MALTI GARG,AMBALA, HARYANA V. INCOME TAX OFFICER, WARD-5, AMBALA, HARYANA

ITA 1031/CHANDI/2024

AI Insights

The case revolves around an appeal by Malti Garg against the orders of the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) [CIT(A)], which had added Rs. 10,46,500 to her taxable income for the assessment year 2017-18 under Section 69A of the Income Tax Act, 1961. The addition was based on the cash deposits made during the demonetization period, which the tax authorities deemed unexplained. The Tribunal examined the evidence presented, including bank statements and withdrawal details, and concluded that the deposits were from legitimate sources, primarily earlier bank withdrawals.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107848 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Inderpal Singh Chawala Vs. Income Tax Officer, CIT(Central)-1, New Delhi Vs. Vatika Township (P) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAKTI SINGH
• Assessee Lawyers: NIKHIL GOYAL
• Keywords: Set aside
• Section: 143(3); 142(1); 143(2); 250; 43; 133(6); 69C; 69A; 246A

Judgement Text

"आयकर अपीलीय अिधकरण,च᭛डीगढ़ ᭠यायपीठ “बी” , च᭛डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: HYBRID MODE ᮰ी िवᮓम ᳲसह यादव, लेखा सद᭭य एवं ᮰ी परेश म. जोशी, ᭠याियक सद᭭य BEFORE: SHRI. VIKRAM SINGH YADAV, AM & SHRI. PARESH M. JOSHI, JM आयकर अपील सं./ ITA No. 1031/Chd/2024 िनधाᭅरण वषᭅ / Assessment Years : 2017-18 Malti Garg, 1663/14, Mahavir Nagar Near Civil Courts, Ambala Haryana-134003 बनाम The ITO Ward-5, Ambala Haryana ᭭थायी लेखा सं./PAN NO: APFPG2267P अपीलाथᱮ/Appellant ᮧ᭜यथᱮ/Respondent िनधाᭅᳯरती कᳱ ओर से/Assessee by : Shri Nikhil Goyal, Advocate, Shri Ashok Goyal, C.A and Shri Rana Gurtez Singh, Advocate राज᭭व कᳱ ओर से/ Revenue by : Shri Shakti Singh, JCIT, Sr. DR सुनवाई कᳱ तारीख/Date of Hearing : 21/01/2025 उदघोषणा कᳱ तारीख/Date of Pronouncement : 20/02/2025 आदेश/Order PER PARESH M. JHOSHI, J.M. : This is an appeal filed by the Assessee under section 254 of the Income Tax Act, 1961 (hereinafter referred to as the Act) before this Tribunal. The assessee is aggrieved by the order bearing number ITBA/APL/S/250/2024-25/1067499131(1) dt. 09/08/2024 of CIT(A) passed u/s 250 of the Act, which is hereinafter referred to as the “impugned order”. The relevant assessment year is 2017-18 and the corresponding previous year period is from 01/04/2016 to 31/03/2017. 2 2. Factual Matrix 2.1 The assessee had filed here return of income on 22/07/2017 declaring taxable income of Rs. 1,59,720/-. 2.2 That subsequently the case of the assessee was selected for “Limited Scrutiny” through computerized aided system of selection (cass) to verify cash deposit during the demonetization period.” 2.3 That a statutory notice u/s 143(2) of the Act was issued on 24/09/2018 by the then ITO, Ward-3, Rohtak. Later on the case was transferred to the Income Tax Officer, Ward-3, Ambala vide letter No. 5732 dt. 07/08/2019 and the ITO Ward-3, Ambala, transferred the case to ITO, Ward-5, Ambala. 2.4 That thereafter, notices under section 142(1) of the Act alongwith Annexures were issued to the assessee on 19/09/2019, 05/11/2019, 19/11/2019 and 30/11/2019. 2.5 That the assessee filed reply on portal on 27/09/2019, 22/10/2019, 14/11/2019, 21/11/2019, 28/11/2019, 03/12/2019 and 12/12/2019. 2.6 That the Income Tax Department called for Bank statement under section 133(6) of the Act, alongwith KYC in formation from following banks: Sr. No. Name of the Bank Address of the bank Address of the Bank 1. Oriental Bank of Commerce Hissar Road, Ambala City 2. Bank of Baroda Court Road, Ambala City 3 3. Punjab and Sind Bank Dev Samaj College Road, Ambala City 4. Punjab National Bank Near Court Road, Ambala City 5. State Bank of India Court Road, Ambala City 6. State Bank of Patiala G.T. Road, Ambala City 7. Union Bank of India Court Road, Ambala City 2.7 That it was revealed to the Income Tax Department that the assessee had made following cash deposits during demonetization period i.e; from 08/11/2016 to 30/12/2016 