KALLINATH BABU JOSE, CHENNAI V. ITO, INTERNATIONAL WARD-1(1), CHENNAI

ITA 2/CHNY/2023

AI Insights

The case revolves around an appeal by Shri Kalliath Babu Jose against the order of the Commissioner of Income Tax (Appeals)-16, Chennai, which confirmed the addition of Rs. 32.10 Lakhs to the assessee's income as unexplained money under sections 69A and 115BBE of the Income Tax Act, 1961. The amount was deposited in the assessee's NRO account during the demonetization period following a cash withdrawal of Rs. 50 Lakhs from an NRE account intended for property purchase. The Tribunal examined the sequence of transactions and the explanations provided by the assessee, ultimately finding them satisfactory and allowing the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 135072 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-02-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 03-01-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 144; 133(6); 69A

Judgement Text

आयकर अपीलीय अिधकरण, ‘सी/एस एम सी’ यायपीठ,चे ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘C/SMC’ BENCH, CHENNAI ी महावीर सह, उपा य के सम BEFORE SHRI MAHAVIR SINGH, VICE PRESIDENT आयकर अपील सं./ITA No.: 2/CHNY/2023 िनधा रण वष /Assessment Year: 2017-18 Shri Kalliath Babu Jose, C/o. KGS Associates, 22, 3 rd Floor, Aarti Arcade, 114, Dr. Radhakrishnan Salai, Mylapore, Chennai – 600 004. PAN: AAKPB 9560E Vs. The Income Tax Officer, International Ward 1(1), Chennai. (अपीलाथ /Appellant) ( यथ /Respondent) अपीलाथ क" ओर से/Appellant by : Shri N. Arjunraj, CA for Shri S. Sridhar, Advocate यथ क" ओर से/Respondent by : Shri AR.V. Sreenivasan, Addl.CIT सुनवाई क" तारीख/Date of Hearing : 23.02.2023 घोषणा क" तारीख/Date of Pronouncement : 23.02.2023 आदेश आदेशआदेश आदेश /O R D E R This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals)-16, Chennai in ITA No.97/CIT(A)-16/2019-20 dated 13.12.2022. The assessment was framed by the Income Tax Officer, International Taxation Ward 1(1), Chennai for the assessment year 2017-18 u/s.144 of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated 26.12.2019. - 2 - ITA No. 2/Chny/2023 2. The only issue in this appeal of assessee is as regards to the order of CIT(A) confirming the action of the A.O in making addition of cash deposit in the bank account during demonetization period amounting to Rs. 32.10 Lakhs. 3. The brief facts of the case are that the assessee is an individual and an NRI. He filed his return of income for the relevant A.Y 2017- 18 admitting total income of Rs. 1,20,020/- from house property. The assessee’s case was selected for limited scrutiny category under CASS to verify cash deposit made during demonetization period amounting to Rs. 32.10 Lakhs. The A.O required the details u/s. 133(6) of the Act issued to Branch Manager, HDFC Bank Ltd., Bangalore. On perusal of the bank statements indicated that the assessee has made cash deposit of Rs. 32.10 Lakhs in the HDFC Bank Ltd. As there was no response from the assessee, despite many notices, assessment was framed u/s. 144 of the Act and making addition of Rs. 32.10 Lakhs u/s. 69A r.w.s 115BBE of the Act. Aggrieved, the assessee preferred appeal before CIT(A). 4. The CIT(A) also confirmed the action of the A.O. Aggrieved, the assessee came in appeal before the Tribunal. 5. Now, the Ld. counsel for the assessee explained from the order of CIT(A) at para 4.2, wherein the second remand report of the A.O - 3 - ITA No. 2/Chny/2023 dated 18.11.2020, which is being reproduced for the better understanding of the assessee: “2. The facts of the case are that the assessee had deposited a sum of Rs.32,10,000/- on 21.11.2016 in mode of cash in HDFC Bank A/c No.0041010005500. The account is a NRO account and the source of cash deposited formed the reason for selection of the case for scrutiny. During the course of scrutiny proceedings, the assessee failed to respond to various notices issued by the AO seeking explanation with regard to the source of cash deposited and in the absence of any material to explain the same, an order u/s144 was passed bringing this sum of Rs, 32,10,000/- to tax as unexplained money u/s69A rws.115BBE of the Act. 3. The assessee preferred an appeal and had submitted further evidences in support of the claim that the cash deposited of Rs.32,10,000/- on21.11.2016, during the period of demonetisation is explained for the purpose of Income tax. On 10.05.2022, the copy of the details and documents submitted before the Ld.CIT(A) was provided, in order to facilitate the submission of a remand report to CIT(A)-16, Chennai in terms of Rule 46A. 4. The relevant submission and its annexures were carefully examined. According to the assessee, a sum of Rs.50lakhs was withdrawn from NRE account held in HDFC Bank on 12.09.2016 in order to acquire a property. Since the deal could not materialize, in the month of Sept.201 6 the cash was retained. Thereafter, a property was acquired on 21.11.2016 vide Document No.9182/2016 located at Bharati Nagar, Ambattur for a consideration of Rs. 16,79,200/-.After appropriating the funds towards sale consideration and allied stamp duty, the balance sum was deposited into HDFC NRO account held by the assessee, to verify the claim of the assesse, notice u/s 133(6) was issued to the Branch Manager, HDFC Bank Ltd. Bangalore dated 28.06.2022 vide DIN. ITBA/COM/F/&/2022-23/1043635195(1), to clearly confirm the nature of transaction whether cash of Rs. 50,00,000/- was actually paid to the assessee or it is a mere transfer of funds between accounts held in your bank. In response, mail was sent by the Branch Manager dated 27.09.2022 stating that it is self cash withdrawal only. The copy of the mail is enclosed. 5. On careful consideration of the bank statements and copy of the sale deed, the events being withdrawal of cash of Rs.50 lakhs on 12.09.2016, acquisition of property and deposit of cash on 21.11.2016 are found to be Correct. However, the link between the cash withdrawn to that of the cash deposited subsequently is not established as there is no compelling need to pay the sale consideration in mode of cash only. There has been no impediment in acquiring any such asset by addressing the sale consideration in mode of any of the banking channels. - 4 - ITA No. 2/Chny/2023 6. It is pertinent to highlight that the provisions of section 269Ss were modified w.e.f. 01.06.2015 to include the phrase 'specified sum', prohibiting cash payments in real estate transactions. Thus, being the case the claim that the cash was withdrawn and kept towards acquisition of property, İs found to be incongruous. 7. Further, in the return of income filed for AY: 2017-18 on 26.10.2017, the assessee has omitted to enter the particulars of cash deposited during the period from 09. 11.2016 to 30.11.2016 in excess of Rs.2 lakhs. Part E of the return of income in ITR-1 stipulates that the filer has to necessarily disclose the particulars of cash deposited in the Return, during the period of demonetization. Though the assessee has entered the relevant particulars of bank, IFSC Code and the Account Number, he had failed to incorporate the details of cash deposited in the said return filed on verification The same may be taken into consideration by the Ld. CIT(A). Under the given circumstances and facts of the case, the issue with regard to the source of cash deposited may be considered on its merits.” 6. The Ld. counsel for the assessee explained that the assessee has withdrawn Rs.50 Lakhs from NRO account held in HDFC Bank on 12.09.2016 for acquiring a property. Since, the deal did not materialize and the cash was kept at home. Subsequently, the property was acquired on 21.11.2016 and registered vide Document No.9182/2016 located at Bharati Nagar, Ambattur for a consideration of Rs. 16.79 Lakhs. After appropriating the funds towards sale consideration and allowed stamp duty etc, the assessee deposited the balance cash of Rs. 32.10 Lakhs in the HDFC Bank Ltd., Bangalore. Admittedly, according to Ld. counsel for the assessee, the cash was deposited but out of the admitted withdrawal of Rs. 50 Lakhs from the HDFC Bank held on 12.09.2016. The Ld. counsel for the assessee as well as Ld. Sr. D.R took us through the - 5 - ITA No. 2/Chny/2023 findings of CIT(A) at Para 5.1, for and against arguments, that the CIT(A) has recorded as under: “As seen from the facts of the case, the appellant has withdrawn Rs.50,00,000/- on 12.09.2016 in cash and the supposed purpose of the withdrawal was investment in property. The appellant who is in the regular habit of converting his foreign sourced income into FD's within one week of transfer from NRE account to NRO account has, as per his own explanation, kept the cash withdrawn in cash only.” 7. The Ld. Sr. D.R also read out the following portion of CIT(A) at Page No.18: “In this case also the source for Rs.50,00,000/- is from an NRE account which seems to be explainable. The appellant who has withdrawn the cash for whatever purpose should have stopped there, instead of "cooking up a transaction" to explain the cash deposit of Rs.32,10,000/-. This sum of Rs.32,10,000/- which was deposited was immediately transferred to FDs on 26.11.2016 itself. It is also pertinent to mention, here, that the appellant has cancelled certain FDS on 09.09.2016 before withdrawal of Rs.50,00,000/- which is a pointer that the appellant had a specific purpose for withdrawal of Rs.50,00,000/-.” 8. After hearing both the sides and going through the facts and circumstances of the case, it is crystal clear that admitted facts are that there is a withdrawal of Rs. 50 Lakhs in cash from the HDFC Bank as on 12.09.2016, which is for the purpose of acquiring a property. Admittedly, the assessee acquired property on 21.11.2016 vide registered Document No.9182/2016 located at Bharati Nagar, Ambattur, for a consideration of Rs. 16.79 Lakhs allied with stamp duty etc. The balance cash amounting to Rs. 32.10 Lakhs was re- deposited in the assessee’s bank account during demonetization period i.e., only on 21.11.2016. It is a coincident that the amount - 6 - ITA No. 2/Chny/2023 of Rs. 32.10 Lakhs i.e., cash was re-deposited in the bank account after acquiring property by the assessee vide Document No.9182/2016 located at Bharati Nagar, Ambattur. It means that the immediate source of cash deposit is explained but only issue remains is of time gap of two months. I noted that the time gap of two months is for the reason that the assessee was looking for a property and for that he has rightly kept the cash at home. The Revenue could not establish that the assessee might have spent the cash or this was used for household expenses. Even, the Revenue could not explain that any investment is made somewhere else. Hence, there is no other alternative except to accept this cash deposit in the bank account as explained. In term of the above, we allow the appeal of the assessee. 9. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 23 rd February, 2023 at Chennai. Sd/- (महावीर सह ) (MAHAVIR SINGH) उपा य /VICE PRESIDENT चे ई/Chennai, #दनांक/Dated, the 23 rd February, 2023 EDN आदेश क" ितिलिप अ'ेिषत/Copy to: 1. अपीलाथ /Appellant 2. यथ /Respondent 3. आयकर आयु* /CIT 4. िवभागीय ितिनिध/DR 5. गाड फाईल/GF.