Zakaria Bajpe, Mangaluru V. Deputy Commissioner of Income-Tax, (International Taxation), Mangaluru

ITA 553/BANG/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 5873 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 30-10-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 03-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARITHIVEL
• Assessee Lawyers: RICHA BAKIWALA
• Keywords: Opportunity of being heard; Tax effect
• Section: 68; 133(6); 250; 69A; 13

Judgement Text

ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru IN THE INCOME TAX APPELLATE TRIBUNAL “C’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA No.553/Bang/2023 Assessment Year: 2014-15 Zakaria Bajpe 22-11-1464/1, Noor Mahal Chamber Garden, Bolar Mangaluru 575 001 PAN NO : AMYPB0788L Vs. Deputy Commissioner of Income- tax (International Taxation) Mangalore APPELLANT RESPONDENT Appellant by : Ms. Richa Bakiwala, A.R. Respondent by : Shri Parithivel, D.R. Date of Hearing : 31.10.2023 Date of Pronouncement : 31.10.2023 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal by assessee is directed against order of CIT(A) for the assessment year 2014-15 passed u/s 250 of the Income-tax Act,1961 ['the Act' for short] dated 31.10.2022. The assessee has raised following grounds of appeal: I. The order of the learned Commissioner of Income-tax (Appeals) is opposed to law, facts and circumstances of the case. II. The order is passed in haste, without providing sufficient and reasonable opportunity of being heard. III. The order is passedagainst the principle of natural justice and thus, liable to be quashed. IV. The learned CIT(Appeals) has erred in considering the order of the learned Assessing Officer as erroneous and prejudicial to the interest of the revenue. ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 2 of 14 V. The learned CIT(A) erred in not appreciating the fact that the impugned cash deposits were made out of the earlier cash withdrawals by the Appellant. VI. The learned CIT(A) erred in rejecting the submissions of the appellant that the cash withdrawn was deposited back as the purpose for which it was withdrawn was not served and further alleging simply without establishing the fact that the cash withdrawn was utilized by the assessee for other purposes and not as explained by the assessee. VII. The learned CIT(A) erred in confirming that additions under section 68 of the Act without demonstrating that the amount in question has been used by the appellant for any other source. VIII. Thelearned CIT(A) erred in holding that there is a lack of nexus between cash withdrawals and cash deposits. The Ld. Authority has erred in completely ignoring the fact that the time gaps between the cash withdrawals and the cash deposits were insignificant. IX. The learned CIT(A) erredin disregarding the explanation submitted by the Appellant about the nature and source of the cash deposits in the bank accounts and taxing the deposits under section 68 of the Act. X. The learned CIT(A)has erred in considering the allegation of the learned Assessing Officer for rejecting the claim of the Appellant as the PAN No. of the depositor is not written in the pay slips. However, it is actually the PAN of the deposit account holder that is required to be written on the pay slips for deposits exceeding Rs. 50,000/- XI. The learned CIT(Appeals) erroneously stated that the Shri. Karanth does not have any authority to operate the bank accounts of the Appellant which is contrary to the present facts and circumstances of the case as Shri Karanth has not signed any cheques on behalf of the Appellant but only deposited those amounts to the Appellant's bank account and all the cheques were signed by the Appellant. XII. Thelearned CIT(Appeals)ought to have considered the facts that the source of funds is well demonstrated by the Appellant as evidentiary the deposit of money in the bank account is preceded by the withdrawal of money from the very same bank account. XIII. The learned CIT(Appeals)erred in simply concurring with the Ld. Assessing Officer without formulating specific points and taking note of details available before him and erred in dismissing the appeal in a summary manner. ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 3 of 14 XIV. The order passed by the learned CIT(Appeals) is not in coherence with the mandate of section 250(6) of the Act and therefore liable to be quashed. Total tax effect Rs.29,12,070/- 2. Ground Nos. I & XIV are too general in nature, which do not require any adjudication. 3. With regard to ground Nos. II & III, assessee has not put any serious arguments. Accordingly, these grounds are dismissed as not argued. 4. Ground Nos. IV to XIII are with regard to sustaining addition of Rs.60,78,575/- made towards unexplained cash deposit. 