relevant to A.Y. 2017-18 the details of which are as under: S.No. Date of Deposit during demonetization period Amount Bank A/c No. 1 18-11-2016 Rs. 49,000/- State Bank of India A/c No. 10488026111 2 24-11-2016 Rs. 2,00,000/- State Bank of India, A/c No. 10488026111 3 18-11-2016 Rs. 49,000/- Oriental Bank of Commerce A/c No. 06012031000656 4 22-11-2016 Rs. 2,00,000/- Oreintal Bank of Commerce A/c No. 06012031000656 5 18-11-2016 Rs. 49,000/- Bank of Baroda, A/c No. 01050100013115 6 22-11-2016 Rs. 2,00,000/- Bank of Baroda A/c No. 01050100013115 7 18-11-2016 Rs. 49,000/- Punjab & Sind Bank, A/c No. 00041000014619 8 28-11-2016 Rs. 2,50,000/- Union Bank of India A/c No. 4 387302010020259 Total Rs. 10,46,500/- 2.8 That the aforesaid data so obtained by the Department of Income Tax revealed that the assessee had made cash deposit aggregating to Rs. 10,46,500/- during the demonetization period i.e; from 9th November 2016 to 30th December 2016. 2.9 That during the course of assessment proceedings the asessee was asked to furnish the source of cash deposits in bank account. The assessee furnished written reply that total cash deposits during the said period is Rs. 10,46,500/- and that the source of cash deposit is out of cash withdrawn on earlier dates from bank accounts and savings. 2.10 That thereafter vide notice u/s 142(1) of the Act dated 19/11/2019 the assessee was asked to furnish the following information: 1. Please furnish cash flow statement for the financial year 2015- 16 and 2016-17. 2. Please furnish the reasons for cash withdrawal in small amounts in the month of June, 2016. 3. When you are having huge amount of cash (specified bank notes) as on 08.11.2016, then why you have not deposited demonetized currency immediately after demonetization in lump- sum. You have deposited small amounts of cash on different dates during demonetization period. Please explain in detail. 2.11 That in response to above, the assessee furnished written reply on 21/11/2019 which is reproduced below: 5 \"1. I have already furnished the cash flow details in my last reply for the FY 2016-17. Cash flow detail for the FY 2015-16 is attached herewith in the pdf cashflow1516. 2. Regarding \"Please furnish the reasons for cash withdrawal in small amounts in the month of June, 2016.\" The amount is the account closing amount. Due to the inconvenience to climb the ramp or stairs of the bank, I have decided to close the accounts. I think you are aware of the crime rate against senior citizens and crime rates in cash handling. Being a 71 years old lady and my husband being a 81 years old man, it is our usual practice to do cash transactions in small amounts so that we may remain safe and secure. 3. I have not deposited demonetized currency immediately after demonetization in lump-sum but it has been deposited with in due course of time much earlier from the given time limit of 31.12.2016. Being a 71 years old lady and my husband being a 81 years old man and out of our usual practice, we have decided to deposit it in small amounts so that we may remain safe. Although it was not an easy job for us yet being an honest senior citizens of India, we have tried our best to do our duty towards our nation.\" 2.12 That Ld. AO vide assessment order bearing no. ITBA/AST/S/143(3)/2019-20/1023353157(1) dt. 28/12/2019 has made addition of Rs. 10,46,500/- (69A r.w.s 115BBE) and has assessed total income of the assessee as Rs. 12,06,220/-. The Ld. AO in the aforesaid assessment order has observed as follows:- 1. The assessee is maintaining bank account and the assessee is making regular bank transactions between the date of withdrawal of cash and date of deposit of cash. 2. Keeping such a huge cash of Rs. 10,46,500/- at home when the assessee is having bank account. 3. The assessee stated in her reply that cash was deposited out of savings, but no documentary evidence has been furnished by the assessee. 4. Further, the assessee deposited cash of Rs. 10,46,500/- approximately after 8 months from the date of withdrawal and after 09 days from the date of demonetization. After demonetization, 6 legal tender character of the bank note in demonetization of Rs. 500/- & 1,000/- issued by RBI was withdrawn on 08.11.2016 and SBN (Specified Bank Notes) were not allowed to use for normal business activity except to deposit in her bank account. The demonetization was declared in the evening of 08/11/2016, if the assessee had any genuine cash as on the date of demonetization i.e. 08.11.2016 she should/could have been deposited immediately after declaration of demonetization. Every person was in hurry to deposit cash in her bank, but the assessee deposited cash of specified bank note of Rs. 10,46,500/-after period of 09 days from the date of demonetization. 5. On the one hand, the assessee is having huge cash of Rs. 10,46,500/-at home and on the other hand, the assessee is withdrawing the small amounts of cash from her bank accounts. This can not be believed that when the assessee is having huge cash at home then why she is making cash withdrawals from her accounts. Thus, it is presumed that the assessee must have utilized the cash for any other purpose. This is not the human behavior and probability when the assessee was having huge cash at home, the assessee was not required to make cash withdrawals. This is against the human behavior and probability. 6. The assessee deposited cash of Rs.10,46,500/- in seven tranches spread over a period of more than twenty days. 2.13 The Ld. AO in addition to the aforesaid has also observed in the aforesaid assessment order as follows: The assessee has tried its best to justify the source of cash deposit during the demonetization period but none is found to be convincing and acceptable. However, the explanations on various queries raised as regards the genuineness of the source of the cash deposit are not found to be genuine. The demonetization was declared in the evening of 08/11/2016, if the assessee had any genuine cash it could or should have been deposited immediately after declaration of demonetization. Keeping in view the facts of the case and reply filed by the assessee, genuineness of cash deposits of Rs. 10,46,500/- of specified bank notes is not proved. Hence; addition of Rs. 10,46,500/- is made to the taxable income of the assessee u/s 69A of the Income Tax Act, 1961. The assessee had failed to prove this 7 fact that the cash deposited during demonetization period are normal receipts and therefore, I hold that the cash deposited during demonetization period, represents income from undisclosed sources and the same is covered under the provisions of Section 69A of the Income Tax Act. 2.14 That the assessee being aggrieved by the aforesaid assessment order dt. 28/12/2019 prefers first appeal under section 246A of the Act before CIT(A) who by the impugned order has dismissed the appeal of the assessee. Being aggrieved by the impugned order the assessee has preferred appeal before this Tribunal and has raised following grounds in Form 36 which are as under: 1. That Ld. CIT(A) has erred in upholding the order of Ld. AO passed under section 143(3) of the Income Tax Act, 1961 without considering the facts and circumstances of the case. 2. That the action of CIT(A) in upholding the additions made by Ld. AO amounting to Rs. 10.44,199/- under section 69A of the Income Tax Act, 1961 is bad in law. 3. That the imposition of a higher tax rate under section 115BBE of the Income Tax Act, 1961 is bad in law. 4. That the appellant craves to add, amend, or alter grounds of appeal before the appeal is finally heard and disposed of. 3. Record of Hearing 3.1 The hearing in the matter took place on 21/01/2025 before this Tribunal when Ld. AR for an on behalf of the assessee appeared before us. The Ld. AR has placed on record of this Tribunal a paper book containing pages 1 to 51 and a bringsynopsis cum argument of case containing pages from 1 to 12. The Ld. AR after briefly narrating the facts of the case which we have already recorded as 8 aforesaid, then contended