Sh. Suresh Kumar Agarwal, B-9, Govind Marg, Raja Park, Jaipur V. ITO, Ward-6(4), Jaipur

ITA 426/JPR/2022

AI Insights

The case revolves around an appeal by Shri Suresh Kumar Agarwal against the order of the CIT(A), National Faceless Appeal Centre, which confirmed the addition of Rs. 60,000 as unexplained income under section 69A of the IT Act, 1961. The addition was initially made by the Assessing Officer (AO) following the observation of a cash deposit of Rs. 60,000 in the assessee's bank account during the demonetization period. The assessee contended that the deposit was from earlier withdrawals and past savings, which the lower authorities rejected due to the perceived improbability of such a claim during the demonetization period. The Tribunal, however, found merit in the assessee's arguments, supported by CBDT guidelines and various judicial precedents, leading to the allowance of the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 132317 (ITAT-JAIPUR)
• Duration Of Justice: 3 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-01-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 07-12-2022
• Other Referred Cases: Vinatha Madhusudan Reddy Vs. ACIT, S.R. Ventakaratnam Vs. CIT, Ramilaben B. Patel Vs. ITO, ACIT Vs. Baldev Raj Charla & Ors., Sh. Hemant Prabhakar Vs. DCIT, Vinod Kumar Goyal Vs. ACIT, R.K. Dave Vs. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Source of fund; Set aside
• Section: 69A

Judgement Text

vk;dj vihyh; vf/kdj.k] t;iqj U;k;ihB] t;iqj IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh laanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 426/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2017-18. Shri Suresh kumar Agarwal B-9, Govind Marg, Raja Park, Jaipur. cuke Vs. The Income Tax Officer, Ward 6(4), Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAYPA 5992 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj l s@ Assessee by : Shri P.C. Parwal, C.A. jktLo dh vksj ls@ Revenue by : Shri Anoop Singh (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 11/01/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 3/04/2023 vkns'k@ ORDER PER: SANDEEP GOSAIN, J.M. This appeal by the assessee is directed against the order of ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi dated 18.11.2022 for the assessment year 2017-18. The assessee has raised the following grounds of appeal :- 1. The ld. CIT (A), NFAC has erred on facts and in law in confirming the addition of Rs. 60,000/- u/s 69A of IT Act by treating the cash deposit to this extent in the bank account as unexplained income of assessee by not appreciating that the source of such cash deposit is the cash withdrawn earlier from the same bank account and past savings. 2. The ld. Lower Authorities have erred on facts and in law in taxing alleged unexplained cash deposit in the bank account u/s 115BBE @ 60% instead of taxing the same @ 30% by ignoring that section 115BBE substituted by Taxation Laws (Second Amendment Act), 2016 which received the assent of President on 17.12.2016 and made applicable from 01.04.2017 is not applicable to AY 2017-18. 2 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. 3. The appellant craves to alter, amend and modify any ground of appeal. 2. The brief facts of the case are that the assessee is a director in company M/s. Ganganagar Motors Ltd. and partner in firm M/s. Royal Exports. He filed his return of income on 22.01.2018 declaring total income of Rs. 7,99,850/-. The assessee declared the income under the head salary, profit and gains from business & profession and income from other sources. The case of the assessee was selected for limited scrutiny for the reason of Cash Deposit during the demonetization for the assessment year under consideration. The AO observed that assessee has deposited cash of Rs. 60,000/- in his savings bank account on 19.11.2016 maintained with Punjab National Bank. On being asked, the assessee filed the relevant required documents/evidences for the verification of the source of the cash deposits made by him during the year under consideration and submitted that the source of such cash deposit is earlier withdrawal from same bank account and accumulated saving. The AO, however, held that assessee failed to explain the source of such cash deposit and accordingly made addition of Rs. 60,000/- under section 69A of the IT Act, 1961. On appeal, the ld. CIT (A) confirmed the addition made by the AO by holding that bank statement revealed that Rs. 60,000/- was withdrawn on 10.08.2016. The assessee contended that it is this very money which was deposited on 19.11.2016 appears farfetched. Just because he appears to have money some three months back does not mean same was also available to be deposited in November, 2016. Withdrawal of money in August 2016 would have been for a purpose which cannot be deposited in the wake of demonetization. Similarly, the statement that it was 3 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. partly on account of accumulated savings is also not substantiated. Aggrieved by the order of the ld. CIT (A), the assessee is in appeal before the Tribunal. The first ground of the appeal relates to confirming the addition under section 69A of the IT Act by treating the cash deposit in the bank account as unexplained income of the assessee. 3. Before us, the ld. Counsel for the assessee submitted his written submissions as under : “ 1. At the outset it is submitted that CBDT vide Instruction No.3/2017 dt. 21.02.2017 (copy enclosed) has issued Standard Operating Procedure to be followed by the AO in verification of cash transactions relating to demonetisation. In this instruction the source specific verification guideline has been given in the Annexure which provides that in case of an individual not having any business income, no further verification is required to be made if total cash deposit is upto Rs.2.5 lakhs. In the present case, the cash deposited in the bank account is only Rs.60,000/-. From the computation of total income and capital account (copy enclosed) it can be noted that assessee is not having any business income. The income shown under the head income from business or profession is remuneration received from firm M/s Royal Exports in which he is a partner. Thus, in view of CBDT Instruction, the addition confirmed by CIT(A) be deleted since no verification is required for such small amount. 2. Without prejudice to above, it is submitted that the source of cash deposit is out of the cash of Rs.60,000/- withdrawn earlier on 10.08.2016 and out of past savings. The Ld. CIT(A) has not accepted this contention of assessee on the 4 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. ground that there is time gap of 3 months from the date of cash withdrawal and cash deposit and the withdrawal of money in August 2016 would have been for a purpose which cannot be deposited in the wake of demonetisation. In this connection it is submitted that the gap between the amount withdrawn and that deposited is only 3 months. No material is brought on record by the lower authorities that this withdrawal has been utilised elsewhere. Hence, the credit of such withdrawal ought to be allowed to the assessee against the subsequent deposit more particularly when the time gap between the withdrawal and the deposit is not large and falls in the same year. Reliance in this connection is placed on the following cases:- Vinatha Madhusudan Reddy Vs. ACIT (2018) 54 CCH 0151 (Mum) (Trib.) 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 filed by the Assessee explaining availability of cash on the various dates of deposit of cash in the bank account has not been disbelieved by the Revenue authorities. They have proceeded on the basis that since there was sufficient time lag between the dates of withdrawal of cash from the bank 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 money 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 Karnataka High Court in the case of S.R. Ventakaratnam Vs. CIT (1981) 127 ITR 0807 has held that once the Assessee discloses the source as having come 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 keep the money unutilized. The ratio laid down in such judgment will apply to the facts of the present case. If the revenue wants to disbelieve the plea of the Assessee then it must show that the previous withdrawal of cash would not have been available with the Assessee on the date of deposit of cash in the bank account. The AO and CIT(A) have proceeded purely on assumption and surmises that cash would not be lying idle with the Assessee for such a long time. 5 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. The Assessee has satisfactorily explained the source of funds out of which deposit of cash was made in the bank account. Therefore, addition is deleted. Ramilaben B. Patel Vs. ITO (2019) 71 ITR (Trib) 0048 (Ahd.) Certain credit entries were reflecting the cash deposit in the bank account of the assessee. But the assessee failed to substantiate his claim for the source of such cash deposit. Therefore, the same was treated as undisclosed income and added to the total income of the assessee. The CIT(A) subsequently confirmed the view taken by the AO. CIT(A) rejected the contention of the assessee that the cash was deposited out of the cash withdrawal from the bank without adducing the cogent reasons. The cash withdrawal has not been doubted by the lower authorities, and nothing has been brought on records suggesting that the cash withdrawn from the bank has been incurred either as revenue expenses or capital expenses. In the absence of any documentary evidence, we can safely presume that the cash withdrawn from the bank was available with the assessee which was subsequently deposited with the bank. Therefore, we cannot treat the same as undisclosed income of the assessee. ACIT Vs. Baldev Raj Charla & Ors. (2009) 18 DTR 413 (Del.) (Trib.) The Hon’ble ITAT vide Para 27 held as under:- We find that this explanation of the assessee was found correct that against these five deposits on dt. 14.06.1996, Rs. 31,000; 21.07.1997, Rs.1,27,000; 18.09.1997, Rs. 22,000; 4.10.1997, Rs.26,000 and on 7.11.1997, Rs. 52,000 there were sufficient cash withdrawals from AWI and from SBI, Mayapuri, but this addition has been confirmed by learned CIT(A) on the basis that there is time gap between the assessee’s withdrawals from his own partnership M/s AWI or from his own bank. There is no finding recorded by the learned AO or by learned CIT(A) that apart from depositing these cash into bank as explained by the assessee, there was any other user by the assessee of these amounts and in the absence of that, simply because there was a time gap, the explanation of the assessee cannot be rejected and hence the addition confirmed by the learned CIT(A) is not correct. Sh. Hemant Prabhakar Vs. DCIT ITA No.684/JP/98 order dt.12.03.04 (Jpr.) (Trib.) It was held that the where the assessee has withdrawn cash from the bank account and deposited the same after 14 months which was 6 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. shown as cash balance in cash flow statement, the said cash is fully explained and the addition is deleted. Vinod Kumar Goyal Vs. ACIT ITA No.310/JP/08 order dt.30.05.08 (Jpr.)(Trib.) In this case the assessee withdrawn the amount from the bank around one to one and half year back and re-deposited the same. It was held that the lower authorities were not justifying in disbelieving the explanation of the assessee that the money withdrawn from the bank was lying with the assessee till it was introduced in M/s Goyal Brothers. R.K. Dave Vs. ITO (2005) 94TTJ 19 (Jodh.) (Trib.) Assessee invested a sum of Rs.15,000/- in NSCs on 08.02.1991, and Rs. 5,000/- in PPF. It stated that amounts of Rs. 15,000/- and Rs. 5,000/- were deposited out of withdrawals of Rs. 45,000/- made on 9.07.1990 & 10.07.1990 & investment in the NSC’s was made on 08.02.1991, i.e., after a gap of seven months. AO made addition of Rs. 20,000/- by holding that there was no evidence that the amount withdrawn on earlier dates was available with the assessee for making investment in NSCs. The same position was found with reference to investment in PPF. On appeal, the Ld. CIT(A) upheld the addition on the ground that there was a time gap between the withdrawals and for making investment in the NSCs which the assessee could not explain satisfactorily. Hon’ble ITAT held that assessee had placed cash flow statement before the authorities below. It is also not in dispute that the assessee had withdrawn an amount of Rs. 45,000/- on 09.07.1990 and 10.07.1990. It is not the case of the revenue that amounts so withdrawn were utilized elsewhere. Mere fact that the assessee could not explain the time gap between the amount withdrawn and the investment in NSCs or where the amount was kept would not itself justify the addition. The claim of the assessee could have been rejected only if the source of balance in the bank account was not established or it could have been demonstrated that the amount so withdrawn was utilized elsewhere. This is not the case here. Therefore, there is no justification for sustaining the impugned addition. In view of above, addition confirmed by Ld. CIT(A) be directed to be deleted.” 4. On the other hand, the ld. D/R supported the orders of the Revenue Authorities. 7 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. 5. We have heard the rival submissions and perused the material available on record and also gone through the orders of the revenue authorities. I have also gone through the CBDT Instruction No. 3/2017 dated 21.02.2017 placed on record, whereby the CBDT has issued Standard Operating Procedure to be followed by the AO in verification of cash transactions relating to demonetization. In this instruction the Source Specific General Verification Guideline has been given in the Annexure is reproduced herein below :- “ 1. Cash out of earlier income or savings: 1.1 In case of an individual (other than minors) not having any business income, no further verification is required to be made if total cash deposit is upto Rs. 2.5 lakh. In case of tax payers above 70 years of age, the limit is Rs. 5.0 lakh per person. The source of such amount can be either household savings/savings from past income or amounts claimed to have been received from any of the sources mentioned in Paras 2 to 6 below. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. The basis for verification can be income earned during past years and its source, filing of ROI and income shown therein, cash withdrawals made from accounts etc.” In the present case, the cash deposited in the bank account is only Rs. 60,000/-. From the computation of total income and capital account, it is noted that the assessee is not having any business income. The income shown by the assessee under the head income from business or profession is remuneration received from firm M/s. Royal Exports in which he is a partner. Therefore, taking into consideration the CBDT Instruction, supra, the case of the assessee does not require any verification being below the limit prescribed by the CBDT. 8 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. 6. On merits, as regards the issue of a cash deposit of Rs.60,000/-, I note that the Ld. CIT(A) rejected the contention of the assessee that the cash was deposited out of the cash withdrawal from the bank without adducing the cogent reasons. The cash withdrawal has not been doubted by the authorities below, and nothing has been brought on records suggesting that the cash withdrawn from the bank has been incurred either as revenue expenses or capital expenses. The AO and the ld. CIT (A) have proceeded on the basis that since there was a time gap of three months between the date of withdrawal of cash from the bank account and the date of deposit, the availability of cash cannot be believed. In the absence of any documentary evidence, it can safely be presumed that the cash withdrawn from the bank was available with the assessee, which was subsequently deposited with the bank. The Coordinate Bench of the Mumbai Tribunal in the case of Vinatha Madhusudan Reddy vs. ACIT (2018) 54 CCH 0151 (Mum-Trib.) followed the decision of Hon’ble Karnataka High Court in the case of S.R. Ventakaratnam vs. CIT, 127 ITR 807 (Kar.) wherein it has been held that once the assessee discloses the source as having come 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 keep the money unutilized. Therefore, following the CBDT guidelines, supra, and the judgment of the Hon’ble Karnataka High Court and the various decisions of the coordinate benches of the Tribunal, I set aside the orders of the revenue authorities by deleting the addition and allow the appeal of the assessee. 9 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. The Second ground of appeal relates to taxing the alleged unexplained cash deposit in the bank account under section 115BBE. 7. Since I have set aside the orders of the revenue authorities and deleted the addition made under section 69A of the IT Act, 1961 in respect of alleged unexplained cash deposit in the bank, the provisions of section 115BBE taxing the said unexplained cash deposit is not applicable in this case. Thus the ground of the assessee has become infructuous. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 3/04/2023. Sd/- ¼lanhi xkslkbZ½ (SANDEEP GOSAIN) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 3/04/2023. Das/ vkns'k dh izfrfyfi vxzsf’kr@Copy of the order forwarded to: 1. vihykFkhZ@The Appellant-Shri Suresh Kumar Agarwal, Jaipur. 2. izR;FkhZ@ The Respondent- The ITO Ward 6(4), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur. 6. xkMZ QkbZy@ Guard File {ITA No. 426/JP/2022} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 10 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.