Srinivasa Reddy Donthireddy, Andhra Pradesh V. The DCIT, Circle-7(1), Ahmedabad

ITA 173/AHD/2020

AI Insights

The case involves Srinivasa Reddy Donthireddy, an employee of ONGC Ltd., who was assessed for unexplained cash deposits amounting to Rs. 26,18,000 during the financial year 2012-13. The Assessing Officer initiated proceedings under Section 147 of the Income Tax Act after receiving information about these deposits. The Assessing Officer made an addition of Rs. 3,93,000 as unexplained investment under Section 69, considering the negative cash peak without adequately accounting for the assessee's cash withdrawals and expenses. The CIT(A) upheld this addition, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, after considering the cash book and bank statements provided by the assessee, found that the expenses and withdrawals were within a reasonable range and allowed the appeal, thus reversing the addition made by the Assessing Officer.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299959 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-03-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 26-02-2023
• Assessment Year: 2013-2014
• Appeal Filed On: 16-02-2020
• Other Referred Cases: Girlgowda Dasegowda Va ITO (ITAT Bangalore), Sudhirbhai Pravinkant Thaker Vs. Income-tax Officer, Ward-5(1), Ahmedabad, Gurpreet Singh v. Income Tax Officer ITAT Chandigarh, Swati Malove Divetia v. Income Tax Officer-(HIGH COURT OF GUJARAT)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained investment; Opportunity of being heard; Corroborative evidences
• Section: 69; 148; 142(1); 143(2); 139(4); 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER I .T .A . No .1 73 /A h d / 20 20 ( A s se ss m e nt Y e a r : 20 13- 14 ) Sr i ni va s a R ed d y D o n th ir ed d y G- 1 0 5, En v y H o m e s , Sr i r a m a c h an dr a N a gar , Vij a ya w a d a ( U r ba n ) , K r is h n a, An dh r a Pr ad es h V s . D C I T C ir cl e - 7 ( 1) , A h me da ba d [ P AN N o. A B GP D9 81 1 K ] (Appellant) .. (Respondent) Appellant by : Shri Suchit Patel, A.R. Respondent by: Shri Sanjay Jain, Sr. D.R. D a t e of H ea r i ng 27.02.2023 D a t e of P r o no u n ce me nt 15.03.2023 O R D E R The appeal filed by the assessee is against the order passed by the Ld. CIT(Appeals)-7, Ahmedabad on 29.11.2019 for A.Y. 2013-14. 2. The grounds of appeal raised by the assessee are as under: “ The Assessing Officer (herein after referred to as AO) has erred on facts and the law by not giving reasonable opportunity of being heard. The AO has passed the Assessment Order dated 3 rd December 2018 without calling for additional details and has only considered the bank statements provided relating to FY 2012-13 treating the negative cash peak as cash deposits made from undisclosed sources. However, the negative cash peak was only because the AO has only considered the cash withdrawals made during the FY 2011-12 and the balance cash on hand to the extent of Rs.4,20,000/- as on 31 March 2012 out of cash withdrawals made during FY 2011-12 was not considered as part of the assessment. The AO has not provided an opportunity for me to explain the reason for the negative cash peak. Further, the AO has sent a notice u/s. 143(2) dated 3 rd December 2018 calling for evidence in support of the income as per the return filed to be submitted in person on or before 6 th December 2018. This notice was served on me on 6 th December 2018. As it was not possible for me to be physically present on 6 th December 2018, a response to the notice was submitted online on 6 th December 2018. However, the AO has passed the order dated 3 rd December 2018 without even waiting for the lapse of time provided for submission of additional details. ITA No. 173/Ahd/2020 Srinivasa Reddy Donthireddy vs. DCIT Asst.Year–2013-14 - 2 - As the AO had failed to consider the additional information relating to the negative cash peak of w.r.t. the sources of income, I plead the Income Tax Appellate Tribunal to consider the fact that a cash balance of Rs. 4,20,000/- as on 31 March 2012 was not considered as part of the assessment. I further plead to reduce the addition of Rs.3,93,000/- towards Unexplained investments as the same was on account of not considering the opening cash balance for FY 2012-13 and waive of the tax liability thereon along with the interest and penalties thereof. To substantiate the same, the Assessing Officer had not given reasonable opportunity and had passed the order accordingly. Further, an extract of the cash ledger and the bank statements supporting the cash withdrawals were provided to substantiate the opening cash balance for FY 2012-13 which was not appreciated by the Commissioner of Income Tax (Appeals) – 7, Ahmedabad. In view of the same, I plead to the Income Tax Appellate Tribunal to consider my case given the facts as in the Statement of Facts and the hardship caused on account of wrong addition of the amount towards unexplained cash credits and dispose the case without any further tax liability and penalty.” 