5. Facts of the issue are that during the course of assessment proceedings, it was found that the assessee had made cash deposits on various dates in two bank accounts i.e. in Vijaya Bank, Jeepu Branch, Mangalore, NRO A/c No.109801041000006 and in IDBI Bank, Falnir. Kankanady, A/c No.078104000070595. The details of the cash deposits are as follows: Vijaya Bank NRO A/c No 109801041000006 Rs.53,76,775/- IDBI Bank NRO A/c No 078104000070601 Rs 53,79,000/- Total Rs.1,07,55,775/- 5.1 Initially, assessee vide his letter dated 08.08.2016 submitted before the AO that the source of income through which the bank accounts were made were from the rental incomes; sale of properties and salary income earned from Mohammed H.M. Almuzain & Partner Co. in A. Jubail, Saudi Arabia. On further inquiries relating to the sources for the cash deposits, the assessee produced a cash flow statement in which a majority of the cash deposits were stated to be out of withdrawals from Banks. An amount of Rs.17,500/- deposited every month was ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 4 of 14 claimed as rent received and an amount of Rs.42,50,000/- was claimed as refund of land advance. 5.2 The ld. AO observed that the bank account extracts of the above accounts in Vijaya Bank and IDBI Bank did not reflect any withdrawals by the assessee. The assessee was asked to explain the above discrepancy, the assessee, vide letter dated 29.08.2016 submitted that the cash withdrawals from the above- mentioned bank accounts had been made by one Mr. A. Krishnamurthy Karanth (A.K. Karanth) who was working for the assessee and who managed his bank and other transactions. The assessee enclosed a confirmation letter from Mr. Karanth to this effect. He also stated that he had executed a General Power of Attorney on 11 12.2010 appointing Mr. Karanth as his attorney to perform various acts and property transactions on his behalf. 5.3 Subsequently, vide letter dated 15.11.2016, the assessee submitted that he had entered into an agreement on 20.12.2012 for the purchase of a residential house for a consideration of Rs.52,50,000/-, wherein an advance amount of Rs.42,50,000/- was paid. Subsequently, this deal could not take place and same was cancelled as per the deed of cancellation of agreement of sale dated 16.05.2013, wherein the whole advance consideration of Rs.42,50,000/- was refunded by cash. 5.4 The assessee further submitted that he wanted to buy an agricultural property, for which purpose he was requested by agents to have enough cash ready to have a good bargain with the agriculturist vendors. For this he had started mobilizing the cash by withdrawing the same of both of his accounts from 25.07.2013 to 13.11.2013 to the tune of Rs.70.15 lakhs. Finally, when it was made clear by an advocate that the assessee being a NRI, was not eligible to buy an agricultural property, the idea of purchasing the agricultural property was given up. This cash was arranged to be redeposited through Mr. A K Karanth to the ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 5 of 14 assessee’s bank accounts which went on till the year end to the tune of Rs.53.14 Lakhs. The assessee stated that Mr. A.K. Karanth was a retired person and in the assessee’s absence, he did not want his family members to take the risk of handing over the cash at once to him to deposit to the bank accounts. The assessee averred that there was no case of negative cash balance at any particular day. 5.5 Regarding the source of the cash deposits, the assessee submitted before the AO that initially, the refund amount from the cancelled purchase deal was deposited to the bank. Then, later on, the cash was withdrawn from time to time for around three and a half months to meet the proposed land deal. The unused cash was kept with him before the same was redeposited in his bank accounts. He also stated that the cash withdrawals were not utilized by him elsewhere for any other purposes. 5.6 Having considered the assessee’s submissions, the AO noted that the confirmation from A.K. Karanth was silent about the source of the deposits made and also did not confirm that the cash deposits are made from the withdrawals made through him. Neither had the claim of redepositing the money of Rs.53.14 lakhs been claimed by Mr. A.K. Karanth. The ld. AO also noted that the Power of Attorney dated 11.12.2010 in favour of A.K. Karanth executed by the assessee speaks about appointing Mr. A.K. Karanth as an agent to act on his behalf in matters relating to the purchase of immovable properties only. The AO held that the withdrawals by A.K Karanth and the sources for the cash deposit were totally unconnected. The ld. A.R. opined that the confirmation from Mr. A.K. Karanth and the Power of Attorney also supports the findings in establishing that there was no nexus between the two. The AO further noted that on examination of the assessee’s NRE accounts, it was seen that there are withdrawals in the name of A.K. Karanth in those ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 6 of 14 accounts also. Hence the AO held that the withdrawals were totally for a different purpose and nowhere could it be established that cash deposits in the NRO accounts were made by A.K. Karanth out of the withdrawals made by him. 5.7 The AO also noted that the deposit slips / pay in slips in respect of cash deposits made in Vijaya Bank, Jeppu Branch, produced by that branch in response to the requisition u/s 133(6) reflected the following: a) All the signatory’s (depositors) are not the same. b) The PAN No of the depositor is not written except for one transaction c) The Manager, Vijaya Bank. Jeppu Branch had stated that the assessee had deposited cash into his account at various branches of the bank i.e.. Mangalore City Branch, Surathkal Branch, Bangalore Branch, etc. The AO found it unbelievable that the withdrawals made by an individual from one branch of the bank and in his possession has been utilized to redeposit the same money at various other branches. The AO held that the assessee’s claim therefore lacked credibility and it is evident that the cash deposits were from unexplained sources. d) While all cash deposits of denomination Rs.3.300/-, Rs.3.600/- and Rs.9000/- were made in Surathkal Branch and the rest of the denominations above those sums are made in the other branches including an amount of Rs 9,00,000/- made in Brigade Road Branch. Bangalore on 11.01.2014. 5.8 The AO held that the amount of Rs 42,50,000/- claimed to be out of refund of advance received on 16.05.2013 on cancellation of agreement of sale deed, was acceptable on account of the same being confirmed by the seller, Ms. Mary Helen D'Souza along with the cancellation deed, in response to ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 7 of 14 a requisition u/s 133(6) of the Act. As per the cash flow statement submitted to the AO, the assessee had claimed 24 payments of Rs.17,800/- as rental receipts received in cash from D.No.4-8-732/42-53 Essel Centre. Since the statement of computation of total income reflected corresponding rent receipts of Rs.35,600/- per month, hence the claim of cash deposits attributable to the extent of rent receipts of Rs.4,27,200/- was accepted by the AO. The remaining amount of Rs.60,78,575/- [Rs.1,07,55,775/- (-) Rs.42,50,000/- (-) Rs.4.27,200/-] being cash deposits in the bank accounts of the assessee was held as unexplained by the AO and brought to tax as the assessee’s income from unexplained sources. Aggrieved by the above addition, the assessee has filed the present appeal 5.9 During the appellate proceedings, the AR filed written submissions, reiterating the assessee’s claims made during the assessment proceedings regarding the source of the cash deposits in his accounts. He submitted the source of the cash deposits to be the withdrawals made earlier. He further submitted that the assessee had authorized Shri A.K. Karanth to make withdrawals from and deposits into the assessee’s bank accounts. On being asked by the then CIT(Appeals), the ld. AR also furnished an affidavit from Shri Karanth attesting to the assessee’s claims. On the legal issue of the addition of cash deposits into the assessee’s bank accounts, the ld. AR initially submitted that the addition could not be made under the provisions of section 68 of the Act on the grounds that the bank passbook is not a book of account, as held by various courts. However, as the ld. CIT(Appeals) had proposed to treat the cash deposits as unexplained money u/s 69A of the Act, the AR has made further submissions on this point as well. The AR also submitted copies of the assessee’s bank statements, the cash flow statement for the period 01.04.2013 to 31.03.2014, copies of the purchase and sale deeds of the properties from which the ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 8 of 14 assessee derived rental income and a copy of the cancellation deed for cancelling the proposed purchase of property by the assessee. 5.10 Against this assessee went in appeal before ld. CIT(A) who has confirmed the order of ld AO. Once again, the assessee is in appeal before us. 6. The ld. A.R. submitted that t he on 20-Dec-2012 assessee entered into an agreement with Mrs. Mary Helen D'Souza for the purchase of a residential house in the Mangaladevi Ward of the Mangalore Taluk for Rs. 52,50,000/-, out of which Rs. 42,50,000/- was paid as a down payment. Consequently, this transaction could not be consummated, and it was cancelled in accordance with the Deed of Cancellation of Sale Agreement dated 16-May-2013, in which the entire advance consideration of Rs. 42,50,000/- was refunded by cash. Over the next 20 days, a total of Rs 40,04,000/- was deposited into his bank accounts at numerous branches. 6.1 Further, she submitted that the assessee wanted to buy an agricultural property wherein he was asked by an agent to have enough cash ready to have a good bargain with the agriculturist vendors. It is common in real estate transactions including agricultural land, to have cash ready for the purchase for the ease of negotiations and finalize the deal benefits and flexibility for both buyers and sellers. Accordingly, he started mobilizing cash by withdrawing the same from his impugned bank accounts from 25-Jul-2013 to 13-Nov-2013 to the tune of Rs.70.15 Lakhs. Subsequently, it was clarified to him that, pursuant to the exchange control regulations, he being a Non-Resident Indian could not purchase an agricultural property in India. Accordingly, the idea of purchasing the agricultural property was dropped. ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 9 of 14 Further, since, Mr. Karanth is a retired person and in the assessee's absence, the assessee did not want anyone else to take the risk of handling these cash. The cash withdrawn was hence later redeposited back to his bank accounts in various branches till the year end to the tune of Rs. 53.14 Lakh. A cash flow statement showing all the impugned cash deposits and cash withdrawals was furnished before the learned Assessing Officer. 6.2 She submitted that the learned Assessing Officer in his assessment order has incorrectly held that there lacks nexus between the cash withdrawals and the cash deposits. The learned Assessing Officer has erred in overlooking the facts that the time gap between the cash withdrawals and the cash deposits was insignificant. Unused/ excess cash withdrawals were deposited back to the bank account within reasonable time. 6.3 She submitted that the learned Assessing Officer has contended that Mr. Karanth in his confirmation letter is silent on the source of the deposits made and does not confirm that the cash deposits are made from the withdrawals made by him. In this regard, she submitted that initially during the course of assessment proceedings, the learned Assessing Officer has concerned about the claim of the Assessee that the cash withdrawals were not made by him but by Mr. Karanth. It was in response to this concern that a confirmation letter was obtained from Mr. Karanth that the withdrawals were made by him at the directions of the Assessee by virtue of the General Power of Attorney. Since, the learned Assessing Officer never directed the Assessee to obtain a confirmation letter from Mr. Karanth with respect to the source of cash deposits, the same was not included in the said confirmation letter. During the assessment proceedings, the learned Assessing Officer has issued notice under section 133(6) of ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 10 of 14 the Act to Mrs. Mary Helen D'Souza for confirming her transactions with the Assessee which was duly responded to the satisfaction of the learned Assessing Officer. However, no such notice was issued to Mr. Karanth to further fortify the claim of the Assessee. Without examining the claim of the Assessee, the same has been rejected arbitrarily by the learned Assessing Officer. 6.4 Additionally, to substantiate the fact with regard to the cash deposits, an affidavit of Mr. Karanth dated 03-Jan-2022 acknowledging the withdrawal and deposits of cash made by him on behalf of the Assessee was duly submitted in front of the learned CIT(A). However, the same was completely disregarded by the learned CIT(A) while upholding the addition. 6.5 She submitted that the Learned Assessing Officer and ld. CIT(A) have contended that the Assessee was unable to provide supporting documents with regard to the cash withdrawn and deposited. In this regard she submitted that the Assessee is a non-resident and is not liable to maintain any regular books of accounts in India. However, cash flow statement, upon the direction of the learned assessing officer, showing the source of cash deposits have been provided in the course of assessment. The purpose of the cash withdrawals was to mobilize the cash for easy bargain on the agricultural land deal. Further the same amount was redeposited since the assessee, being a non-resident, could not buy agricultural property in India. Nevertheless, learned Authorities have failed to appreciate the fact that even in absence of regular books of accounts, the Assessee has provided all the necessary details and explanations regarding the cash withdrawals and deposits. ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 11 of 14 6.6 She submitted that the Assessee has duly explained the nature and source of the cash credits in his bank accounts which have not been considered in right perspective by the learned Assessing Officer. 