Radhe Developers (India) Ltd., Ahmedabad V. The ACIT, Cir-3(1)(2), Ahmedabad

ITA 237/AHD/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 6386 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-08-2023
• Assessment Year: 2016-2017
• Appeal Filed On: 11-04-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law; Tangible material; Set aside
• Section: 69; 143(3); 113

Judgement Text

आयकर आयकरआयकर आयकर अपीलीय अपीलीयअपीलीय अपीलीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद 瀈यायपीठ 瀈यायपीठ瀈यायपीठ 瀈यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ B’’ BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And SHRI TR SENTHIL KUMAR, JUDICIAL MEMBER आयकर अपील सं./ITA No. 237/AHD/2023 /Asstt. Year: 2016-2017 Radhe Developers (India) Limited, 1 st Floor, Chinubhai Chambers Behind City gold Cinema, Ashram Road, Ahmedabad-380009. PAN: AAACR9177L Vs. A.C.I.T, Circle-3(1)(2), Ahmedabad. (Applicant) (Respondent) Assessee by : Shri Vartik Choksi, AR Revenue by : Shri Sudhendu Das, CIT. DR सुनवाई क琉 तारीख/Date of Hearing : 22/08/2023 घोषणा क琉 तारीख /Date of Pronouncement: 16/11/2023 आदेश आदेशआदेश आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income tax (Appeals), Ahmedabad, arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2016-2017. 2. The assessee has raised following grounds of appeal: 1. In law and in the facts and circumstances of the appellant's case, the Ld. CIT (A) has erred in confirming the addition of Rs.46,98,90,920/- made by the Assessing Officer on account of alleged unexplained cash deposit in the bank account. 2. In the facts and circumstances of the appellant's case, the Ld. CIT (A) has, while deciding the issue failed to appreciate the following:- ITA no.237/AHD/2023 A.Y. 2016-17 2 (a) As per the cash flow statement explained before the Assessing Officer, which is reproduced on Page-5 of the assessment order, there was opening balance of cash of Rs. 2.05 crores and such cash balance is not challenged. (b) The appellant had also explained that it had withdrawn cash from the bank account wherein sufficient balance was available. Thus, the source of cash as per the cash book was fully explained. The books are audited. Further, it is not the contention of Assessing Officer that such cash was utilized. (c) The Assessing Officer or the Department has not doubted the source of amount withdrawn from the bank account. (d) The appellant had also explained the reasons for withdrawal of cash from the bank account and for maintaining such cash balance which was for the purpose of business. (e) It is not the case of Department that such cash was not available with the appellant. (f) Purpose of maintaining such cash balance was fully explained and it is the decision for business. (g) Various decisions including the decision of the Jurisdictional High Court and Tribunal support, the appellant's explanation that having regard to the said facts, the addition was not justified. 2.1 Having regard to the facts and circumstances of the appellant's case, the Ld. CIT (A) ought to have deleted the said addition. The Hon'ble ITAT may please give direction for deleting such addition. 3. The appellant craves leave to add to amend or to raise any further grounds of appeal as case may arise. 3. The only effective issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 46,98,90,920/- on account cash deposit in the bank. 4. The facts in brief are that the assessee, a public company, is engaged in the business of real estate. The assessee for the year under consideration was selected for limited scrutiny to verify the sources of cash deposit which later converted into complete scrutiny. The AO during the assessment proceedings noticed that the assessee in the cash book, prepared for the year under consideration, has shown an opening cash balance of Rs. 2,50,13,132/-, total cash withdrawal for Rs. 47,26,31,022/- and cash deposit for Rs. 46,98,90,920/- only. ITA no.237/AHD/2023 A.Y. 2016-17 3 The AO further noticed that the majority of cash was withdrawn during the period April 2015 to January 2016 whereas the majority of cash was deposited during February to March 2016 on daily basis. Accordingly, the AO raised certain questions to the assessee regarding such huge cash deposits and withdrawals. 4.1 The assessee in response to such notice of the AO, explained that it, being in the business of real estate development, was in the process of acquiring lands at Vijapur and Derol area for which it received fund from Nova Chem Enterprises through banking channel. As the negotiation for purchase of land was going on with the farmers, it withdrew the fund from the bank with the objective of paying to the farmers upon the completion of negotiation. However, the negotiation could not reach a finality and deals got cancelled. Therefore, the cash withdrawn earlier was re-deposited in the bank. The assessee regarding the evidence of negotiation with the farmers stated that the entire communication/negotiation for purposed deal were made verbally or through telephone. Hence, it does have any documentary evidence. Likewise, the deal for purchase of land got cancelled. Hence, no banakhat or agreement was entered or executed. The assessee regarding the allegation about the details of fees paid to any person deputed for verification of land, property title etc., submitted that it has not appointed any person or paid any fee in this regard. 5. However, the AO was not satisfied with the explanation furnished by the assessee. The AO found that the assessee has not provided cash flow statements establishing the claim made by it. The cash from the bank was withdrawn from the Month of April to January on a regular basis whereas deposits were made during the month of February to March. The assessee’s claim that cash was withdrawn for purchase of lands has not been substantiated based on cogent material. As such the assessee failed to provide any evidence regarding the so- called land deal for which it withdrew money from the bank, but the same got cancelled. Further, if the negotiation for purchase of land was not finalized then ITA no.237/AHD/2023 A.Y. 2016-17 4 what was the reason for the withdrawal of such huge cash. It is also not acceptable that a prudent business will withdraw such huge hard cash and keep the same as it is for such a long period in pursuance to a deal which was not materialized at all. The AO also referred to the judgment of Hon’ble Delhi High court in case of Shri Dinesh Kumar Jain vs. PCIT reported in 97 taxmann.com 113 wherein the assessee claimed the cash was deposited out of remaining cash withdrew on earlier occasion to meet construction expenses. Such explanation was not accepted, since the assessee failed to provide evidence relating to construction and correlation that after-meeting construction expenses remaining cash was re- deposited. In view of the above, the AO treated the cash deposit as unexplained income and added to the total income of the assessee. 6. The aggrieved assessee preferred an appeal before the learned CIT(A) who confirmed the finding of the AO by observing as under: 5.2 The assessing officer relied on the decision of Hon'ble Delhi High Court in the case of Dinesh Kumar Jain vs. Pr.CIT [2018] 97 taxmann.com 113 (Delhi). In this case, the facts are that the assessee claimed that huge cash withdrawals were made from the bank account by utilizing over draft facility, for the purpose of construction of a building and once the construction was over the surplus money was re-deposited in the bank account. In this case, the assessee failed to provide any details of cost of construction incurred by him and no bills of purchase of construction material or any payment to contractors were produced. The assessee company had no evidence at all to explain as to how much amount was incurred in construction of property. In these circumstances the Hon'ble High Court observed that no material could be brought on record to show that after incurring the cost of construction the assessee was left with any huge surplus of cash. It has been submitted by the AR of the appellant that the facts in the case of the appellant company are totally different. 5.3 Appellant was in process of purchase of huge land, and for making better deal, it had withdrawal the cash. When the deal did not materialize, the cash was deposited in the bank account. Cash withdrawal was prior to deal cancellation as appellant was in process of purchase of huge land, and for making better deal, it had withdrawn the cash. 5.4 In this connection the assessing officer asked the appellant company the purpose of maintaining such huge cash balance and in response to the same, it was submitted that the appellant was planning to purchase agricultural lands and the negotiations were in progress. The negotiations were carried on verbally and telephonically and therefore huge cash balance was maintained on the assumption that as soon as the negotiations were completed, payment regarding the same could be made, but the parties could not come to a common point and the deal got cancelled. Further the appellant company has submitted that as the negotiation process was conducted verbally and telephonically there was no question of furnishing any evidence as the deal was not finalized. But the Assessing officer has not accepted this explanation and treated all the cash deposits made in the bank ITA no.237/AHD/2023 A.Y. 2016-17 5 account as unexplained which resulted into the impugned addition of Rs. 46.98 crore. The Revenue has not tried to put itself in the arm-chair of the businessman. It has merely asked the appellant to discharge its onus by producing cogent evidence. The various decisions relied upon by appellant can be distinguished from the facts of the case. 5.5 Hon'ble Supreme Court in the case of Roshan Di Hatti Vs. CIT [1992] 2 SCC 378 has held that if the assessee fails to discharge its onus by producing cogent evidence and explanation, the AO would be justified in making additions to the income of the assessee. 5.6 In view of the above discussion, the reliance placed by AO on the decision of Dinesh Kumar Jain Vs. PCIT of Hon'ble Delhi High Court and the above cited decision of Hon'ble Supreme Court in the case of Roshan Di Hatti Vs. CIT [1992] 2 SCC 378, I hold that there is no reason to disturb the finding of assessing officer regarding addition of Rs.46,98,90,920/-. Hence, this ground of appeal is dismissed. 7. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 8. The learned AR before us filed paper book running from pages 1 to 177 and inter-alia contended that the source of cash deposit was duly explained and the same was also not doubted by the authorities below. 9. On the other hand, the learned DR supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the cash deposited by the assessee was treated as unexplained income of the assessee by the AO on the reasoning that the assessee failed to make satisfactory explanation regarding the sources of such cash deposit. The assessee during assessment as well appellate proceeding before the learned CIT(A) explained that the cash was deposited out of the opening cash balance and cash withdrawal made in the year under consideration. As such the assessee explained that the cash was withdrawn for the purpose of purchase of land, but the land deal did not materialize, hence the same was redeposited. However, neither of the lower authorities agreed with the explanation of the assessee and accordingly an addition was made by the AO which was, subsequently, confirmed by the ld. CIT-A. ITA no.237/AHD/2023 A.Y. 2016-17 6 10.1 From the order of the AO and the learned CIT(A), we note that the assessee offered explanation regarding the sources of deposit made in the bank accounts and in support its explanation furnished copy of cash book and bank books. The activity of the assessee, i.e. withdrawing the huge cash, keeping the same in hard form for a considerable period and finally re-depositing the same in the bank account, might appear to be very unusual. It is because no prudent businessman will do so, particularly in a situation where there was already sufficient cash in hand available with the assessee all the time. Indeed, a suspicion arises in the mind for the genuineness of the transaction on hand as discussed above. 10.2 However, it is the settled law, a suspicion cannot take the place of the evidence as held by Hon’ble Supreme Court in the case of CIT vs. Daulat Ram Rawatmull reported in 53 ITR 574, the relevant extract reads as under: “The circumstances relied upon by Mr. Sastri do raise suspicion, but suspicion cannot take the place of evidence.” 10.3 For the sake of repetition, we also note that indeed, the activity of withdrawing the cash, keeping the same as it is and redeposit the same in the bank after considerable period is very unusual practice but there is no prohibition under any of the law for the time being in force for doing such activity. Thus, merely an unusual activity of the assessee does not give an authority to the revenue to make the addition to the total income of the assessee. 10.4 In fact the assessee in the given facts and circumstances has discharged the onus imposed under the provisions of section 68/ 69 of the Act by furnishing the necessary details which have been elaborately discussed in the preceding paragraph. Thus, the onus shifted upon the revenue to disprove the contention of the assessee based on the tangible materials. But we note that the learned DR has not brought any iota of evidence suggesting that the amount of cash deposit was ITA no.237/AHD/2023 A.Y. 2016-17 7 not out of the cash withdrawal from the bank. Likewise, there was no information that the assessee has spent the cash withdrawal somewhere else towards the capital or revenue expenses. At this juncture, we also find pertinent to refer the order of this tribunal in case of Sudhirbhai Pravinkant Thaker vs. ITO reported in 88 taxmann.com 382, wherein similar facts and circumstances it was held as under: 4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements relied upon by the ld. counsel for the assessee. There is no dispute with regard to the fact that the assessee had deposited the cash of Rs.11,27,800/- starting from 07/06/2007 to 31/02/2008. The cash withdrawn from the bank was of Rs.4,20,000/- on 01/07/2006, Rs.4,90,000/- on 06/07/2006, Rs.83,000/- on 26/06/2007, Rs.51,000/- on 20/11/2007, Rs.1,28,000/- on 14/12/2007 and Rs.2,00,000/- on 07/01/2008. However, the cash was deposited on 07/06/2007 of Rs.2 lacs, on 08/06/2007 of Rs.2 lacs, on 11/06/2007 of Rs.1,50,000/-, on 12/06/2007 of Rs.2 lacs, on 13/06/2007 of Rs.2,25,000/-. The total deposits till 13/06/2007 was of Rs.9,75,000/- and the amount withdrawn till 06/07/2006 was of Rs.9,10,000/- (Rs.4,20,000 + 4,90,000). Rest of the deposits of the total addition were made on 18/06/2007, 26/06/2007 and 13/02/2008. However, withdrawal after 06/07/2006, the assessee had withdrawn on 26/06/2007 of Rs.83,000/-, on 20/11/2007 of rs.51,000/-, on 14/12/2007 of Rs.1,28,000/- and on 07/01/2008 of Rs.2,00,000/-. From 20/11/2011 to 07/01/2008 the assessee had withdrawn total amount of Rs.3,79,000/-. However, cash was deposited in the bank account after 13/06/2007 of Rs.1,52,800/-. So far as the amount of Rs.83,000/- is concerned, i.e. matching from withdrawals and deposits and rest of the amount, there is a gap between withdrawals and deposits of the amount. In respect of deposit made on 13/02/2008 is also within one month from the withdrawal of amount on 07/01/2008. In respect of other entries, the cash withdrawal is even before one year of deposit of the amount. The contention of the assessee is that the amount was kept as cash in hand. The authorities have doubted about the explanation furnished by the assessee. The authorities below have doubted the source of the cash deposits, however, the contention of the ld. counsel for the assessee is that he had withdrawn the amount from his bank account and there is no finding by the authorities below that the cash withdrawn by the assessee was utilized for any other purpose. In the absence of such finding, addition is not justified. We find merit into the contention of the ld. counsel for the assessee that there is no dispute that the amount which was withdrawn by the assessee on various dates during the year 2006 was available with him for making deposits. In the absence of finding that the amount which was previously withdrawn by the assessee had been utilized for any other purpose merely on the basis of conjecture that the amount might have been utilized for any other purpose and was not available with the assessee for making the deposits, we are unable to accept the reasoning of the authorities below. In our considered view, when the assessee has demonstrated that he had withdrawn cash from the bank and there is no finding by the authorities below that this cash available with the assessee was invested or utilized for any other purpose, in that event, it is not open to the authority to make the addition on the basis that the assessee failed to explain the source of deposits. Moreover, the authorities below have not disputed the fact that the assessee had withdrawn amount of Rs.9,10,000/- before the deposits made on various dates during the FY 2007-08. Therefore, the orders of the authorities below are set aside and the AO is directed to delete the addition. Thus, ground raised in the assessee's appeal is allowed. ITA no.237/AHD/2023 A.Y. 2016-17 8 10.5 We also find pertinent to refer the order of Hon’ble Gujarat High Court in the case of Commissioner of Income-tax v. Shailesh Rasiklal Mehta reported in 176 taxman 270 wherein similar facts and circumstances it was held as under: 8. In relation to the first question it is an admitted fact that there was no evidence to disbelieve or disprove the fact that sufficient cash was available in the cash book on the two dates for making the deposits and there was no reason found by the Tribunal for disbelieving the books of account maintained by the assessee as narrated in paragraph No. 31.1 of the impugned order. 9. These are pure findings of fact recorded after appreciation of evidence and do not give rise to any question of law, much less a substantial question of law. 10.6 In view of the above, there cannot be any addition to the total income of the assessee on account of cash deposited in the bank unless the revenue demonstrates that the amount in question has been used by the assessee for any other purpose. Thus, in our considered view the addition on account of cash deposit in the bank is based on assumption and presumptions of wrong facts which is bad in law. 10.7 Regarding the reliance placed by the revenue on the judgement of Hon’ble Delhi High Court in the case of Shri Dinesh Kumar Jain Vs. PCIT reported in 97 taxmann.com 113, in our humble understanding, we note that the facts of that case are distinguishable from the facts of the present case. In the case of Shri Dinesh Kumar Jain, the assessee could not furnish the necessary details about the expenses incurred for the purpose of the construction. As such, the addition was confirmed by the Hon’ble Delhi High Court in the case of Shri Dinesh Kumar Jain in the absence of supporting documents whereas in the present case the fact that the money was withdrawn from the bank has nowhere been doubted which strongly indicates that there was cash available with the assessee. The revenue has also not brought anything on record suggesting that the cash withdrawn from the bank has been utilized elsewhere. Thus, in our humble understanding the principles laid down by the Hon’ble Delhi High Court are not applicable in the instant set of facts. ITA no.237/AHD/2023 A.Y. 2016-17 9 10.8 Likewise, the principles laid down by the Hon’ble Supreme Court in the case of Shri Roshan Di Hatti Vs. CIT reported in 2 SCC 378 are not applicable in the case of the present assessee. It is for the reason that in the case of Shri Roshan Di Hatti, the assessee failed to prove the necessary supporting documents with cogent reasons whereas in the present case, the assessee has furnished all the necessary documentary evidence discussed above. 10.9 In view of the above elaborate discussion and considering the facts in totality, we hereby set aside the finding of the learned CIT(A) and direct the AO to delete the addition made by him. Hence, the ground of appeal of the assessee is hereby allowed. 11. In the result, the appeal of the assessee is hereby allowed. Order pronounced in the Court on 16/11/2023 at Ahmedabad. Sd/- Sd/- (TR SENTHIL KUMAR) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 16/11/2023 Manish आदेश आदेशआदेश आदेश क琉 क琉क琉 क琉 灹ितिलिप 灹ितिलिप灹ितिलिप 灹ितिलिप 灡ेिषत 灡ेिषत灡ेिषत 灡ेिषत/Copy of the Order forwarded to : आदेशानुसार आदेशानुसारआदेशानुसार आदेशानुसार/BY ORDER, True Copy उप उपउप उप/सहायक सहायकसहायक सहायक पंजीकार पंजीकारपंजीकार पंजीकार (Dy./Asstt. Registrar) आयकर आयकरआयकर आयकर अपीलीय अपीलीयअपीलीय अपीलीय अिधकरण अिधकरणअिधकरण अिधकरण, अहमदाबाद अहमदाबादअहमदाबाद अहमदाबाद / ITAT, Ahmedabad 1. अपीलाथ牸 / The Appellant 2. 灹瀄यथ牸 / The Respondent. 3. संबंिधत आयकर आयु猴 / Concerned CIT 4. आयकर आयु猴(अपील) / The CIT(A) 5. िवभागीय 灹ितिनिध, आयकर अपीलीय अिधकरण / DR, ITAT, 6. गाड榁 फाईल / Guard file.