MUTHUSAMY BASKAR,COIMBATORE V. ITO, WARD-1, , POLLACHI

ITA 71/CHNY/2025

AI Insights

The case revolves around an appeal by Muthusamy Baskar against the order of the Commissioner of Income Tax (Appeals), which had dismissed his earlier appeal concerning the addition of Rs.6,88,500 to his income for the Assessment Year 2017-18. This addition was made under section 69A of the Income Tax Act, which pertains to unexplained money, bullion, jewelry, or other valuable articles. The primary contention was the source of cash deposits made during the demonetization period. The assessee argued that these deposits were from legitimate savings of his family members, including his wife and elderly mother. The Tribunal referenced a similar case, Smt. Uma Agrawal Vs ITO, and noted that instructions from the CBDT and the Prime Minister's statements during the demonetization period suggested that small deposits by individuals with no business income would not be questioned if they were below Rs. 2.5 lakhs, the exemption limit for income tax.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360761 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2017-2018
• Other Referred Cases: Smt. Uma Agrawal Vs ITO [2021] 127 taxmann.com 735 (Agra-Trib.)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: S. SRIDHAR; ERODE
• Keywords: Business income
• Section: 143(3); 69

Judgement Text

" आयकर अपीलीय अिधकरण, ‘बी’ \u000fा यपीठ, चे\u0014ई IN THE INCOME TAX APPELLATE TRIBUNAL , ‘B’ BENCH, CHENNAI \u0016ी मनु क ुमा र िग\u001bर ,\u000fा ियक सद एवं \u0016ी जगदीश , लेखा सद क े सम& BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI JAGADISH, ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.71/Chny/2025 (िनधा\u0005रण वष\u0005 / Assessment Year: 2017-18) Muthusamy Baskar, 24, Anumandrayan Kovil Street, Pollachi, Coimbatore -642 001. Vs The ITO Ward-2 Pollachi. PAN : ARYPB-4660-Q (अपीलाथ\u000f/Appellant) (\u0010\u0011यथ\u000f/Respondent) अपीलाथ\u000fक\u0014ओरसे/ Appellant by : Mr. S.Sridhar, Advocate (Erode) \u0010\u0011यथ\u000fक\u0014ओरसे/Respondent by : Smt.Gouthami Manivasagam, JCIT सुनवाईक\bतारीख/Date of hearing : 19.03.2025 घोषणाक\bतारीख /Date of Pronouncement : 21.05.2025 आदेश आदेश आदेश आदेश / O R D E R PER MANU KUMAR GIRI, JM: The captioned appeal filed by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals), ADDL/JCIT(A)-2, Gurugram [CIT(A)] dated 13.11.2024 for Assessment Year 2017-18. 2. Brief facts are as follows:- The assessee is an individual filed his return of income electronically for the AY 2017-18 on 29.12.2017 admitting income of Rs.3,02,060/. The case was selected for the limited scrutiny through CASS for the reason ‘Cash deposit during demonetization period”. The AO finalized the assessment u/s 143(3) on 17.12.2019 by making the addition of Rs.6,88,500/- u/s 69A of the Act. 3. Aggrieved, the assessee challenged order of assessment before the CIT(A). The CIT(A) has dismissed the appeal of the 2 ITA No. 71/Chny/2025 assessee and noted that assessee did not provide any supporting documents to substantiate his explanation, against which the assessee is in further appeal before us. 4. The ld. counsel for the assessee submitted that cash deposits made during demonetization period are as under: Rs. 2,25,000/- belonged to assessee; Rs.2,20,000/- belonged to assessee’s wife; Rs.2,00,000/- belonged to assessee’s mother (73 yrs old). Ld. counsel for the assessee further submitted that the AO without making any enquiries has simply rejected the submissions of the assessee. He also relied upon the order of the Tribunal in the case of Smt. Uma Agrawal Vs ITO [2021] 127 taxmann.com 735 (Agra-Trib.) and contended that in similar circumstances the Tribunal has accepted the explanation of the assessee and allowed the appeal. 5. Per contra, the ld.DR relied upon the orders of the authorities below and prayed for the dismissal of the appeal. 6. We have heard both the parties and perused material on record. We note that the AO has not taken any step to enquire about the money which is belonged to assessee’s wife and mother. We also cannot ignore the situation after the demonetization, where the housewives of every age had revealed the cash. To remove the doubt of the AO, we may refer the Tribunal order in the case of Smt. Uma Agrawal Vs ITO [2021] 127 taxmann.com 735 (Agra-Trib.) as under: 23. Hon'ble PM and thereafter CBDT, considering the above said aspects in mind and showing their concern to Women (house wife etc) had issued instruction under section 119 to AO, had assured that the individual assessee and house wife having no business income , would not be questioned if the bank deposits during the demonetisation were found to 3 ITA No. 71/Chny/2025 be less than Rs. 2,50,000/(exemption limit of Income tax) . Further revenue had issued following press release for the benefit of public on 18/11/2016, immediately after the announcement of the Scheme. Government of India Ministry of Finance Department of Revenue Central Board of Direct Taxes New Delhi, 18th November, 2016. PRESS RELEASE Sub: Demonetisation of Old High Denomination Currency & Cash Deposits in Bank Accounts It was announced by the Government earlier that small deposits made in the banks by artisans, workers, housewives, etc. would not be questioned by the Income-tax Department in view of the fact that present exemption limit for Income-tax is Rs. 2.5 lakh. Reports are being received of instances where people are using other persons' bank accounts to convert their black money into new denomination notes for which reward is also being given to the account holders who agree to allow their accounts to be used. This activity has been reported in case of Jan-Dhan Accounts also. It is hereby clarified that such tax evasion activities can be made subject to Income-tax and penalty if it is established that the amount deposited in the account was not of the account holder but of somebody else. Also the person who allows his or her account to be misused for this purpose can be prosecuted for abetment under Income-tax Act. However, genuine persons depositing their own household savings in cash into their bank accounts would not be questioned. The people are requested not to get lured by black money converters and be a partner in this crime of converting black money into white through this method. Unless all citizens of the country help the Government in curbing black money, this mission of black money will not succeed. Also the people who are against the black money should give information of such illegal activities going on to the Income-tax department so that immediate action can be taken and such illegal transfer of cash can be stopped and seized. Black money is a crime against humanity. We urge every conscientious citizen to help join the Government in eradicating it. (Meenakshi J. Goswami) Commissioner of Income Tax (Media and Technical Policy) Official Spokesperson, CBDT. 24. The assessee during the assessment proceedings and before first appellate authority, had raised her plea of issuing the binding instructions , however despite that the additions were made on account of the deposit made in the bank for an amount of Rs. 2, 21, 000/-. In our view the addition made by the lower authority cannot be sustained on account of the 4 ITA No. 71/Chny/2025 statement given by the Prime Minister, press statement and the standard operating procedure issued by the board, as instructions under section 119 to the Assessing officer, as the instructions issued by the Board are statutory and binding on the revenue. In the matter of Dinakar Ullal v. CIT [2010] 323 ITR 452 (Kar.) [24-02-2010] it was held as under: \"10. A plain reading of the aforestated statutory provision, it is beyond cavil of doubt that, the Board is empowered from time to time to issue orders/directions/instructions to income-tax authorities, as it may deem fit for proper administration of the Act, and more particularly under clause (b) of sub-section (2) of section 119, for avoiding genuine hardship in any case, authorising any income-tax authority to admit an application or claim for any exemption, deduction, refund or any other relief under the Act after the expiry of the period specified by or under the Act for making such application or claim and deal with the same on the merits, in accordance with law. The statute does not indicate vesting a jurisdiction in the Board to issue instructions in excess of what is stated in section 119(2)(b). It is well-settled that instructions/circulars/guidelines are binding to the extent they are not inconsistent with the provisions of the Act. 11. It is elsewhere said that the power of the Board is enlarged where the provisions of the Act bar the income-tax authorities from entertaining any application for claim of any exemption, deduction, refund or any other reliefs due under the Act for the reason that the time limit specified for the making of such application or claim has expired. Thus, the Board is empowered to authorise the Commissioner of Income-tax Officer to admit such application or claim even after the time limit and to deal with it, in accordance with law. 12. In State of M.P. v. G.S. Dall and Flour Mills, AIR 1991 SC 772 ; [1991] 187 ITR 478, the apex court held that executive instructions can supplement a statute or cover areas to which the statute does not extend but they cannot run contrary to the statutory provisions or whittle down their effect. In Kerala Financial Corporation v. CIT [1994] 210 ITR 129 (SC); AIR 1994 SC 2416, following the opinion of Mukharji J. at paragraph 42 in State Bank of Travancore v. CIT [1986] 158 ITR 102 (SC); AIR 1986 SC 757, that circulars \"cannot detract from the Act\", the apex court held that a circular of the Board under section 119 cannot override or detract from the Act inasmuch as, what section 119 has empowered is to issue orders, instructions or directions for the proper administration of the Act or for such other purpose specified in sub-section (2) of that section and that such an order, instruction or direction cannot override the provisions of the Act which would be destructive of all the known principles of law as 5 ITA No. 71/Chny/2025 the same would really amount to giving powers to a delegated authority to even amend the provisions of the law enacted by Parliament. 13. Thus viewed, section 119 authorises the Board to issue orders, instructions and directions to the income-tax authorities \"for proper administration of the Act\". A circular is admittedly executive in character and has to be issued in aid of functioning of the Act and with the objective that, the provisions of the Act are properly administered. The Board may, in issuing a circular, clarify a point of ambiguity in any provision of law. Such clarification is not binding upon the courts. It cannot also run counter to the legislative provisions and create rights or obligations which are contrary to the statute. Instructions really supplant the law and not supplement the law. It is settled law that circulars cannot impose any burden on the taxpayer but can deviate from the provisions of the Act if it is beneficial to the assessee and has mitigated or relaxed the rigour of the law.\" 25. In view of the law laid down by the High Court and also by the Supreme Court with respect to binding nature of the instruction issued by the board Instruction No. 03/2017 Dated 21st of February, 2017, we are of the opinion that the assessing officer was prohibited from making the addition in the hands of the housewife if the amount deposited in the bank was found to be less than 2.5 lakhs. The instructions were issued by the board , for the benefit of the person mentioned in the instructions, including the housewife and with a view to mitigate their grievances and also save them from the rigorous provisions of Income-tax Act. 26. Further we may refer section 69A of the Act, which provies as under : 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income 64, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the 61a[Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year. 6 ITA No. 71/Chny/2025 27. From the reading of the above said provision makes it abundantly clear that the requirement of the section is that money or other asset must be \"found \"and the assessee is found to be owner of article specified in the section. Further this provision provides that if the assessee offers no explanation about the nature and source of acquisition of money etc or the explanation offered by the assessee, in the opinion of the AO is not satisfactory then the assessing officer \"may\" deem such money etc as income of the assessee for such financial year. 28. In the present case the assessee had given the explanation to the AO during the assessment proceedings and had submitted that the amount deposited in the bank, were her money saved by her in last many year's and were kept by her , for herself and for the family in case of emergency need. However, this explanation was rejected by the AO on the pretext the assessee was not having income from any business. However assessing officer has not brought on record any document, evidence etc to show that the assessee was having any income from any other source other than saving from various activities mentioned elsewhere. Further no evidence had been brought on record , AO, in terms of press statement dated 18-11- 2016 and SOP to established that the amount deposited in the account was not of the account holder/assessee but of somebody else. In the light of the above when the AO had brought on record the evidence of proving that the money belongs to other person and not of the assessee, the amount deposited shall not added as income of the assessee. 