that the impugned order and so also assessment order are bad in law, illegal and not proper and that the same deserves to be set aside. It was emphasized that the assessee along with her husband are very senior citizen in terms of age. Due to age related issue generally very senior citizen are in habit of keeping huge amount of cash due to some reason or other. In senior age these are several issues like health, safety, dependence, lack of confidence, emotional and physiological issues etc for these reasons the assessee periodically withdrew money in earlier years and after spending some amounts to meet necessities of life kept back remaining at home. On demonetization happening she the assesse decided to slowly deposit the old currency in her bank account. She did not rush through and instead deposited cash in small tranches spread over a period of time for which Government had given time. Ld. AR contended that spreading deposit of amount is a prudent approach particularly for senior citizen who due to age factors become very apprehensive, suspicious, etc. It was contended that provisions of section 69A of the Act are not applicable as plausible explanation was given. It was also contended that the addition u/s 69A is based on assumption that cash deposits were not explained properly. The assessee has demonstrated that source of cash withdrawals were made before demonetization period and that the bank account details submitted to the Ld. AO were sufficient to establish the legitimate source of these funds. The explanation offered to Ld. AO is plausible, reasonable and prudent. The source of 9 cash is explained as previous withdrawals from bank account of assessee only. Explanation given is that there was accumulation of amount by a senior citizen due to several concerns like safety, feeling of uncertainty etc. The core evidence of source is earlier withdrawal from bank of assessee itself of earlier years. The Ld. CIT(A) also failed to appreciate that no evidence has been brought on record by the AO to prove that the funds deposited during demonetization period were from unexplained on illegal sources. The Ld. AR basis chart below contended that source of cash deposit is earlier withdrawals from banks of the assessee itself aggregating to Rs. 9,61,556 and old saving / earning of Rs. 84,944/- aggregating to Rs. 10,46,500/- which came to be deposited. Date Name of Bank A/c No. Cash withdrawn (Rs.) 21/03/2016 State Bank of Patiala A/c No. 65072410249 100000/- 25/03/2016 State Bank of Patiala A/c No. 65072410249 100000/- 03/06/2016 State Bank of Patiala A/c No. 65072410249 270000/- 03/06/2016 State Bank of Patiala A/c No. 65072410249 11955/- 21/03/2016 Punjab National Bank A/c No. 3255000110026926 100000/- 25/03/2016 Punjab National Bank A/c No. 3255000110026926 100000/- 03/06/2016 Punjab National Bank A/c No. 3255000110026926 275000/- 08/06/2016 Punjab National Bank A/c No. 3255000110026926 4601/- Total Cash Withdrawal (I) 961556 Old Savings & Earning during the year (II) 84944 Total Cash (I + II) 1046500 10 3.2 The Ld. AR then contended that basis bank statement (page 42- 51 of Paper Book) the assessee had discharged the primary onus cast on her by providing details / documents and information of cash deposited in bank accounts during demonetization period. Hence additions made by tax authorities under section 69A of the Act were made based on suspicions and surmises and is required to be deleted. 3.3 The Ld. AR has placed reliance on judgment of ITAT Raipur Bench in the case of Inderpal Singh ChawalaVs. Income Tax Officer wherein it was held that “24. We are of a firm conviction that as the A.O had failed to place on record any material which would prove to the hilt that the amount of cash withdrawals of Rs.78.80 lacs (out of cash withdrawals of Rs.98.80 lacs) made by the assessee during the pre- demonetisation period, i.e. in September, 2016 was thereafter invested/utilized by the assessee somewhere else and, thus was not available with him to source the cash deposits in SBNs in his bank accounts during the demonetization period, therefore, there could have been no justification on his part to have held the cash deposits of Rs.62 lacs (supra) as the assessee's unexplained money u/s. 69A of the Act. Accordingly, we herein vacate the addition of Rs.62 lacs made/sustained by the lower authorities. Thus, the Grounds of appeal Nos.1 & 2 raised by the assessee are allowed in terms of our aforesaid observations25. In the result, appeal of the assessee is allowed in terms of our aforesaid observations.