6.7 Furthermore, the learned Assessing Officer and CIT(A) has erred in prejudicially referring to the GPA and stated that the GPA does not refer to the nexus between cash withdrawals and cash deposits. It is mentioned that the said GPA authorizes Mr. Karanth to purchase immovable properties in the Assessee's name. The GPA also provides Mr. Karanth to pay any dues, taxes etc. on behalf of the Assessee. Additionally, clause 6 of the GPA further authorizes Mr. Karanth to do all acts, deeds and things incidental thereto. 6.8 She also submitted that a similar GPA was also filed with the banks, which was accepted and allowed Mr. Karanth to carry out the cash deposits and cash withdrawals on behalf of the Assessee. 6.9 The ld. A.R. submitted that the learned Assessing Officer has also commented that all the signatory's (depositors) are not the same in the bank's records and hence, the claim of deposits being only by Mr. Karanth is untrue. In this regard, she submitted that all the major amounts have been deposited under the signature of Mr. Karanth in the deposit payslips. It is only in case of some minor deposit amounts where the depository slips were signed by some other persons like Mr. Karanth's daughter Kirana and the house property tenants. With regard to the deposits through various branches of the Bank, it is mentioned that the major amounts ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 12 of 14 have been deposited by Mr. Karanth from the Mangalore City Branch. 6.10 She submitted that unavailability of PAN of the depositor/s is another ground mentioned by the learned Assessing Officer for rejecting the claim of the Assessee. In this connection, she submitted that the learned Assessing Officer has erred in assuming that the PAN of depositors is required to be mentioned on the payslips. It is the PAN of the deposit account holder that is required to be written on the payslips for deposits above Rs. 50,000/-. Thus, the contention of the learned Assessing Officer here is unwarranted. 6.11 She submitted that the learned Assessing Officer has also referred to the deposit of Rs. 9,00,000/- from the Bangalore Branch of the Bank. In this regard, she submitted that the said cash was deposited by Mr. Karanth's daughter, Mrs. Kirana Karanth, while they were in Bangalore for his medical treatment. 6.12 The ld. A.R. submitted that the ld. CIT(A) has made the contention that the Assessee was unable to provide the necessary evidence about the planned agricultural land transaction. In this context, she submitted that the learned CIT(A) has not adequately recognized the fact that the taxpayer was merely seeking to acquire agricultural land. Nevertheless, the assessee was unable to proceed with the notion of purchasing the land due to the limitations imposed on non-residents in accordance with the restrictions set forth by the exchange control regulations. Consequently, there was no agreement being considered for discussion. Moreover, no expenditures were accrued in relation to this ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 13 of 14 matter, as the fees for brokers/agents are contingent upon the finalization of the deal. 7. The ld. D.R. relied on the order of lower authorities. 8. We have heard the rival submissions and perused the materials available on record. In this case, the assessee has deposited above money into two bank accounts as follows: a) Vijaya Bank, Jeppu Branch, Mangalore, NRO A/c No.10980104100006 - Rs.53,76,775/- b) IDBI Bank, Falnir, Kankanady NRO A/c No.078104000070595 - Rs.53,79,000/- Total: - Rs.1,07,55,775/- 8.1 The contention of the assessee is that assessee has filed detailed cash flow statement before the lower authorities explaining the receipt of cash from various parties and also inter-bank deposits between these two accounts and submitted that the sources are genuine, which are not doubted by the department and inter bank transfers to be accepted as genuine. In our opinion, the assessee has not filed specific source of receipt of money from various parties with corresponding sources. Hence, we are not in a position to appreciate the cash flow statement filed by the assessee. Hence, in the interest of justice we remit the entire issue to the file of ld. AO with a direction to assessee to specifically explain the sources of deposit into these bank accounts by filing relevant details of source of fund to the satisfaction of the ld. AO. ITA No.553/Bang/2023 Zakaria Bajpe, Mangaluru Page 14 of 14 9. In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 31 st Oct, 2023 Sd/- (Beena Pillai) Judicial Member Sd/- (Chandra Poojari) Accountant Member Bangalore, Dated 31 st Oct, 2023. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The CIT(Judicial) 5. The DR, ITAT, Bangalore. 6. Guard file By order Asst. Registrar, ITAT, Bangalore.