Kiran Gopal Gargesh, Ahmedabad V. Income Tax Officer, Ward-1,Int.Taxn., Ahmedabad

ITA 345/AHD/2022

AI Insights

The case revolves around the appeal by Kiran Gopal Gargesh against the order of the Commissioner of Income Tax (Appeals) which confirmed the addition of Rs. 9,36,500 as unexplained cash deposit under Section 69A of the Income Tax Act. The Assessing Officer had initially added this amount, suspecting it to be unexplained cash during the demonetisation period. The assessee argued that these deposits were from substantial cash withdrawals made in earlier years, which were not spent but kept for emergencies, including medical needs for his elderly mother. The Tribunal, referencing various judicial precedents, concluded that the additions made were not justified as the assessee had provided a plausible explanation for the cash deposits.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125649 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 16-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 05-09-2022
• Other Referred Cases: Sampathraj Rakesh Kumar vs. ITO, CIT vs. Manoj Choksi, Ashish Kritikumar Sha vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 69A; 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . N o . 3 4 5/ A h d /2 0 2 2 ( A s s e s s me nt Y ea r s : 2 0 17 -1 8) Kir a n G op a l G a r ge s h , B- 3 , Su c h it a A p ar t me nt, Nr . V ij a y C ro ss R o a d, Na vr a n g pu r a , A h m ed a ba d- 38 00 0 6 V s .In c o me Ta x Of f ic e r , War d- 1( I n t. T a x. ) , Ah me da b ad [P AN N o. B C AP G 4 50 3 J ] (Appellant) .. (Respondent) Appellant by : Shri Hardik Vora, A.R. Respondent by: Shri Ashok Kumar Suthar, Sr. D.R. D a t e of H ea r i ng 17.07.2023 D a t e of P r o no u n ce me nt 05.09.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals)-13, (in short “Ld. CIT(A)”), Ahmedabad vide order dated 04.08.2022 passed for Assessment Year 2017-18. 2. The assessee has taken the following grounds of appeal:- “1. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has erred in confirming addition of Rs. 9,36,500/- on account of unexplained cash deposit u/s 69A of the Act made by Assessing Officer. ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 2 - 2. On the facts and circumstances of the case as well as on the subject, the learned CIT (Appeals) has erred in confirming the calculation of demand by invoking the provisions of section 115BBE of the Act. 3. On the facts and circumstances of the case as well as law on the subject, the learned CIT (Appeals) has erred in confirming addition of Rs. 9,36,500/- on account of unexplained cash deposit u/s 69A of the Act ignoring the earlier withdrawal of cash from bank account and fact that appellant is 76 year old person having no source of income except pension income and was living with 97 years old mother during the year under consideration. 4. It is therefore prayed that the above addition/disallowance made by the Assessing Officer may please be deleted. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 3. The brief facts of the case are that the assessee filed return of income on 23.03.2018 declaring total income of Rs.6510/-. The case of the assessee was thereafter picked up for scrutiny and it was found that the assessee had deposited large amount of cash during demonetisation period as compared to returned income of the assessee. During assessment proceedings, the assessee submitted that he had withdrawn money in cash regularly from his bank accounts over the past period, which was the source of deposit made by the assessee during the ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 3 - demonetisation period. The assessee had made withdrawals from his bank accounts in the earlier years and also in the impugned assessment year prior to the demonetisation period, and thereafter expended a very small portion of the same amount, thereby showing an opening balance of Rs.11,30,000/- as on 01.04.2016. The Assessing Officer, did not believe the contentions of the assessee and found that huge cash has been withdrawn by the assessee but claimed to have not been spent by the assessee. The Assessing Officer was of the view that in the instant facts, the assessee has failed to give any cogent reason to accumulate such huge cash and maintain such huge cash balance in hand. Thereby, the Assessing Officer added an amount of Rs.14,36,500/- as unexplained money under Section 69A the Act. 4. In appeal before Ld. CIT(Appeals), the assessee submitted a cash flow statement since 01.04.2014 and also his bank account statements. On perusal of the above, Ld. CIT(Appeals) observed that the assessee had sufficient cash balance of Rs.6,85,000/- as on 01.04.2015 and Rs.12,20,000/- as on 01.04.2016. Further, the assessee withdrew an amount of Rs.7,10,000/- during the Financial Year 2014-15 and a sum of Rs.5,45,000/- during Financial Year 2015-16. However, the assessee has shown personal expenses of only Rs.75,000/- during Financial Year 2014-15 and Rs.90,000/- during Financial Year 2015-16, which are very less as compared to the cash withdrawals during the period. The assessee submitted before Ld. CIT(Appeals) that the assessee is a person of 75 years of age and does not have any unaccounted money since he is retired person and his only source of income is pension income from UK and ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 4 - bank interest. Further, the assessee submitted that the Assessing Officer has made additions merely on surmises, conjectures and suspicion and without any reasonable basis. It was further submitted by the assessee that the Assessing Officer has not disproved the contention made by the assessee nor found any default in the details submitted before him. It was further submitted by the assessee that it is not illegal to have large cash in hand from accounted income. He further submitted that the assessee’s mother is very old and he has kept cash on hand for medical emergency for his mother. However, Ld. CIT(Appeals) gave partial relief to the assessee, with the following observations: “6.3.5 However, this is a fact that the appellant had withdrawn Rs.1,00,000/- in August, 2016 And Rs. 60,000/- in Sept, 2016 and Rs. 98,000/- in Oct, 2016. Some amounts are in the close vicinity of the demonetization declaration. Further, the appellant’s mother was an old lady and many times people keep cash in hand for medical purposes. Furthermore, the CBDT instruction’s (supra) in the case of Senior citizens had directed the AO not to conduct verification if the cash deposits during demonetization is upto Rs.5,00,000/- which sets some parameter to create a standard for liberal approach in such cases. 6.4 In view of the above discussion, I hold that an amount of Rs.5,00,000/- is accepted as available cash in hand of the appellant before 08/11/2016. For the remaining Rs.9,36,500/-, I hold that the explanation of the appellant regarding the nature and ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 5 - source of the deposit was not satisfactory and thereby I confirm the addition of the said amount in the hands of the appellant u/s 69A r/w 115BBE of the Act. The AO is directed to delete balance amount of Rs.5,00,000/-. Grounds of appeal 1 to 5 are partly allowed.” 5. The assessee is in appeal before us against the aforesaid additions confirmed by Ld. CIT(Appeals) amounting to Rs.9.36 lakhs. Before us, the Counsel for the assessee drew our attention to Pages 19-20 of the Paper Book and submitted that the assessee is a British citizen and was earlier working with National Health Scheme (UK). The assessee drew our attention to charts submitted at Page 20 of the Paper Book and submitted that the assessee was having opening cash balance of Rs.6.85 lakhs as on 01.04.2015 and also opening cash balance of Rs.11.30 lakhs as 01.04.2016. Further, the above facts have not been disputed by the Department. The Counsel for the assessee submitted that the addition was made solely on the basis of presumption/assumption that the assessee must have consumed/expended the aforesaid amounts which were withdrawn by the assessee in the prior years. However, no cogent evidence has been placed on record to disprove the assertion made by the assessee. Further, the Department has also not disputed that the assessee had made substantial cash withdrawals during the earlier period, prior to the demonetisation period. The assessee also drew our attention to several judicial precedents in support of the contention that once cash withdrawals precede the cash deposit, no additions can be made in the hands of the assessee, only on the basis of presumptions. ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 6 - 6. In response, the Ld. DR submitted that there is a substantial time gap between the time when the withdrawals were made by the assessee and when the same was deposited by the assessee in his bank account during the demonetisation period. It was submitted by the Ld. DR that any person cannot have such substantial cash in hand, and it was but natural that the assessee would have expended the same. 7. We have heard the rival contentions and perused the material on record. Looking into the instant facts, we observe that it has not been disputed that the assessee had made substantial cash withdrawals in the years prior to the demonetisation period. The assessee is a senior citizen of 74 years of age and is a British citizen, and earning pension income and interest income. Further, the Department has not placed on record any concrete material to show that the assessee had actually expended the amount which he had withdrawn from his bank account in the prior period/years (in the form of purchase of property or car or any valuable asset etc.). While at first instance, it does seem logical that any person would not normally withdraw and keep substantial cash in hand, but at the same time, addition cannot be sustained in the hands of the assessee only on the basis of presumption/assumption that the assessee would have expended this amount for personal consumption, unless certain cogent facts are brought on record to show that the assessee has expended the aforesaid amount. The assessee is a senior citizen and his mother is also very old, and it has been submitted by the assessee before us that the aforesaid amount was kept in the house to meet any medical emergency. Further, it is also not disputed that the assessee had made ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 7 - substantial cash withdrawals in the period prior to the deposit, from the bank account which the assessee has been maintaining. In the case of Sampathraj Rakesh Kumarm in ITA No. 1451/Bang/2018, the Tribunal made the following pertinent the observations on similar set of facts: “12. Thus, the total cash withdrawn from the bank account by the assessee was Rs.20,91,500 + 17,71,800 which was withdrawn by his self-cheque. There was also a deposit of Rs.9 lakhs in the bank account in March, 2013. After excluding the cash deposit, net cash available with assessee from the withdrawals was a sum of Rs.29,63,000. The availability of cash as a source of deposit in the bank account was disbelieved by the AO for the only reason that it was highly improbable for a person to keep withdrawals in the bank account for a period of two years. In this regard, we find that the Hon'ble Karnataka High Court in the case of S.R. Venkataraman (supra) had taken a view that withdrawals of cash in the past as a source of deposit at a later point of time in the bank account cannot be disbelieved merely on the surmise that it was improbable for an assessee to keep cash withdrawn for two years. The Hon'ble High Court held that revenue authorities were not competent to dictate as to what the assessee should do with the money withdrawn from the bank. The court held that as long as the source is explained and established and if money is withdrawn from SB account and paid to discharge loan by deposit into a loan account, it is not possible to hold that the source is not explained. ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 8 - The Court also held that money might have been utilised in the interregnum period for some purpose and thereafter appropriated towards discharge of loan. But that fact cannot be held against the assessee. The aforesaid decision of the Hon'ble Karnataka High Court in the facts and circumstances of the present case supports the plea of the assessee. I accordingly hold that the revenue authorities were not justified in rejecting the explanation of assessee with regard to source of deposit of cash in the bank account. The consequent addition made is directed to be deleted and the appeal of the assessee is allowed.” 8. In the case of CIT v. Manoj Choksi in Tax Appeal No. 821 of 2015, the Gujarat High Court made following observations: “At the outset it is required to be noted that the AO directed to make the addition of Rs.39,70,500/- as unexplained cash on the ground that the assessee had withdrawn the same from his own bank account and again redeposited the same in his bank accounts. The AO also made "the aforesaid addition by observing that the assessee withdrew the cash instead of sufficient cash balance available with him. However, the aforesaid addition has been restricted by the learned CIT(A) to Rs.7,95,160/- being the peak balance available in the bank account of the assessee as on 26.08.2008. It is required to be noted that as such the assessee did explain the cash deposit in his bank account by submitting that he has taken the same as unsecured loan from other persons whose ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 9 - names were also given by the assessee. Thus, as such the assessee did explained his deposit of the aforesaid amount in his bank account. Thereafter, it was immaterial whether the assessee had withdrawn the said amount and applied subsequently for his own use by redepositing the same in his bank account. As rightly observed by the learned CIT(A), once the source of deposit is explained, subsequent withdrawal is not required to be explained. In the facts and circumstances of the case, learned CIT(A) has not committed any error in restricting the addition to the extent of Rs.7,95,160/- on account of unaccounted income. In para 4, the learned CIT(A) while restricting the addition to Rs.7,95,160/-, has observed as under: “4. I have considered the facts of the case, finding of the AO and written submission made by the appellant. The undisputed facts are that the appellant has withdrawn and deposited cash. It is also a fact that the appellant has withdrawn cash inspite of sufficient cash balance available with him. As far as cash hook is concerned there is no negative cash balance observed. The appellant is also furnished explanation with regard to the requirement of cash in his line of business. The AO's case rests on the issue that though sufficient cash balance was available with the appellant but he kept on ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 10 - withdrawing money from the bank accounts and during the course of proceedings he did not explain satisfactorily the requirement of such withdrawals. Therefore, considering the surrounding circumstances and applying the test of human probabilities, the AO concluded that the explanation offered by the assessee is not genuine. To that, assessee's contention is that there is no requirement under the law with regard to the limit of cash carried from day to day and oho there is no requirement with regard to the reasons for carrying such cash balance. According to him once the source of deposit is explain subsequent withdrawal is not required to be explained. There can be an addition on account of source there could not be addition of withdrawals from explained sources. No doubt there is no limit of cash balance prescribed in the Act or Rules and secondly the AO cannot dictate to the appellant as to how to conduct business. However, the question is not with regard to the rights of the appellant but it is concerning the fairness and truthfulness of the accounts maintained as well as how fairly the business is being conducted. The AO is not off the mark when he enquires about the intention of withdrawing money when sufficient cash is available. And if the plausible and satisfactory explanation is not forthcoming then the financial transaction appears suspicious. The only explanation available for ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 11 - withdrawing cash in spite of cash balance is available is that i) the cash has been invested in unaccounted activities, income which is not offered. OR ii) there is really no cash balance available with the assessee as shown in the cash book. These arguments have not been demolished by the appellant therefore, question still remains unanswered. No reply to the above querries will lead to only one conclusion and that is the affairs of the appellant are opaque and suspicious. On the other hand, AO's action of making addition on accounts of all deposits made in the bank