Sri.K. Ajaykumar, Cochin V. The ITO, Cochin

ITA 195/COCH/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7650 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 17-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 22-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A DHANARAJ
• Assessee Lawyers: K P PAULSON
• Keywords: Unexplained investment; Source of fund
• Section: 143(3); 69; 10

Judgement Text

ITA NO . 195/C/2016 1 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH (SMC) KOCHI BEFORE SHRI GEORGE GEORGE K , JUDICIAL MEMBER ITA NO 195/COCH/2016 (A SST YEAR 2009 - 10 ) SH K AJAYKUMAR SREEPAADAM OPP BLUEMOON APARTMENTS KADAVANTHRA KUMARANASAN NAGAR KOCHI 682 02 VS THE INCO ME TAX OFFICER WARD3(1) KOCHI ( APPELLANT) (RESPONDENT) PAN NO. ABGPA2880H ASSESSEE BY SH K P PAULSON REVENUE BY SH A DHANARAJ, SR DR DATE OF HEARING 17 TH OCT 2016 DATE OF PRONOUNCEMENT 18 TH OCT 2016 ORDER PER GEORGE GEORGE K,J M : THIS APP EAL, AT THE INSTANCE OF THE ASSESSEE, IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 11.1.2016. THE RELEVANT ASSESSMENT YEAR IS 2009 - 10. 2 THE GROUND RAISED READ AS FOLLOWS: THE LD CIT(A) ERRED IN IGNORING THE GROUNDS MADE OUT IN THE GROUNDS OF APPEAL FILED BEFORE HIM, REGARD VARIOUS AMOUNTS DEPOSITED TO BANK ACCOUNT, TREATED AS UNEXPLAINED INVESTMENT: RS. 1 2,23,000/ - : ( I ) VARIOUS AMOUNTS TOTALLING RS.14,92,0001 - DEPOSITED IN FEDERAL BANK WAS TREATED AS UNEXPLAINED INVESTMENT ALLEGING GAPS, AS THE DATE OF DEPOSITS IN BANK AND DATE OF CASH WITHDRAWAL FROM BANK/DRAWINGS FROM COMPANIES ETC. DOES NOT MATCH EXACT LY, EVEN THOUGH, THE SAID ITA NO . 195/C/2016 2 DEPOSITS WERE REFLECTED IN THE CASH FLOW STATEMENTS FILED WITH THE ASSESSING AUTHORITIES. (II) SIMILARLY, CASH DEPOSITS TOTALLING TO RS.2,08,0001 - IN HOUSING LOAN ACCOUNT NO.3580, WAS ALSO ALLEGED AS UNEXPLAINED INVESTMENT, EVEN THOUGH, THE SAID DEPOSITS WERE REFLECTED IN THE CASH FLOW STATEMENTS FILED WITH THE ASSESSING AUTHORITIES. (III) THUS, TOTALING THE ABOVE RS.14,92,0001 - AND RS.2,08,0001 - AND AFTER CONSIDERING THE AGRICULTURAL SALE PROCEEDS OF RS.4,80,0001 - EARNED BY THE APPELLANT, AN ADDITION OF RS.12,23,0001 - WAS MADE, AS UNEXPLAINED INVESTMENT. [RS. 14,92,000 ( + ) RS. 2,08,000 ( - ) RS. 4,80,000]. (THERE IS A TOTALLING MISTAKE OF RS.3,0001 - , IN THE ASSESSMENT ORDER) . 