash was kept for emergent medical need. There was cash balance of Rs. 40,41,951/- as on 31.10.2016 out of which Rs. 20,80,000/- was deposited and was still having cash balance of Rs. 19,65,871/- as on 31.12.2016. The ld CIT(A) on considering the submissions of assessee held that AO was concerned with the cash deposited in the bank for which no plausible explanation was given by assessee. The assessee has not shown any cogent reason why such huge amount was kept in hand. Further, the assessee has not demonstrated with cogent evidence as to how such huge cash was generated. The details of agriculture land and expenses required for is not shown. The name and address of the persons to whom agriculture product were sold is filed on record. Mere production of cash books is not sufficient for generation of such huge cash in hand. It was also held that for making addition of section 68 or 69A, rejection of books of accounts are not mandatory. On the basis of above observations, the ld ITA No. 385/Srt/2024 Ishwarbhai Karsanbhai Patel Vs ITO 4 CIT(A) upheld the addition made by AO. Further aggrieved, the assessee has filed present appeal before the Tribunal. 5. I have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr.DR) for the revenue and have perused the orders of the lower authorities carefully. The ld. AR of the assessee submits that the assessee is agriculturist, having age of sixty years. The wife of assessee is also of same age. Mother of assessee is eighty years. The assessee require to keep substantial amount of cash in hand for emergency medical needs. To substantiate the source of cash deposits during demonetization period the assessee furnished all details available with the assessee. the assessee file cash book, bank statement in the form of bank book, from FY 2012-13 to FY 2106-17, balance sheet and profit and loss account. The assessee was having opening cash balance of Rs. 40.41 lacs in the beginning of FY 2016- 17. None of the evidence filed by the assessee was rejected by the AO. The AO as well as ld CIT(A) disregarded the submissions of assessee without rejecting the books of accounts. No investigation of facts was carried out the AO or ld CIT(A). The main objection of AO for rejection of cash available with assessee was that no such cash was shown in the return for AY 2016- 17, the assessee filed return for AY 2016-17 under ITR-4 as the assessee has earn Rs. 5,000/- from future and options. In the return of income for AY 2014-15, the assessee has shown agriculture income of Rs. 6,20,822/-, copy of computation of income is filed at page no. 39 of paper book. The ITA No. 385/Srt/2024 Ishwarbhai Karsanbhai Patel Vs ITO 5 cash in hand is shown in cash book. The ld AR of the assessee submits that section 69A is not applicable in his case, thus, the addition made under section 69A is not technically correct. 6. On the other hand, the ld. Sr. DR for the revenue supported the orders of the lower authorities. The ld. Sr. DR for the revenue submits that the Assessing Officer as well as the ld. CIT(A) in his finding have categorically held that the assessee failed to substantiate the source of cash deposit. In the year under consideration the assessee has shown income of Rs. 98,520/- only. The assessee has shown net agriculture income of Rs. 57,280/- only. There is no correlation of cash deposits and the income offered by the assessee during the year under consideration. The AO has clearly held that in the ITR for AY 2015-16, copy of which is now filed by ld AR of the assessee, the assessee has not shown any cash in hand, despite the fact that there is a column in the said form. The lower authorities have considered all such submissions of the assessee. On the specific submission of ld AR that AO has not rejected the books of assessee, the ld Sr DR of the revenue submits that the assessee is not engaged in any business activities, so he was not required to maintain alleged books of account. Even otherwise, once such evidence was not accepted, that amounts to rejection of such evidences. 7. In the rejoinder submission, the ld AR of the assessee submits that the assessee was maintaining cash book of his own. Under section 44AA, the assessee required to maintain the books, if the turnover of assessee is ITA No. 385/Srt/2024 Ishwarbhai Karsanbhai Patel Vs ITO 6 beyond the threshold limit prescribed therein. The ld AR of the assessee prayed for deleting the entire addition. 8. I have considered the submissions of both the parties and gone through the orders of the lower authorities carefully. In the computation of income, the assessee has shown income from other source, dividend income and agriculture income. The assessee is consistently showing agriculture income from last several years. The main reason for addition on account of cash deposit was that opening cash balance available with the assessee was not believed by the AO as there was no cash balance, as assessee while filing return of income for AR 2015-16 on 06.02.2016. There is no dispute that the assessee has made cash deposit of Rs. 20,80,000/- during demonetization period. The Assessing Officer doubted the source of cash deposit and availability of cash in hand. From the copy of ITR of earlier years, I find the assessee has shown agriculture income, which is accepted in past and he is filing regular return of income. The AO has not investigated about the area of the land or agriculture activities carried out by the assessee, thus, in such circumstances, in my view, sustaining the entire cash deposit is not justifiable. Considering overall facts and circumstances of the case in my view, 20% of disallowance entire cash deposits during this financial year would be sufficient to avoid the possibility of revenue leakage. Thus, the Assessing Officer is directed to restrict the addition to the extent of 20%. So far as addition under section 69A is concerned, the ld AR of the assessee has not shown any law in his favour. Hence, in absence of any ITA No. 385/Srt/2024 Ishwarbhai Karsanbhai Patel Vs ITO 7 contrary law such submission is not acceptable. In the result, grounds of appeal raised by the assessee are allowed partly. No other ground of appeal is raised about the taxability of the addition nor any submissions at the time of making submission. 9. In the result, this appeal of assessee is partly allowed. Order announced in open court on 04th November, 2024. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 04/11/2024 *self / author Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By order 5. Guard File // True Copy // Sr. Private Secretary, ITAT, Surat "