Smt.Vinatha Madhusudhan Reddy , Bangalore V. Assistant Commissioner of Income Tax Circle-3(2)(1), Bangalore

ITA 257/BANG/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3469 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 30-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M NARASIMHA RAJU JT BENGALURU
• Assessee Lawyers: B S BALACHANDRAN
• Keywords: Unexplained cash credit; Peak credit; Source of fund; Reasonable cause

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI A.K. GARODIA , ACCOUNTANT MEMBER I TA NO. 257/BANG/2018 ASSESSMENT YEAR : 2014 - 15 SMT. VINATHA MADHUSUDAN REDDY, NO.82, AVALAHALLI, ANJANAPURA POST, J.P. NAGAR, 9 TH PHASE, BANGALORE 560 062. PAN: AAHPR 8319N VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 3(2)(1), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI B.S. BALACHANDRAN, ADVOCATE RE SPONDENT BY : SHRI M. NARASIMHA RAJU, JT.CIT(DR)(ITAT), BENGALURU. DATE OF HEARING : 02 .0 8 .201 8 DATE OF PRONOUNCEMENT : 24 .08.2018 O R D E R PER N.V. VASUDEVAN, JUDICIAL MEMBER THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 19.12.2017 OF THE CIT(APPEALS)-3, BENGALURU RELATIN G TO ASSESSMENT YEAR 2014-15. 2. THE ASSESSEE IS AN INDIVIDUAL. SHE DERIVES INCO ME UNDER THE HEAD INCOME FROM HOUSE PROPERTY AND INCOME FROM CAPITAL GAINS. THE ASSESSEE FILED RETURN OF INCOME FOR AY 2014-15 DECL ARING TOTAL INCOME OF RS.3,00,18,930/-. IN THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO NOTICED THAT THERE WERE CASH DEPOSITS IN THE BANK A /C. NO.2476101000898 MAINTAINED BY THE ASSESSEE WITH CANARA BANK. THERE WERE ALSO ITA NO. 257/BANG/2018 PAGE 2 OF 7 WITHDRAWALS OF CASH FROM THE VERY SAME BANK ACCOUNT BY THE ASSESSEE. THE DETAILS OF THE DEPOSIT AND WITHDRAWAL IN THE BA NK ACCOUNT WAS AS FOLLOWS:- 3. THE AO CALLED UPON THE ASSESSEE TO EXPLAIN THE S OURCE OF FUNDS OUT OF WHICH THE CASH DEPOSITS WERE MADE BY THE ASSESSE E IN HIS BANK ACCOUNT. THE ASSESSEE EXPLAINED THE SOURCE OF FUND S FOR CASH DEPOSITS AS FROM AND OUT OF THE WITHDRAWALS MADE FROM THE VERY SAME BANK ACCOUNT. THE TOTAL OF THE CASH DEPOSITS IN THE BANK ACCOUNT WAS RS.24,59,000 WHILE THE WITHDRAWALS FROM THE BANK ACCOUNT WAS RS. 23,00 ,000/-. THE ASSESSEE POINTED OUT THAT THE CASH WITHDRAWALS WERE PRIOR TO THE DATE OF DEPOSIT OF CASH IN THE BANK ACCOUNT. THE ASSESSEE ALSO SUBMITTED THAT THE WITHDRAWALS FROM THE BANK ACCOUNT WAS MADE FOR THE PURPOSE OF MEETING EXPENSES IN CONNECTION WITH MARRIAGE OF HER DAUGHTE RS. THE MARRIAGE OF THE 2 DAUGHTERS OF THE ASSESSEE HAD TAKEN PLACE IN MARCH, 2013 AND ITA NO. 257/BANG/2018 PAGE 3 OF 7 DECEMBER, 2014. THE AO WAS OF THE VIEW THAT THE CA SH WITHDRAWALS AND DEPOSITS WERE DURING OCTOBER, 2013 TO JANUARY, 2014 AND THEREFORE THERE WAS NO CORRELATION BETWEEN THE CASH WITHDRAWALS, DE POSITS AND THE MARRIAGE OF THE DAUGHTERS. THE AO PARTLY ACCEPTED T HE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE SOURCE OF FUNDS FOR DEP OSIT IN THE BANK ACCOUNT BUT DID NOT ACCEPT THE PLEA OF THE ASSESSEE REGARDI NG EXPLANATION OF SOURCE OF DEPOSITS TO THE TUNE OF RS.17,31,500/-, FOR THE FOLLOWING REASONS:- 6. WITHOUT ACCEPTING THE VALIDITY OF THE ASSESSEE' S ARGUMENTS, THERE MAY BE TRUTH IN THE CLAIM THAT SOME COMPONENT OF CASH- DEPOSIT IS FROM THE WITHDRAWALS. IT IS SEEN THAT AS ON 18-05-2013, 23-10-2013 AND 24-10-2013 THE ASSESSE HAD SUFFICIEN T CASH IN HAND WHICH WAS WITHDRAWN IN THE IMMEDIATE PAST. THE DEPOSITS MADE FROM 26.11.2013 TO 18.01.2014 ARE NOT SUPPORTE D BY ANY WITHDRAWALS IN THE IMMEDIATE PAST. HENCE THE SAME A RE TREATED AS UNEXPLAINED CASH CREDITS IN THE BOOKS OF THE ASSESS E. TOTAL ADDITION: 17,31,500 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONFIRMED THE ORDER OF THE AO. THE FOLLOWING WERE THE REASONS GIVEN BY THE CI T(A) FOR CONFIRMING THE ORDER OF THE AO:- 4.4 THE APPELLANT HAS TRIED TO EXPLAIN THE CASH DEP OSITS BY MEANS OF CASH FLOW STATEMENT FOR FY 2013-14, HOWEVE R THE SAME ALSO DOES NOT RETIED THE TRUE STATE OF AFFAIRS. THE CASH FLOW STATEMENT SHOWS THAT HUGE CASH IS BEING WITHDRAWN C ONTINUOUSLY DURING PERIOD 08.04.2013 TO 17.09.2013 (THESE WITHD RAWALS ARE IN ADDITION TO THE WITHDRAWAL OF RS.30,000/- PER MONTH BEING MADE FROM THE HANK ACCOUNT AND SHOWN AS PERSONAL DRAWING S) AND THEN THE SAME IS BEING DEPOSITED DURING PERIOD 03.10.201 3 TO 28.02.2014. HERE THE ISSUE IS WHY A PERSON WOULD KE EP ON WITHDRAWING MONEY FROM ITS BANK ACCOUNT WHEN THE MO NEY FROM EARLIER CASH WITHDRAWALS IS ALREADY LYING WITH IT. THESE ASPECTS SHOW THAT THE CASH WITHDRAWN HAD BEEN CONSUMED BY T HE APPELLANT AND CASH DEPOSITED WAS FROM SOME UNEXPLAI NED SOURCES OF INCOME. ITA NO. 257/BANG/2018 PAGE 4 OF 7 4.5 THE APPELLANT HAS TRIED TO TAKE SHELTER OF THE THEORY OF PEAK CREDIT, HOWEVER THE SAME CANNOT BE APPLIED BLINDLY WITHOUT APPRECIATING FACTS OF THE CASE. WHETHER TO APPLY TH E PEAK CREDIT THEORY OR NOT AND TO WHICH ENTRIES IT IS TO BE APPL IED DEPENDS ON FACTS OF EACH CASE AND MATERIAL ON RECORD. IN THE C ASE UNDER CONSIDERATION, THE FACTS AS DISCUSSED ABOVE CLEARLY SHOW THAT THE DEPOSITS IN THE BANK ACCOUNT ARE FROM UNDISCLOSED S OURCES AND THE APPELLANT HAS NOT GIVEN ANY REASONABLE CAUSE WHICH REQUIRES APPLICATION OF THE PEAK CREDIT THEORY IN HER CASE. CONSIDERING ABOVE, THE ADDITION OF RS.1731,500/- IS UPHELD AND THE GROUNDS OF APPEAL 2 TO 4 OF THE APPELLANT ARE DISMISSED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSESSE E HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. THE ASSESSEE H AD FILED A CASH FLOW STATEMENT EXPLAINING THE AVAILABILITY OF CASH ON TH E VARIOUS DATES WHEN DEPOSITS WERE MADE IN THE BANK ACCOUNT. THE SAME I S AS FOLLOWS:- STATEMENT OF CASH FLOW FOR THE FINANCIAL YEAR 2013- 14 DATE PARTICULARS CH. NO DEBIT CREDIT BALANCE 1.4.13 OPENING BALANCE 23,181 23181 2.5.13 PERSONAL DRAWINGS 20,000 3,181 8.4.13 CASH DRAWN 385292 200,000 203,181 19.4.13 CASH DRAWN 385293 200,000 403,181 2.5.13 PERSONAL DRAWINGS 30,000 373,181 2.5.13 CASH DRAWN 385295 400,000 773,181 2.5.13 CASH DRAWN 385296 300,090 1,073,181 3.5.13 CASH DRAWN 394581 500,000 1,573,181 4.5.13 CASH DRAWN 394582 500,000 2,073,181 7.5.13 CASH DRAWN 394585 25,000 2 ,098,181 18.5.13 CASH DEPOSITED 150,000 1,948,181 1.6.13 PERSONAL DRAWINGS 30,000 1,918,181 2.7.13 PERSONAL DRAWINGS 30,000 1,888,181 1.8.13 PERSONAL DRAWINGS 30,000 1,858,181 19.8.13 CASH DRAWN 396168 200,000 2,058,181 31.8.13 CASH DRAWN 396169 200,000 2,258,181 2.9.13 PERSONAL DRAWINGS 30,000 2,228,181 7.9.13 CASH DRAWN 396170 50,000 2,278,181 10.9.13 CASH DRAWN 396171 150,000 2,428,181 ITA NO. 257/BANG/2018 PAGE 5 OF 7 13.9.13 PERSONAL DRAWINGS 28,659 2,399,522 17.9.13 CASH DRAWN 672539 60,000 2,459,522 3.10.13 PERSONAL DRAWINGS 20,000 2,439,522 23.10.13 CASH DEPOSITED 300,000 2,139,522 24.10.13 CASH DEPOSITED 200,000 1,939,522 2.11.13 PERSONAL DRAWINGS 30,000 1,909,522 25.11.13 CASH DEPOSITED 7,500 1,902,022 26.11.13 CASH DEPOSITED 500,000 1,402,022 27.11.13 CASH DEPOSITED 500,000 902,022 1.12.13 PERSONAL DRAWINGS 22,500 879,522 28.12.13 CASH DEPOSITED 100,000 779,522 30.12.13 CASH DEPOSITED 250,000 529,522 30.12.13 CASH DEPOSITED 7,500 522,022 31.12.13 CASH DEPOSITED 144,000 378,022 2.1.2014 PERSONAL DRAWINGS 29,000 349,022 18.01.14 CASH DEPOSITED 230,000 119,022 24.1.14 CASH DRAWN 20,000 139,022 27.01.14 CASH DEPOSITED 10,500 128,522 31.01.14 CASH DEPOSITED 50,000 78,522 1.2.2014 PERSONAL DRAWINGS 22,500 56,022 25.02.14 CASH DEPOSITED - 10,500 45,522 28.02.14 CASH DEPOSITED 35,000 10,522 24.3.14 CASH DRAWN 552028 25,000 35,522 29.3.14 CASH DRAWN 552030 11,100 46,622 30.3.14 PERSONAL DRAWIN GS 20,000 26,622 31.3.14 CLOSING BALANCE 26,622 TOTAL 2,864,281 2,864,281 6. WE HAVE HEARD THE SUBMISSION OF THE LEARNED COUN SEL FOR THE ASSESSEE AND THE LEARNED DR. THE LEARNED COUNSEL F OR THE ASSESSEE REITERATED PLEA OF THE ASSESSEE AS PUT FORTH BEFORE THE AO AND CIT(A). THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IT IS SEEN THAT THE CASH DEPOSITS IN THE BANK ACCOUNT ARE PRECEDED BY WITHDRAWAL FROM THE VERY SAME BANK ACCOUNT. THE CASH FLOW STATEMENT FI LED BY THE ASSESSEE EXPLAINING AVAILABILITY OF CASH ON THE VARIOUS DATE S OF DEPOSIT OF CASH IN THE BANK ACCOUNT HAS NOT BEEN DISBELIEVED BY THE REVENU E AUTHORITIES. THEY ITA NO. 257/BANG/2018 PAGE 6 OF 7 HAVE PROCEEDED ON THE BASIS THAT SINCE THERE WAS SU FFICIENT TIME LAG BETWEEN THE DATES OF WITHDRAWAL OF CASH FROM THE BA NK ACCOUNT AND THE DATES OF DEPOSITS, THE AVAILABILITY OF CASH CANNOT BE BELIEVED. THE LEGAL POSITION IN THIS REGARD IS THAT IF THE DEPOSIT OF M ONEY IN THE BANK ACCOUNT IS PRECEDED BY WITHDRAWAL OF MONEY FROM THE VERY SAME BANK ACCOUNT THEN THE SOURCE OF FUNDS IS PRIMA FACIE DEMONSTRATED OR EXPLAINED BY THE ASSESSEE. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF S.R. VENTAKARATNAM VS CIT, KARNATAKA-I & OTHERS 127 ITR 807 HAS HELD THAT ONCE THE ASSESSEE DISCLOSES THE SOURCE AS HAVING CO ME FROM THE WITHDRAWALS MADE ON A GIVEN DATE FROM A GIVEN BANK, IT WAS NOT OPEN TO THE REVENUE TO EXAMINE AS TO WHAT THE ASSESSEE DID WITH THAT MONEY AND CANNOT CHOSE TO DISBELIEVE THE PLEA OF THE ASSESSEE MERELY ON THE SURMISE THAT IT WOULD NOT BE PROBABLE FOR THE ASSESSEE TO K EEP THE MONEY UNUTILIZED. WE ARE OF THE VIEW THAT THE RATIO LAID DOWN IN THE AFORESAID JUDGMENT WILL APPLY TO THE FACTS OF THE PRESENT CAS E. IF THE REVENUE WANTS TO DISBELIEVE THE PLEA OF THE ASSESSEE THEN IT MUST SH OW THAT THE PREVIOUS WITHDRAWAL OF CASH WOULD NOT HAVE BEEN AVAILABLE WI TH THE ASSESSEE ON THE DATE OF DEPOSIT OF CASH IN THE BANK ACCOUNT. THE A O AND CIT(A) HAVE PROCEEDED PURELY ON ASSUMPTION AND SURMISES THAT CA SH WOULD NOT BE LYING IDLE WITH THE ASSESSEE FOR SUCH A LONG TIME. IN OU R VIEW, THE ASSESSEE HAS SATISFACTORILY EXPLAINED THE SOURCE OF FUNDS OUT OF WHICH DEPOSIT OF CASH WAS MADE IN THE BANK ACCOUNT. WE THEREFORE DELETE THE ADDITION MADE IN THIS REGARD. ITA NO. 257/BANG/2018 PAGE 7 OF 7 8. IN THE RESULT, THE APPEAL BY THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON THIS 24 TH DAY OF AUGUST, 2018. SD/- SD/- ( A.K. GARODIA ) ( N.V. VASUDEVAN ) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED, THE 24 TH AUGUST, 2018. / D ESAI S MURTHY / COPY TO: 1. THE APP ELL ANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BANGALORE.