3 BRIEFLY STATED THE FACTS OF THE CASE ARE AS FO LLOWS: THE ASSESSEE IS AN INDIVIDUAL DERIVING SALARY AND AGRICULTURAL INCOME. FOR THE AY 2009 - 10, RETURN OF INCOME WAS FILED ON 22.12.200 9 DECLARING THE TAXABLE INCOME OF RS. 2,48,033/ - AND AGRICULTURAL INCOME OF RS. 4 LACS. THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY BY ISSUING NOTICE U /S 143(2) OF THE ACT. THE SCRUTINY ASSESSMENT U/S 143(3) OF THE ACT WAS COMPLETED VIDE ORDER DATED 14.12.2011 , BY FIXING THE TOTAL INCOME AT RS. 27,56,630/ - AND AGRICULTURAL INCOME AT RS 4 LACS. ONE OF THE ADDITIONS MADE BY THE ASSESSING OFFICER WAS THE ADDITION U/S 69 OF THE I T ACT AMOUNTI NG TO RS. 12,23,000/ - . THE BACKGROUND , LEADING TO THE ADDITION U/S 69, ARE DETAILED BELOW: 3.1 AS PER THE AIR INFORMATION, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD MADE CASH DEPOSITS AMOUNTING TO RS. 18,28,500/ - DURING THE PERIOD 1.4.2008 TO 31.3.2009. THE ASSESSING OFFICE R , BY OFFICE LETTER DATED 19.8.2011 , ASKED THE ASSESSEE TO FURNISH THE SOURCE OF FUNDS FOR MAKING CASH ITA NO . 195/C/2016 3 DEPOSITS. THE ASSESSEE FILED THE DETAILS OF SOURCE OF FUNDS VIDE HIS LETTER DATED 28.10.2011. THE SOURCE OF CASH DEPOSITS, AS SUBMITTED BY THE ASSESSEE, IS REPRODUCED AT PARA 8 OF THE ASSESSMENT ORDER. OUT OF THE CASH DEPOSITS OF RS. 18,36,000/ - , THE ASSESSING OFFICER WAS OF THE VIEW THAT SOURCE FOR RS. 14, 92,000/ - HAS NOT BEEN EXPLAINED PROPERLY. FURTHER, ACCORDING TO THE ASSESSING OFFICER, THE SOURCE OF CASH DEPOSITS OF RS. 2,08,000/ - IN THE LOAN ACCOUNT NO.3580 , WAS ALSO REMAINED UNEXPLAINED. THE ASSESSING OFFICER BY OFFICE LETTER DIRE CTED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE CASH DEPOSITS OF RS. 17,03,000/ - SHOULD NOT BE TREATED AS UNEXPLAINED INVESTMENT U/S 69 OF THE ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFICER, THE ASSESSEE SUBMITTED THE FOLLOWING REPLY: 'CASH DEPOSITS OF RS.17, 03,000/ - MENTIONED IN YOUR QUERY NO .4 ARE OUT OF THE CASH WITHDRAWAL FROM S.B. ACCOUNT NO.3282, DONE IN THE MONTH OF JULY 2008. THE REASON FOR KEEPING CASH IN HAND IS BECAUSE I HAD ORIGINALLY INTENDED TO PURCHASE 12.4 CENTS OUT OF WHICH I COULD PURCHASE ONLY 6 CENTS. WITH INTENTION TO PURCHASE THE BALANCE PROPERTY, I WAS CONTINUING THE NEGOTIATION HOLDING CASH IN HAND. ON VARIOUS OCCASIONS, PORTIONS OF IT HAVE BEEN DEPOSITED TO BANK. WE ARE RELYING ON THE CASH FLOW STATEMENT FOR THE YEAR ALREADY SUBMITTED TO YOU TO SUBSTANTIATE OUR SUBMISSION. OUT OF RS.22,50,000/ - , TRANSFERRED FROM THE LOAN ACCOUNT NO.3580 AND CREDITED IN THE S.B. ACCOUNT NO.3282, I HAD PAID ONLY RS. 2,5.0,0001 - BY CHEQUE TOWARDS . FULL AND FINAL SETTLEME NT AGAINST PURCHASE OF PROPERTY AND WITHDRAWN THE BALANCE AMOUNT AS CASH AND RE - DEPOSITED INTO THE S.B. ACCOUNT NO.3282 ON VARIOUS DATES AS MENTIONED IN THE DE AILS GIVEN IN THE SOURCE OF CASH DEPOSITS.' 