3. The assessee is an employee of ONGC Ltd. who did not furnish any return of Income as required Under Section 139(4) of the Act. The Revenue Office received an information regarding cash deposit of Rs. 26,18,000/- during the F.Y. 2012-13and therefore, assessment proceedings under Section 147 of the Act was initiated by issuing notice under Section 148 of the Act after recording reasons and obtaining statutory approval. Since the assessee has not furnished return of income show-cause notice under Section 142(1) served. The assessee filed its response. The Assessing Officer observed that the deposits and withdrawals of cash are peak credit and therefore, the same has been determined at negative peak of Rs. 3,93,000/- which shows that the assessee has no cash-in-hand on that date. Yet assessee continues to deposit the cash. Thus, the Assessing Officer made addition of Rs. 3,93,000/- as unexplained investment under Section 69 of the Act. 4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee. ITA No. 173/Ahd/2020 Srinivasa Reddy Donthireddy vs. DCIT Asst.Year–2013-14 - 3 - 5. There is a delay of 10 days in filing the scrutiny appeal for which the assessee has filed affidavit and it appears that the assessee has a genuine reason, therefore, delay is condoned. 6. The Ld. A.R. submitted as under: “1. The Learned CIT(A) had confirmed Assessment order of addition of Rs. 3,93,000/ as unexplained investments- u/s 69 of the Act for negative cash balance on following ground. 1.1 No such argument forwarded before the Assessing officer 1.2 Assessee has not submitted any documentary evidence a regard cash withdrawals and subsequent deposit for the immediately preceding years 1.3 Even if the argument of the appellant as regards cash deposit out of opening cash balance from cash withdrawals from immediate past year is accepted to be correct, there remains a valid query as to what was the need for the appellant to further withdrawal the cash to the tune of Rs. 1,61,000/- from First April to 6 th May more precisely, when he claims to have had sufficient opening cash balance on hand on account of previous cash withdrawal. In this regard assessee hereby submit his contention before your honour as under: It is to be noted that assessee hail submitted the following documents before CTT(A) for supporting evidence for source of cash deposit: 1. Cash book from Assessment year 2011-12 to 2013-14 2. Bank statement from Assessment Year 2011-12 to 2013-14 From the cash book and Bank statement from Assessment Year 2011-12 to 2013-14 we hereby summarized as under: Table-A Assessment Year Cash withdrawal Cash deposit in Bank 2011-22 7,06,500 1,000 2012-23 8,27,600 1,29,000 2013-14 18,10,000 15,25,000 It is clearly establish from the above table-A that during the concerned assessment year, source of cash deposit in bank account from cash withdrawal from bank accounts in current year and earlier years. ITA No. 173/Ahd/2020 Srinivasa Reddy Donthireddy vs. DCIT Asst.Year–2013-14 - 4 - Further Assessee also relied on following judgment 1. Girlgowda Dasegowda Va ITO (ITAT Bangalore) (ITA No.360/Bang/2022)- “I have carefully considered the rival submission. The Hon'ble Karnataka High Court in the case of Smt. P. Padmavathu (supra) clearly laid down that earlier withdrawals of cash from Bank account have to be accepted as available to an assessee to explain later deposit as source. The Hon'ble Court held that it was not open to the Revenue to content that the assessee has to explain as to how the cash with lemon earlier was utilized by an assessee and was still available with the assessee. The decisions cited by the learned DR are contrary to the law laid down by the Hon'ble Karnataka High Court and therefore not binding. I therefore, hold the past withdrawals as claimed by the assessee from 2013 should be considered as being available to the assessee to explain the source of deposit. We are also of the view that a reasonable quantum of cash available out of past savings should also be considered as being available to the assessee to explain the source of cash deposited in the bank account.” 2. Sudhirbhai Pravinkant Thaker Vs. Income-tax Officer, Ward-5(1), Ahmedabad(ITAT Ahmebabad) [2017] 88 taxmann.com 382-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 assesse was invested or utilized for any other purpose, it was not open to authority to make addition on basis that assesse failed to explain source of Deposit. 3. Gurpreet Singh v. Income Tax Officer ITAT Chandigarh [2015] 61 taxmann.com 425-Held that Re-deposit of excess withdrawals made out of explained bank deposits can't be held as unexplained money. 4. Swati Malove Divetia v. Income Tax Officer-(HIGH COURT OF GUJARAT)[2018] 98 taxmann com 447 (Gujarat)-held that "Reason recorded by the Assessing Officer must be seen in light of such facts We are not for a moment judging sufficiency of the reasons enabling the Assessing Officer to form a belief that income chargeable to tax had escaped C/SCA/7628/2018 ORDER assessment. We are testing the reasons on the basis of material which was available with him. In pre-notice queries, the Assessing Officer had asked the assessee to explain the source of the cash deposits post demonetization. The assessee disclosed such source being her own bank accounts and their withdrawals matching quite closely to the deposits which withdrawals were made within the close proximity of the deposits. If the Assessing Officer had any reason to discard such disclosures and still form a belief that the deposits were from the sources not indicated by the assessee, nothing of the sort has come in the form of reasons recorded. In fact, the reasons recorded completely ignored the Assessing Officer's query and the response made by the assessee to such queries. In other words, the Assessing Officer in the reasons recorded has simply kept aside the assessee's explanation for the availability of cash on hand for deposit post demonetization. The reasons thus clearly lacked validity and proceeded on erroneous premise.” ITA No. 173/Ahd/2020 Srinivasa Reddy Donthireddy vs. DCIT Asst.Year–2013-14 - 5 - From the above submission Assessee request to your honor to give relief of addition u/s 69 of Rs 393000/- and oblige.” The Ld. A.R. further submitted that the assessee has withdrawn the cash from salary account and made the deposit in HDFC Account after incurring daily expenses. 7. The Ld. D.R. submitted that the AO has only added peak and granted the expenses. The Ld. D.R. relied upon the assessment order and the order of the CIT(A). 8. Heard both the parties and perused all the relevant material available on record. As regards, the cash book and the details filed by the assessee for A.Y. 2010-11 to 2013-14 it is a regular practice of the assessee to withdraw certain amount from its salary account and deposit the same into HDFC account. In the past the same was accepted by the Assessing Officer / Revenue. Since, the deposits whether to the extent of Rs. 15,25,000/- but the withdrawal was 18,10,000/-. The Assessing Officer without any basis had made assumption that it is a negative peak of Rs. 3,93,000/- but from the individual aspect and the salaried employee, it is pertinent to note that the expenses are within the range and therefore, the Assessing Officer as well as CIT(A) has not taken this into account. Hence, the appeal of the assessee is allowed. 9. In result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 15/03/2023 Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER Ahmedabad; Dated 15/03/2023 TANMAY, Sr. PS TRUE COPY ITA No. 173/Ahd/2020 Srinivasa Reddy Donthireddy vs. DCIT Asst.Year–2013-14 - 6 - आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 10.03.2023 2. Date on which the type draft is placed before the Dictating Member 13.03.2023 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S 13.03.2023 5. Date on which the fair order is placed before the Dictating Member for pronouncement .03.2023 6. Date on which the fair order comes back to the Sr.P.S./P.S 15 .03.2023 7. Date on which the file goes to the Bench Clerk 15.03.2023 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 Despatch of the Order..........................................