accounts of the appellant is without any justification and bordering to the point of high pitch assessment. During the course of assessment proceedings as well as before the undersigned the appellant has produced cash book showing daily cash balances. From this statement it is observed that appellant was having maximum cash balance of Rs.7,95,165/- on 26/08/2008. Considering that whatever income the appellant earned is being ploughed back into his business and he could have at the most earned income to the extent of the maximum cash balance as per his cash book, ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 12 - accordingly maximum addition is restricted to the peak of cash balance during the year. Under the circumstances, addition of Rs.7,95,160/- on account of unaccounted income is being confirmed and the assessee gets relief Rs.31,75,604/-. This ground of appeal is partly allowed.” The aforesaid is confirmed by the learned Tribunal by impugned judgment and order by observing in para 4 as under: “4. Now the Revenue is before us. ld. Sr. D.R. vehemently argued that the appellant used whatever cash withdrawal from the bank for other purposes, he had not established direct linkage between cash withdrawn and cash deposit. Therefore, A.O. was right to make the addition of Rs.39,70,500/-. No one appears from the assessee side. Therefore, we decide this case on the basis of facts available in file. During the course of assessment proceedings, the assessee had produced cash book and copy of the bank account. The appellant submitted before the A.O. that cash withdrawal from the bank was re-deposited in the bank account. The A.O. did not find any discrepancy between cash withdrawal from the bank ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 13 - and cash available in the cash book on a particular date. The appellant had not claimed any expenditure on account of interest payment. The appellant had filed the confirmation of the persons from whom loans were given. The appellant neither paid interest nor earned any income on account of interest on advance. This aspect has not been doubted by the A.O. There is no limit in cash withdrawing the re-depositing in the bank account. The assessee has offered a plausible and satisfactory explanation before the A.O. for each financial transaction. He had not brought on record any evidence which proves that cash withdrawal had been invested somewhere else and cash balance in the cash book is artificial. Thus, we confirm the order of the CIT(A).” [5.0] In the facts and circumstances of the case, we are in complete agreement with the view taken by the learned Tribunal as well as the learned CIT(A) restricting the addition to the extent of Rs.7,95,160/-. Under the circumstances, as there arise no substantial question of law, present tax appeal deserves to be dismissed and is, accordingly, dismissed.” 9. In the case of Ashish Kritikumar Sha in ITA No. 92/Ahd/2023, the ITAT made the following observations: ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 14 - “7. Heard both the parties and perused all the relevant material available on record. It is an undisputed fact that the money had withdrawn by the assessee in the year 2015 as stated out by the assessee and observed by the Assessing Officer. The money belongs to the assessee. The assessee, due to medical problems of himself as well as of his wife, has to keep the amount in hand for the emergency period as per the explanation of the assessee. From the perusal of medical reports, it appears that the assessee requires constant monitoring of his health and, therefore, having cash in hand is practical solution for the assessee for any medical emergencies. The Assessing Officer as well as the CIT(A) has not pointed out that the deposits made in the year 2017-18 are not that of assessee’s money. The explanation given by the assessee about the withdrawals and the deposits appears to be plausible as the assessee has to deposit the amount because of the demonetization declared in the country; but the amount is a huge amount for medical emergencies and, therefore, the alternative argument made by the learned AR that the amount of Rs.11,00,000/- be accepted as cash balance appears to be more plausible. As regards to amount of Rs.3,61,500/- was out of the savings of the assessee also emerged with the statement made by the learned AR that the cash balance should be accepted of the assessee. But from the perusal of the records, it appears that both the assessee and his spouse are on medical treatment which requires substantial amount of cash in hand for the emergencies. In fact, the ITA No. 345/Ahd/2022 Kiran Gopal Gargesh vs. ITO (Int. Tax.) Asst. Years –2017-18 - 15 - explanation given by the assessee that his daughter was also planning to go to USA for further studies also requires that much amount. The assessee is also having NRI status; therefore, the explanation given by the assessee about the withdrawals of cash and deposits of the said cash appear to be genuine. Hence, this appeal of the assessee is allowed.” 10. In view of the above observations made by jurisdictional High Court and various Tribunals, we are of the considered view that looking into the instant facts, Ld. CIT(Appeals) erred in facts and in law in partly confirming the addition made by the Assessing Officer. Accordingly, looking into instant facts and judicial precedents on the subject, the addition made by the Assessing Officer is directed to be deleted. 11. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 05/09/2023 Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 05/09/2023 TANMAY, Sr. PS TRUE COPY 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