3.2 THE ASSESSING OFFICER ADMITTED THAT THERE WAS SUFFICIENT CASH WITHDRAWS FROM THE FEDERAL BANK ACCOUNT. HOWEVER, HE HELD THAT THESE CASH WITHDRAWALS WOULD NOT BE AVAILABLE WITH THE ASSESSEE FOR MAKING THE CASH DEPOSITS. THE ITA NO . 195/C/2016 4 ASSESSING OFFICER REJECTED THE ASSESSEES CONTENTION THAT CASH DEPOSITS ARE O UT OF WITHDRAWALS FROM 1.7.2008 TO 23.7.2008 AND CONCLUDED AS UNDER: IN THE CIRCUMSTANCES, THE CLAIM OF THE ASSESSEE THAT THE CASH DEPOSITS ARE OUT OF WITHDRAWALS ON 21.7.2008 TO 23.7.2008 IS REJECTED. CONSIDERING THE ARGUMENTS THAT HE HAD EARNED SALE PRO CEEDS OF AGRICULTURAL PRODUCE OUT OF WHICH HE DEPOSITED A SUM OF RS. 4,80,000 TO THE SB ACCOUNT, THE BALANCE SUM OF RS. 12.23.000 (17,03,000 4,80,000/) DEPOSITED IN THE SB ACCOUNT IS TREATED AS UNEXPLAINED INVESTMENT U/S 69 OF THE I T ACT, AND ADDED TO THE RETURNED INCOME. 4 AGGRIEVED BY THE SAID ADDITION, THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER. THE RELEVANT FINDINGS OF THE CIT(A), READ AS FOLLOWS: 6.3 IT IS SEEN THAT THERE HAS BEEN CASH DEPOSITS DURING THE PERIOD RELEVANT TO THE ASSESSMENT YEAR, FOR WHICH THE EXPLANATION SUBMITTED DURING THE COURSE OF APPEAL PROCEEDINGS, HAVE ALREADY BEEN EXAMINED BY THE ASSESSING OFFICER IN DETAILS. THE APPELLANT'S PLEA THAT THE CASH WERE WITHDRAWN FROM THE ACCOUNT, WERE RE - DEPOSITED INTO THE BANK ACCOUNT; LACKS CREDIBILITY AS THE SAME COULD NOT BE EXPLAINED WITH THE SUPPORTIVE EVIDENCES, AS TO WHY THE APPELLANT WITHDREW THE CASH FROM BANK ACCOUNT AND RE - DEPOSITED AGAIN AFTER SO ME INTERVAL. THE QUESTION ARISES IS WHETHER THIS EXPLANATION COULD BE TREATED AS EXPLAINABLE SOURCE FOR THE AVAILABILITY OF CASH DEPOSITS; THE ANSWER IS NEGATIVE, BECAUSE THE EXPLANATION SUBMITTED IS OF GENERAL NATURE WHICH FAIL TO EXPLAIN THE SPECIFICITY OF OCCASIONS OR THE CIRCUMSTANCES, IF COMPARED WITH THE ANALYSIS MADE BY THE ASSESSING OFFICER OF SUCH OCCASIONS AND THE CIRCUMSTANCES. THUS, WHILE THE ASSESSING OFFICER HAS BEEN VERY SPECIFIC IN HIS ANALYSIS AND FINDINGS, THE APPELLANT'S EXPLANATION IS OF VAGUE AND GENERAL NATURE. ACCORDINGLY, IT IS HELD THAT THE ADDITION MADE BY THE ASSESSING OFFICER BY TREATING THE CASH DEPOSITS IN THE SB ACCOUNT AS UN - EXPLAINED INVESTMENT U/S 69 IS UPHELD. THE APPEAL ON THIS GROUND IS DISMISSED. 5 AGGRIEVED BY THE ORD ER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE LD COUNSEL FOR THE ASSESSEE HAD FILED A PAPER BOOK CONTAINING 26 PAGES, INTER - ALIA ENCLOSING THE COPY OF CASH FLOW STATEMENT; COPY OF THE SAVING BANK ACCOUNT NO.328 2 WITH FEDERAL BANK; THE ITA NO . 