\" 3.4 Lastly Ld. AR contended that the imposition of higher rate of tax u/s 115 BBE of the Act is bad in law. The said section was amended by taxation laws (second amendment) Act 2016. The amendment increased the rate of tax to 60% for income determined under 11 section 68,69,69A, 69B, 69C and 69D effective from 15/12/2016 whereas assessee’s deposit occurred before amendment i.e; by 24/11/2016 and therefore the tax rate of 30% (as applicable before the amendment) should have applied. Further if section 69A is not applicable on assessee then the special rate of tax charged by the AO u/s 115BBE of the Act is also not applicable that it would be contrary to the law and provisions of the Act to apply the same. Reliance was placed on judgment of Hon’ble Supreme Court of India in case of CIT(Central)-1, New Delhi Vs. Vatika Township (P) Ltd. reported in (2024) 367 ITR 466 (SC). 3.5 Per contra, the Ld. DR has supported the order of Assessment and the impugned order. 4. Observations Findings & Conclusions 4.1 We now have to decide the legality validity and proprietary of the impugned order basis records of the case. 4.2 We have examined the records of the case and have heard rival submissions. We are of the considered view that assessee basis copies of bank statements (page 42 to 51 of PB) has successfully demonstrated that total cash deposit of Rs. 10,46,500/- were sourced from earlier withdrawals. 4.3 On page 39 of the paper book assessee first has shown that there are in total 5 bank account with different banks which are (1) SBI Ambala City (2) OBC Ambala City, (3) BOB Ambala City (4) UBI 12 Ambala City (5) Punjab & Sindh Bank Ambala City in which various amounts aggregating to Rs. 10,46,500/- came to be deposited. It is pertinent to note that these bank accounts are also disclosed in the ROI for A.Y. 2017-18 (page 23 of Paper Book-ROI for A.Y. 2017-18). 4.4 We hold that basis page 39, 40 of paper book the assessee has successfully shown that sum of Rs. 4,81,955/- as amount withdrawn from SBI in March 2016 to June 2016 and Rs. 4,79,601/- as amount withdrawn from PNB in March 2016 to June 2016. Thus aggregate withdrawal as above comes to Rs. 9,61,556/-. These withdrawals gets corroborated with the bank statement of SBI & PNB which are at page 42 & 43 of Paper Book (bank statement). We therefore have no hesitation in holding that the assessee has shown the sources of earlier withdrawal to the extent of Rs. 9,61,556/-. By noting the fact that an amount of Rs. 84,944/- is cash out of earlier income or saving. We finally conclude that an amount of Rs. 1046500/- in respect of which addition is made under section 69A is successfully explained and proved too. We therefore hold that such addition of Rs. 10,46,500/- is incorrectly made by lower authorities by treating the same as unexplained within the meaning of Section 69A of the Act. 4.5 In the premises drawn up by us. We set aside the impugned order. 13 Order 5. In the result, appeal of the assessee is allowed. Order pronounced in the open Court on 20/02/2025. Sd/- Sd/- िवŢम िसंह यादव परेश म. जोशी (VIKRAM SINGH YADAV) (PARESH M. JOSHI) लेखासद˟/ ACCOUNTANT MEMBER Ɋाियकसद˟ / JUDICIAL MEMBER AG आदेश कᳱ ᮧितिलिप अᮕेिषत/ Copy of the order forwarded to : 1. अपीलाथᱮ/ The Appellant 2. ᮧ᭜यथᱮ/ The Respondent 3. आयकर आयुᲦ/ CIT 4. आयकर आयुᲦ (अपील)/ The CIT(A) 5. िवभागीय ᮧितिनिध, आयकर अपीलीय आिधकरण, च᭛डीगढ़/ DR, ITAT, CHANDIGARH 6. गाडᭅ फाईल/ Guard File आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar "