Jitesh Vithalbhai Rashiya, Surat V. Income Tax Officer Wd.,2(3)(2), Surat

ITA 116/SRT/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0404 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 02-08-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 26-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Business income; Income from undisclosed sources; Salary income; Corroborative evidences; Set aside
• Section: 68; 142(1); 143(2); 139(4); 119

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No. 116/SRT/2021 Ǔनधा[रणवष[/Assessment Year: (2017-18) (Virtual Court Hearing) Jitesh Vithalbhaia Rashiya, D-5/501, Krishna Township,Varachha Road, Surat-395101. Vs. The ITO, Ward-2(3)(2), Surat. (Appellant) (Respondent) èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AJZPR2122E Assessee by Shri Mehul Shah, CA Respondent by Shri S. B. G. Mahapatra, Sr. DR Date of Hearing 03/08/2022 Date of Pronouncement 18/10/2022 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the Assessee, pertaining to Assessment Year (AY) 2017-18, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (in short ‘NFAC’), which in turn arises out of an assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 03.12.2019. 2. The grounds of appeal raised by the assessee are as follows: “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing Officer in making addition of Rs.10,20,000/- u/s 68 of the Income Tax Act, 1961 on account of alleged unexplained cash credits made in the bank. 2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of assessing officer in taxing the income u/s 115BBE @ 77.25% by applying the duly substituted S.115BBE inserted retrospectively instead of taxing it at 35.54% as per the old provision of S.115BBE. Page | 2 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya 3. It is therefore prayed that addition made by the assessing officer and confirmed by CIT(A) may please be deleted or the matter may please be set aside to the file of CIT(A). 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 3. Succinct facts are that assessee filed his return of income declaring total income at Rs.3,09,870/- on 29.11.2017 u/s 139(4) after due date. During the year under consideration, the assessee derived income from "salary and income from other sources". The case was selected for Limited Scrutiny in CASS for the reason "large value cash deposits during demonetization period as compared to Returned Income". Therefore notice u/s 143(2) of the Act was issued on 10.09.2018 and duly served upon the assessee. Subsequently, notice 142(1) of the Act cum questionnaire was issued on 28.08.2019 & 09.11.2019 and served upon the assessee. In response to these notices issued, the assessee furnished his reply/ submission/explanation enclosing I.T. Return, computation and statement sowing cash on hand on 01.04.2016. The assessing officer examined the details submitted by the assessee. 4. During the course of assessment proceedings, it was observed by the assessing officer that assessee has deposited cash amounting to Rs.10,20,000/- during demonetization period. All the deposited amount was denomination notes (old notes) during 09.11.2016 to 31.12.2016. The assessee was asked to explain the cash deposit. In response, the assessee replied to the assessing officer that cash deposited out of his cash on hand, withdrawal and past savings. However, assessing officer, rejected the contention of the assessee and held that assessee failed to explain the cash deposit with documentary proof/evidence. Therefore, assessing officer treated Rs.10,20,000/- as unexplained cash credits and added to the total income of the assessee. 5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the action of the Assessing Officer. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before us. 6. Shri Mehul Shah, Counsel for the assessee, pleads that assessee has deposited the amount during monetizing scheme form past savings. During the year under consideration, assessee was a salaried employee of HK Hub Diamond LLP and Page | 3 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya received salary of Rs. 3,71,336/-. The employer company is a part of Group HK (also known as Hare Krishna Exports ) which is an Indian diamond conglomerate promoted by Mr. Savjibhai Dholakiya and family. The said Company is well known to take care of its employees in terms of social needs and drives many programmes for employees for benevolent purpose. The employer provides breakfast and lunch to employees and also distributes/equips clothes, bed-sheets and household utensils to its employees. The group received media attention nation-wide for 'gifting' his employees cars, jewellery and homes as bonuses on Diwali. In 2014, it gifted 491 cars, 525 pieces of diamond jewellery and 200 apartments. In 2016, the company gifted 1260 cars and 400 apartments as per News source in public domain and Source: Wikipedia. Although, assesse was not a direct part of the beneficiary, it clearly shows that the employer group is taking care of the social and drawing needs of employee at various level as contended by the assessee. Further, the assesse has clearly stated that he is not having any immovable property. In fact, assessee stays in the house property of his brother and in the joint family, major part of his expenses including food and education of his daughters are borne by his elder brother. The Ld. Counsel also submitted written submission which is reproduced below: “I. During the year under consideration assessee is salaried employee with HK HUB Diamonds LLP and earned income from salary income & income from other sources i.e. interest from IT Refund, interest from saving bank account and dividend income. II. Copy of ITR along with computation of Income for AY.2017-18 is already submitted in our earlier submission dated 03.09.2019 via acknowledgement number 0309191539213. During the year assessee earned income from salary income & income from other sources and is thus not liable to maintain books of accounts. III. Copy of Bank Passbook is already submitted in our earlier submission dated 03.09.2019 via acknowledgment number 03091911539213. IV. During the year under consideration assessee is salaried employee with HK HUB Diamonds LLP. Copy of Form 16 is submitted in our earlier submission. V. During the year under consideration, assessee has deposited cash amount in bank account out of earlier income, cash withdraw from bank and past savings. During the year under consideration assessee is salaried person and received salary income through banking channel and withdraws cash from bank out of salary received. However, cash deposits are duly accounted for in the books of the assessee on the credit side of the cash flow statement. Assessee is also assessed to tax and regularly filed his income tax return since long time. I have mentioned herewith information of Gross total income. Income tax paid and cash on hand available at the end of the respective financial year of last 9 years:- Page | 4 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya VI. Details of the Cash Deposits in Bank are as under: VII. This point is not applicable as assessee is not doing any business activity for FY. 2015-16 & 2016-17. VIII. Cash deposits made during the demonetization period can also be cross verified with bank passbook. IX. Furnish the details of the Opening cash in hand with supporting evidences in the following format: From 01.04.2015 to 08.11.2015 & 01.04.2016 to 09.11.2016:  01.04.2015 to 08.11.2015: Page | 5 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya  During the year assessee is salaried employee and earned income from salary Income & income from other sources and is thus not liable to maintain books of account. Details mentioned above arrived on the basis of bank pass book & other available evidence. X. Copy of cash flow statement is already submitted in our earlier submission. Page | 6 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya XI. It is also pointed out that cash deposits in banks were sourced out of earlier income, cash withdraw from bank and past savings is evident from the entries in cash flow statement. Hence, cash deposits with axis bank account are very much genuine as assessee deposited such amount out of cash withdraw from bank, earlier income and past savings. On verification of cash flow statement for the considerable period it is clearly show that assessee had sufficient cash balance for deposits of Rs.10,22,000/- in bank account. XII. In light of the above submission, source of cash deposits stands proved and no addition in respect of cash deposits to be made to the income of assessee.” 7. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 8. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. The ld Counsel submitted before us that amount deposited in the bank account represents past withdrawal as well as past savings and it is also contended that a part of the deposit has also come from his wife’s savings and estreedhan given to the assessee`s wife. That is, assessee and his wife, both are using the same saving bank account and assessee`s wife also deposited her lifelong savings in the said saving bank account during demonetization. The ld Counsel also pointed out that assessee`s wife does not have other saving bank account in her name, therefore assessee`s wife deposits her pin money, savings, gift received from father- in-law and estreedhan received from father-in-law etc. 9. Taking into account, the facts narrated above, we note that Instruction issued by the CBDT should be considered, vide Press Release dated 18.11.2016 and Guidelines for Verification of Cash deposit during demonetization to the AO vide Instruction No. 3/2017[ F.NO. 225/100/2017/ITA-II] dated 21.2.2017 and annexure thereof issued under section 119 of Income Tax Act, which are discussing and providing a blanket exemption of Rs. 2,50,000/- per person. In the Press release dated 18.11.2016 also, it was stated that: “It was announced by the Government earlier that small deposits made in the banks by artisans, workers, housewives, etc. would not be questioned by the Income Tax Page | 7 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya Department in view of the fact that present exemption limit for Income Tax is Rs.2.5 lakh”. 10. The relevant excerpts of Instruction No. 3/2017[F.NO. 225/100/2017/ITA-II] dated 21.02.2017, in Annexure-“Source Specific General Verification Guidelines ” states as follows: “1 Cash out of earlier income or savings: In case of an individual (other than minors) not having any business income, no further verification is required to be made if total cash deposit is up to Rs.2.5 lakh. In case of taxpayers above 70 years of age, the limit is Rs.5.0lakh per person. The source of such amount can be either household savings/savings from past income or amounts claimed to have been received from any of the sources mentioned in paras 2 to 6 below. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. The basis for verification can be income earned during past years and its source, filing of ROI and income shown therein, cash withdrawals made from accounts etc.” 11. From the above CBDT instruction, it is vivid that In the case of taxpayers above 70 years of age, the limit is Rs. 5.0 Lakh per person and for other person the limit is Rs.2.50 lakh per person. The source of such amount can be either household savings/ savings from past income or amounts claimed to have been received from any of the sources mentioned in Paras 2 to 6 of the CBDT circular. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. It is a settled law that the Circulars issued by CBDT are binding on the Revenue. This position was confirmed by the Apex Court in the case of Commissioner of Customs vs. Indian Oil Corporation Ltd. reported in 267 ITR 272 wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circular and laid down that when a circular issued by the Board remains in operation then the Revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute. 12. Considering the above CBDT Circular, we are of the view that in assessee`s case under consideration, the assessee and his wife is having only one saving bank account wherein both deposits their past savings, therefore assessee should be allowed a blanket exemption of Rs. 5,00,000/- in view of instructions of CBDT, as the wife of the assessee did not have any other operational bank account and hence she has deposited her household savings in the same bank account of Axis bank where she is also a nominee ( Name:Janvi is mentioned in pass book at Pg 37 of the paper Book). Page | 8 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya The CBDT Instructions also clearly states that only the amount above the cut-off may require verification. Therefore, assessee is entitled to claim a blanket exemption of Rs. 5,00,000/- (Rs.2,50,000/- assessee himself and Rs.2,50,000/- for wife) in view of instructions of CBDT. 13. So far the balance amount is concerned, it is Rs.5,20,000/- ( 10,20,000- Rs.5,00,000). Against the additional amount deposited of Rs. 5,20,000/-, if we weigh the same against the criteria mentioned in the said Instruction of CBDT to support the same, that is: (i) income earned during past years and its source, (ii) filing of Return of Income and income shown therein, (iii) cash withdrawals made by the assessee. We note that assesses succeeds on all these above three criteria because he is regularly filing return of income (ROI) and has already made a chart during assessment proceedings of last nine years showing total gross income of Rs.21,67,215/- and further the cash withdrawals of Rs.9,35,000/- in immediate three years is more than sufficient to cover the amount of Rs.5,20,000/-. The ld Counsel has also explained that due to the nature of service/source and social needs being fulfilled by employer and staying in joint family with elder brother, the drawings are negligible and hence the balance addition of Rs.5,20,000/- on account of cash deposit should also be deleted. We note that in the course of assessment proceedings, the assessee filed evidences in the form of Financial Statements and Return of Income of preceding years and the year under consideration to support his claim that cash deposit is reflected in the accounts maintained by him. Further, the assessee also filed the bank statement of the preceding years and the year under consideration; and bank books and cash book of the year under consideration. In addition, the assessee has also filed the Cash Flow Statement to reflect the cash available in the books. Based on these evidences, it is proved that the assessee was having sufficient cash on hand at the time of deposit of the cash in the bank. In response to the various notices filed by the assessee in the explanations, the assessing officer was not able to rebut the explanation offered by the assessee. He just observed that the cash withdrawn by the Page | 9 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya assessee in the various years were towards the household expenses. In this connection, it is submitted that the assessee has already shown the household expenses in the capital account filed by him in the course of the assessment proceedings. The assessing officer was not able to bring on record any evidence that the cash withdrawn from the banks were utilized by the assessee in excess of the amount shown by the assessee for household expenses. The assessing officer has not found that the household expenses debited in the capital account in various years were low. 14. We note that the assessee is regular in filing his Return of Income for more than nine years and has already shown his books of accounts and submitted the same to the Assessing Officer to show that he has sufficient cash balance to justify cash deposit during demonetization and hence no adverse view should be drawn in absence of any finding that the cash withdrawn is used for any unaccounted income or any unaccounted asset. Demonetization was a compulsion event and hence it has to be viewed differently from normal cash deposits. Reliance is placed on the decision of Agson Global Pvt. Ltd. vs ACIT [ITA NO. 3741 to 3746/Del/2019] wherein it was held as follows: “Mere addition made on this ground that there is deviation in ratio is not proper. When the assessee had regular cash sale and deposit of cash in bank accounts and if nothing incrementing is found contrary then addition u/s 68 of such cash sale would tantamount to double taxation.” Particularly, in the said judgement, the Tribunal remarked that it was observed that the intention of the Legislature behind introduction of section 115BBE was not to bring to tax genuine cash credits already offered to tax as income by the Assessee at higher tax rates. Such an interpretation would lead to recurring attempts on the part of the Revenue Authorities to reject genuine explanations offered by the Assessee with respect to sums credited/offered as income in its books as unsatisfactory solely to extort higher rates of taxes thereon u/s 115BBE of the Act. The A.O in exercising his powers u/s 68 of the Act is not vested with unfettered powers to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjecture. The AO is bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by the taxpayer. From the facts of the case at hand, it is clear that the A.O has acted unreasonably and capriciously in rejecting the genuine explanations offered by the Assessee in respect of the impugned cash deposits as unsatisfactory solely with the aim of fastening exorbitant tax liability on the Assessee- Company under the garb of unexplained cash credit u/s 68 of the Act. Such recourse primarily hedged on surmises, conjecture, assumptions, presumptions and whims of the Revenue Authorities is clearly unwarranted and the additions so made is unsustainable in the eyes of law and thus deserves to be quashed.” Page | 10 ITA 116/SRT/2019/AY.2017-18 Jitesh Vithalbiai Rashiya 15. We also note that submission was furnished by the assessee to assessing officer, during assessment proceedings, with supporting evidence and no defect could be pointed out in these evidences maintained by the assessee. We therefore, taking into account all these peculiar facts and circumstances, delete the balance amount of Rs.5,20,000/-. 16. In ground No.2 the assessee stated that learned CIT(A) has erred in confirming the action of assessing officer in taxing the income u/s 115BBE of the Act. Since, we have adjudicated the ground no.1 raised by the assessee in his favour, therefore ground No.2 raised by the assessee becomes infructuous and hence does not require adjudication. 17. Since we have adjudicated the assessee`s appeal, taking into account peculiar facts and circumstances of the case, as narrated above, therefore it is made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year. 18. In the result, the appeal filed by the assessee is allowed. Order is pronounced on 18/10/2022 by placing the result on the Notice Board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 18/10/2022 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat