PRADNYA MUNDE, MUMBAI V. ITO 21(2)(5), MUMBAI

ITA 4911/MUM/2016

AI Insights

The case involves Smt. Pradnya Munde appealing against the additions made by the Income Tax Officer (ITO) under sections 68 and 56(2)(vii) of the Income Tax Act, 1961, concerning unexplained cash deposits and a gift received from Gopinath Munde HUF. The ITO had added Rs.25,00,000 as unexplained cash credit and Rs.6,00,000 as undisclosed income from the gift. The Commissioner of Income Tax Appeals (CIT(A)) upheld these additions. However, the Tribunal, after examining the evidence and submissions, including the agricultural income and the financial statements of the HUF, concluded that the additions were unjustified and allowed the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 302450 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 19-01-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 25-07-2016
• Other Referred Cases: DCIT vs. Ateev V Gala, Pankil Garg vs. PCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Gift; Depreciation
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, ‘G‘ BENCH MUMBAI BEFORE: SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA No.4911/Mum/2016 (Asse ssment Year: 2012-13) Smt. Pradnya Munde Flat No.1201, Poorna Worli Sagar Soc Sir, Pochkhanwala Road Worli, Mumbai – 400 025 Vs. Commissioner of Income Tax Appeals (33), Mumbai PAN/GIR No.AFVPM4963Q (Appellant) .. (Respondent) Assessee by Shri Sanket Joshi Revenue by Ms. Richa Gulati Date of Hearing 20/01/2023 Date of Pronouncement 30/01/2023 आदेश / O R D E R PER M. BALAGANESH (A.M): This appeal in ITA No. 4911/Mum/2016 for A.Y.2012-13 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-33, Mumbai in appeal No.CIT(A)-33/Rg.21/41/2015-16 dated 17/05/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 30/03/2015 by the ld. Income Tax Officer 21(2)(5), Mumbai (hereinafter referred to as ld. AO). ITA No.4911/Mum/2016 Smt. Pradnya Munde 2 2. The ground No.1 raised by the assessee is challenging the addition of Rs.25,00,000/- of agricultural income as unexplained cash credit. 3. We have heard rival submissions and perused the materials available on record. During the year, the assessee has shown receipt of agricultural income, income from business, income from house property and income from other sources. The return of income for the A.Y.2012-13 was filed by the assessee on 13/06/2013 declaring total income of Rs.3,50,120/-. The said return was selected for scrutiny and during the course of scrutiny assessment proceedings, the ld. AO found that assessee had deposited cash of Rs. 25,00,000/- in SB A/C. No.27604 maintained with Jana Kalyan Sahakari Bank Ltd. at Dadar Branch. The assessee was asked to explain the source of those cash deposits. The copy of bank statement of Jana Kalyan Sahakari Bank Ltd Dadar Branch vide SB A/c. No.27604 is enclosed in pages 20-22 of the paper book filed before us. We find that assessee had made the following cash deposits during the year under consideration:- Date Amount of Cash Deposit 01/11/2011 Rs.1,00,000/- 03/01/2012 Rs.4,00,000/- 04/01/2012 Rs.4,00,000/- 03/02/2012 Rs.8,00,000/- 01/03/2012 Rs.8,00,000/- 3.1. The assessee in response to its show-cause notice explained that cash deposits were made out of agricultural income earned by the assessee during A.Y.2012-13. In the original return filed by the assessee, ITA No.4911/Mum/2016 Smt. Pradnya Munde 3 the assessee had declared net agricultural income of Rs.30,20,220/- out of gross agricultural proceeds of Rs.36,47,931/-. The agricultural income and expenditure account for the A.Y.2012-13 is enclosed in page 3 of the paper book filed before us. For the sake of convenience, the same is reproduced hereunder:- PARTICULATRS AMOUNT RS. PARTICULARS AMOUT RS. To Labour Charges To Fertilisers and Pesticides & seeds To Manure To Agriculture Income 3,26,001 1,75,850 1,25,860 30,20,220 By Sale of Sugar Cane By Sale of Cotton By Sale of Vegetables By Sale of Watermelon By Sale of Muskmelon 9,19,249 3,34,095 13,34,587 4,62,500 5,97,500 Total Rs. 36,17,931 Total Rs. 36,47,931 3.2. The assessee submitted that she owned agricultural land admeasuring 7 Hectares and 10 Ares i.e. around 19 Acres of agricultural land which was under cultivation in this year. The assessee submitted the copy of 7/12 extract in this regard which is enclosed in page 4 of the paper book. The assessee also furnished confirmations / bills in respect of agricultural produce sold by her to various parties during this year. These documents are enclosed in pages 5-11 of the paper book filed before us. Further, the assessee also produced the vouchers for labour expenses incurred for conducting agricultural operations which are enclosed in pages 12-18 of the paper book. The ld. AO on going through the aforesaid receipts from agriculture produce and evidences for agriculture ITA No.4911/Mum/2016 Smt. Pradnya Munde 4 expenses, accepted the claim of agricultural income of Rs.30,20,220/- as genuine and did not make any addition thereon, in the assessment. This was not disturbed by the ld. CIT(A) also in his appellate order. 3.3. The main grievance of the lower authorities in the instant case is that the agricultural income is earned by the assessee in the distant location at Beed whereas the cash deposits were made by the assessee in a bank account maintained at Dadar. Accordingly, the lower authorities concluded that it falls under the improbability theory that no person would carry the cash for 300 kms from Beed for the purpose of making deposits in the bank account at Dadar. In our considered opinion, this is totally irrelevant fact. The assessee had submitted that Munde family is originally from Beed district even though they are residing mainly in Mumbai. Since the family members were not in Beed where the agriculture produce were sold, as per the general practice, the agriculture sale proceeds, net of expenses, were handed over to the family members at Mumbai which inturn were deposited in the bank account maintained at Mumbai. Hence, merely because agricultural income earned at Beed district were deposited in bank account at Mumbai, such cash deposits cannot be held to be sourced out of undisclosed income. It is not in dispute that assessee had indeed earned net agricultural income of Rs.30,20,220/-. In fact, the ld. CIT(A) in para 14.3 of his order categorically says that genuineness of agriculture income earned by the assessee is not in dispute before us. It is not in dispute that agricultural income of Rs.30,20,220/- is indeed earned by the assessee in cash. The assessee had furnished the cash account before the lower authorities. The assessee was also asked to submit the reconciliation of agricultural receipts with the cash deposits made in the bank. This is tabulated in page 6 of the order of the ld. CIT(A). On perusal of para 14.2 of the order ITA No.4911/Mum/2016 Smt. Pradnya Munde 5 of the ld. CIT(A), the ld. CIT(A) had considered the cash deposits made in the total sum of Rs.25 lakhs as cash withdrawals made by the assessee and based on this incorrect fact had drawn his entire conclusions that cash was deposited and within few days thereafter, cash is withdrawn by the assessee. When the basic primary fact relied upon by the ld. CIT(A) itself is incorrect and flawed, then consequently conclusions drawn by him by relying on the said incorrect fact also becomes wrong. This fact was duly brought on record by the ld. AR before us at the time of hearing, which could not be controverted by the Revenue before us with cogent evidences. It is not in dispute that assessee had furnished entire cash book containing the cash inflows from various sources and cash outflows. Hence, what is to be seen is availability of positive cash balance with the assessee on each date of making cash deposits. In the instant case, the same has been duly complied with by the assessee as she is having sufficient cash balances in her books to make cash deposits in the bank account. It is not the case of the Revenue that the agricultural income earned by the assessee together with dairy receipts in cash were used by the assessee for some other expenses and the same is not available with her as cash source. Once the nature and source of cash deposits made in the bank account had been duly explained by the assessee with cogent evidences, there cannot be any addition u/s.68 of the Act as unexplained cash credit. Hence, we have no hesitation to direct the ld. AO to delete addition made in the sum of Rs.25,00,000/- towards cash deposits in the facts and circumstances of the instant case. Accordingly, the ground No.1 raised by the assessee is allowed. 4. The ground No.2 raised by the assessee is challenging the confirmation of addition of Rs.6,00,000/- made on account of gift received by the ITA No.4911/Mum/2016 Smt. Pradnya Munde 6 assessee from Gopinath Munde HUF by treating the same as undisclosed income. 