195/C/2016 5 SALE AGREEMENT DATED 5.1.2007; THE RELEVANT PAGE IN THE AGREEMENT DATED 5.11.2007 WHEREIN THE AGREEMENT VALIDITY PERIOD WAS FURTHER EXTENDED AND THE NEW AGREEMENT DATED 16.7.2008 ETC. THE LD COUNSEL REITERATED THE SUBMISSIONS MADE BEFORE THE INCOME TAX AUTHORITIES. ON THE OTHER HAND, THE LD DR SUPPORTED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A). 6 I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAD PRODUCED THE CASH FLOW STATEMENT BEF ORE THE ASSESSING OFFICER, WHICH IS PLACED AT PAGE 7 OF THE PAPER BOOK FILED BY THE ASSESSEE. IN THE CASH FLOW STATEMENT , ALL THE INFLOWS INCLUDING THE ABOVE INFLOW OF RS. 12,23,000/ - AS WELL AS THE BANK WITHDRAWALS ARE CLEARLY DEPICTED. THE CASH FLOW STATEMENT SUBMITTED, ACCORDING TO ME HAS TALLIED AND THERE IS NO ERROR. THE SOURCE O F CASH DEPOSITS, ACCORDING TO THE ASSESSEE , ARE OUT OF CASH WITHDRAWALS IN THE MON TH OF JULY 2008 FROM ASSESSEES FEDERAL BANK ACCOUNT NO.3282 , WHICH WERE RE - DEPOSITED ON VARIOUS DAYS AS PER THE DETAILS GIVEN IN CASH FLOW STATEMENT. THE SOURCES OF DEPOSITS, AS PER THE CASH FLOW STATEMENT ARE AS FOLLOWS: DATE AMOUNT SOURCE FROM 30.03.2009 6,02,000 AGRI. SALES PROCEEDS - RS. 4, 8 O,OOO, CASH WITHDRAWN FROM FB SB A/C RS. 1,22,000 11.02.2009 48,000 THE DEPOSIT OF RS.48, OOO/ - ON 11.02.2009 IN SB ALC NO.3282 WAS OUT OF THE CASH WITHDRAWAL FROM S.B. ALC NO.3282 DONE IN THE MONTH OF JULY, 200 8 13.01.2009 44,000 RS.44,OOO/ - DEPOSITED TO THE SB ALC NO.3282 ON 13.01.2009 WAS OUT OF THE CASH WITHDRAWN FROM SB I, ACCOUNT NO.3282, DONE IN THE MONTH OF JULY, 2008. 20 .11.2008 1,00,000 CASH DEPOSIT OF RS.1,OO,OOO/ - ON 20.11.2008 IS OUT OF THE CASH WITHDRAWN FROM SB ACCOUNT NO.3282 DONE IN THE MONTH OF JULY, 200 8 . ITA NO . 195/C/2016 6 18.11.2008 2,00,000 CASH DEPOSIT OF RS.2,OO,OOO/ - ON 18.11.2008 IS OUT OF THE CASH WITHDRAWN FROM SB ACCOUNT NO.32B2 DONE IN THE MONTH OF JULY, 200 8 . 11.11.2008 1,80,000 CASH DEPOSITS OF RS.1,BO,OOO/ - ON 11.11.200 8 IS OUT OF CASH WITHDRAWN FROM SB ACCOUNT NO.32 8 2, DONE IN THE MONTH OF JULY, 200 8 . 0 5.11.2008 65,000 CASH DEPOSIT OF RS.6 5 ,OOO/ - ON O 5 .11.2008 IS OUT OF CASH WITHDRAWAL FROM THE SB ACCOUNT DONE IN THE MONTH OF JU1Y,200 8 25.10.2008 25,000 SALARY ADVANCE DT.24.1 0.2008 RS. 10000, 2S.1 0.2008 RS. 1S000 19.10.2008 50,000 CASH DEPOSIT OF RS. 5 O,OOO/ - ON 19.10.2008 IS OUT OF CASH WITHDRAWAL FROM THE FEDERAL BANK SB ALC NO.3282, DONE IN THE MONTH OF JULY, 2008. 16.10.2008 1,00,000 THE CASH DEPOSIT OF RS.1,O O,OOO/ - MADE ON 16.10.2008 TO THE SB ACCOUNT NO.3282 IS OUT OF THE CASH WITHDRAWAL FROM SB ALC NO.32B2 DONE IN THE MONTH OF JULY, 200 8 . 06.10.2008 7,000 CASH IN HAND, AS PER CASH FLOW STATEMENT 22.09.2008 7,000 CASH IN HAND, AS PER CASH FLOW STATEMENT 19.09.2008 25,000 THE CASH DEPOSIT OF RS.25,OOO/ - ON 19.09.200B WAS OUT OF THE CASH WITHDRAWAL FROM SB ALC NO.3282 DONE IN THE MONTH OF JULY, 2008. 04.08.2008 11,500 THE CASH DEPOSIT OF RS. 11,5000 ON 4.8.2008 IS OUT OF THE CASH WITHDRAWAL FROM SB A /C NO.3282DONE IN THE MONTH OF J ULY 2008 0 8.07.2008 14, 000 CASH IN HAND, AS PER CASH FLOW STATEMENT 0 7 .07.2008 9,500 CASH IN HAND, AS PER CASH FLOW STATEMENT 05.07.2008 2,000 CASH IN HAND, AS PER CASH FLOW STATEMENT TOTAL 14,90,000 SOURCE OF DEPOSITS TO HOUSING LOAN ACCOUNT: DATE AMOUNT SOURCE FROM 30.12.2008 82,000 OUT OF THE CASH WITHDRAWAL FROM SB A/C NO 3282 DONE IN THE MONTH OF JULY 2008 31.12.2008 1,13,000 OUT OF THE CASH WITHDRAWAL FROM SB A/C NO 3282 DONE IN THE MONTH OF JULY 2008 30.09.2008 13,000 OUT OF THE CASH IN HAND MAINTAINED BY ME DURING THE YEAR FB 2008 - 09 TOTAL 2,08,000 6.1 THE REASONING FOR DISBELIEVE THE SOURCE OF DEPOSITS OF CASH IS THAT THE WITHDRAWALS IN THE MONTH OF JULY 2008 COULD NOT BE AVAILABLE WITH THE ASSESSEE FOR THESE CASH DEPOSITS. THE ASSESSEE HAD ORIGINALLY INTENDED TO PURCHASE 12.586 CENTS OF LAND IN SY NO.655 AT CHILAVANOOR DESOM, COCHIN CORPORATION AS PER ITA NO . 195/C/2016 7 AGREEMENT DATED 5.11.2007, WHICH IS PLACED AT PAGE 16 TO 21 OF THE PAPER BOOK FILED BY THE ASSESSE E , WHICH DID NOT MATERIALIZE EVEN THOUGH THE VALIDIT Y OF THE AGREEMENT WAS EXTENDED . FINALLY, THE AGREEMENT GOT LAPSED. SUBSEQUENTLY, THE VENDOR SOLD 6 CENTS OUT OF 12.40 CENTS FOR HIGHER PRICE FOR WHICH A SEPARATE SALE AGREEMENT DATED 16.7. 2008 WAS EX EC U T ED, WHICH IS PLACED AT PAGE 22 OF THE PAPER BOOK. THE ASSESSEE W ITH THE INTENTION TO PURCHASE THE BALANCE PROPERTY WAS CONTINUING TO NEGOTIAT E WITH THE SELLER , KEEPING THE CASH IN HAND . HOWEVER, ON VARIOUS OCCASIONS, TO MEET THE PR ESS ING EXPENDITURE DEMANDS, PORTION OF THE CASH IN HAND WERE RE - DEPOSITED INTO THE BANK ACCOUNT. FOR EXAMPLE ON 18.11.2008 , THERE WAS CASH DEPOSIT OF RS. 2 LAKHS AND ON 18.11.2008 ITSELF THERE IS DEBIT FO R RTGS CUSTOM . TH US T HE REASON S FOR KEEPING THE CASH I N HAND AND PERIODICAL DEPOSITS OF CASH IN THE SAID BANK ACCOUNT, ACCORDING TO ME, IS JUSTIFIED AND I HOLD THAT ADDITION U/S 69 OF THE ACT IS NOT WARRANTED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. IT IS ORDERED ACCORDINGLY. IN THE RESULT, THE APPEAL FILED BY T HE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF OCT 2016 . SD/ - ( GEORGE GEORGE K) JUDICIAL MEMBER COCHIN: DATED 18 TH . OCT 2016 RAJ* ITA NO . 195/C/2016 8 COPY TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT(A) 4 . CIT, 5 . DR 6 . GUARD FILE BY ORDER ASSISTAN T REGISTRAR ITAT, COCHIN