29. In our opinion assessee had duly explained the source of deposit i.e previous years saving and we have no hesitation to accept the same , as it would been presumed that this small amount of Rs. 2,21, 000/would have been accumulated or saved by her from various activities undertaken by her for and on behalf of family in last many years . Further as mentioned herein above, in the decision of Kirti (supra), women per say cannot be said to be not having income from any activities, as they are presumed to always been doing economic activities in the family for many years, hence in our view the assessee had duly explained the source of her investment. 7 ITA No. 71/Chny/2025 Therefore no additions can be made by lower authority. Further even if we ignore the explanation, for the sake of argument, then also it is for the assessing officer to bring on record some cogent evidence to prove that the amount deposited in the bank was undisclosed income arising from the business or from any other activities. No evidence has been brought on record by the lower authorities. Hon'ble Supreme Court in the matter of CIT v. Smt. P.K Noorjahan [1999] 103 Taxman 382/237 ITR 570 it was held as \"3. Shri Ranbir Chandra, the learned counsel appearing for the revenue, has urged that the Tribunal as well as the High Court were in error in their interpretation of section 69. The submission is that once the explanation offered by the assessee for the sources of the investments found to be non-acceptable the only course open to the ITO was to treat the value of the investments to be the income of the assessee. The submission is that the word 'may' in section 69 should be read as 'shall'. We are unable to agree. As pointed out by the Tribunal, in the corresponding clause in the Bill which was introduced in the Parliament, the word 'shall' had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word 'may'. This clearly indicates that the intention of the Parliament in enacting section 69 was to confer a discretion on the ITO in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. The question whether the source of the investment should be treated as income or not under section 69 has to be considered in the light of the facts of each case. In other words, a discretion has been conferred on the ITO under section 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case. 4. In the instant case, the Tribunal has held that the discretion had not been properly exercised by the ITO and the AAC in taking into account the circumstances in which the assessee was placed and the Tribunal has found that the sources of investments could not be treated as income of the assessee. The High Court has agreed with the said view of the Tribunal. We also do not find any error in the said finding recorded by the Tribunal. There is, thus, no merit in these appeals and the same are, accordingly, dismissed. No order as to costs.\" 8 ITA No. 71/Chny/2025 30. The word \" may\" had been used by the statute under section 69A , as had been used by the statute under section 69 of the Income-tax Act 1961, therefore applying the same analogy as laid down by SC in the case of Smt. P.K. Noorjahan (supra) , we are of the opinion that the amount deposited by the assessee during the demonetisation. Cannot be treated as income of the assessee. Hence the appeal of the assessee is allowed. 31. We may clarify that this decision may be treated as precedent in respect to proceedings arising out of the cash deposit made by the housewives during the demonetisation scheme 2016, only up to the limit of Rs. 2.5 lakhs only. 32. Lastly We record our appreciation for contribution made by Sh Manoj Sharma Adv in adjudication of this appeal. 33. In the result the appeal of the assessee is allowed. 7. In light of the aforesaid discussions, and respectfully following the decisions of the Tribunal (Supra), we accept the explanation of the assessee. We further do not countenance the action of the Assessing Officer and delete the addition. 8. In result, appeal of the assessee is allowed. Order pronounced in the open court on 21st May, 2025. Sd/- Sd/- (जगदीश ) ( मनु क ुमार िग\u001bर ) ( Jagadish ) ( Manu Kumar Giri) लेखा लेखा लेखा लेखा सद\u0003य सद\u0003य सद\u0003य सद\u0003य / Accountant Member \u000fाियक सद / Judicial Member चे\u0019ई/Chennai, \u001bदनांक/Date:21.05.2025 DS आदेश क\u0007 \bितिलिप अ\u000eेिषत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु\u0013/CIT Chennai/Coimbatore 4. िवभागीय \bितिनिध/DR 5. गाड फाईल/GF. "