4.1. We have heard rival submissions and perused the materials available on record. The assessee is a member of Gopinath Munde HUF. During the year under consideration, she received cash gift of Rs.6,00,000/- from the said HUF. During the course of assessment proceedings, the assessee furnished confirmation of members of HUF, income tax return and balance sheet of Gopinath Munde HUF duly reflecting gift given to the assessee out of current year‟s income of HUF. These documents are enclosed in pages 24-35 of the paper book filed before us. With regard to this issue, the discussion of the ld. AO in his order is as under:- “5. Assessee's authorized representative stated vide letter dtd. 14.03.2015 the confirmation of Gift of Rs. 6,00,000/- is enclosed which is given & received by the assessee. Over and above the so called gift is received in cash from Gopinath Munde HUF is evidently the cash is undisclosed cash of the assessee. Hence, the same is added to the income of the assessee as unexplained cash credit u/s 68 of the IT Act. Penalty proceedings u/s 271(1)(c) are separately Initiated for furnishing inaccurate particulars of income.” 4.2. Before the ld. CIT(A), the assessee apart from reiterating the arguments together with evidences submitted before the ld. AO also submitted the scrutiny assessment order of Gopinath Munde HUF for A.Y.2012-13 where the gift given to the assessee was accepted. The assessee also submitted the copy of confirmations given on behalf of Gopinath Munde HUF by the Karta, Smt. Munde and Coparcener Ms. Yashashree Munde confirming the gift given by HUF to assessee herein. The ld. CIT(A) did not deny the furnishing of these documents or did not draw any adverse inference on these documents. However, the ld. CIT(A) observed that the said receipt of gift would be governed by the ITA No.4911/Mum/2016 Smt. Pradnya Munde 7 provisions of Section 56(2)(vii) of the Act and that since HUF cannot be considered as amount received from relative by an individual assessee herein, the same would become taxable in view of the provisions of Section 56(2)(vii) of the Act. With this observation, the ld. CIT(A) upheld the addition made by the ld. AO. 4.3. The fact of assessee furnishing the aforesaid documentary evidences before the lower authorities are not in dispute before us. The capacity of Gopinath Munde HUF to advance cash gift of Rs.6,00,000/- to the assessee herein is also proved beyond doubt from the financial statements of HUF (where this gift is reflected) and also the scrutiny assessment order framed for A.Y.2012-13 in the hands of the said HUF. Whether gift received from HUF by an individual would fall outside the ambit of definition of “relative” as defined u/s.56(2)(vii) of the Act was subject matter of adjudication by the Co-ordinate Bench decision of this Tribunal in the case of DCIT vs. Ateev V Gala in ITA No.1906/Mum/2014 for A.Y.2010-11 dated 19/04/2017 wherein it was held that HUF is „a group of relatives‟ and hence, the gift received by an individual from HUF would also be exempt u/s.56(2)(vii) of the Act. We find that similar view has been taken by the Co-ordinate Bench of Chandigarh Tribunal in the case of Pankil Garg vs. PCIT reported in 178 ITD 282. 4.4. We find that in any case it is not in dispute that money has been received by the assessee from HUF as gift. In any case, the same would be exempt u/s.10(2) of the Act in the hands of the assessee individual as admittedly the said amount of Rs.6,00,000/- has been received by the assessee out of the current year‟s income of the HUF, which fact is evidenced from the financial statements of HUF and scrutiny assessment order of HUF u/s.143(3) of the Act for A.Y.2012-13. In view of the ITA No.4911/Mum/2016 Smt. Pradnya Munde 8 aforesaid observations, we have no hesitation in directing the ld. AO to delete the addition made in the sum of Rs. 6,00,000/- towards gift received from HUF. Accordingly, the ground No.2 raised by the assessee is allowed. 5. The ground No.3 raised by the assessee is with regard to carry forward of depreciation and business loss which would be consequential in nature in view of the decisions rendered in ground No.1 & 2 hereinabove. 6. The ground No.4 raised by the assessee is general in nature and does not require any specific adjudication. 7. In the result, appeal of the assessee is allowed. Order pronounced on 30/01/2023 by way of proper mentioning in the notice board. Sd/- (VIKAS AWASTHY) Sd/- (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 30/01/2023 KARUNA, sr.ps ITA No.4911/Mum/2016 Smt. Pradnya Munde 9 Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//