NANIKRAM FATEHCHAND CHANGLANI,ULHASNAGAR, THANE V. ITO, WARD-2(5), KALYAN

ITA 2199/MUM/2024

AI Insights

The case involves Nanikram Fatehchand Changlani, a retired railway official, who appealed against the order of the Commissioner of Income-tax (Appeals) pertaining to an assessment order for the Assessment Year 2017-18. The primary issue was the unexplained source of a cash deposit of Rs. 9,00,000 made during the demonetization period. The Assessing Officer (AO) and the CIT(A) rejected the appellant's explanation that the deposit was from accumulated earnings from a family business of trading stove parts, due to lack of substantial evidence such as a shop license or GST returns. The Tribunal upheld the lower authorities' decisions, emphasizing the absence of concrete evidence to substantiate the claimed source of income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 26713 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: K
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: KIRAN UNAVEKAR
• Assessee Lawyers: SURESH OTWANI
• Keywords: Business income
• Section: 143(3); 142(1); 143(2); 69A

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL “K(SMC)” BENCH, MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER & SHRI PRABHASH SHANKAR, ACCOUNTANT MEMBER ITA No.2199/MUM/2024 (A.Y. 2017-18) Nanikram Fatehchand Changlani, 403, 4th Floor, Manila Apartments, O.T. Section, Ulhasnagar - 421005, Maharashtra v/s. बनाम Income Tax Officer, Ward – 2(5), Kalyan, Wayle Nagar, Khadakpada, Kalyan - 421 301, Maharashtra स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AIYPC1289P Appellant/अपीलार्थी .. Respondent/प्रतिवादी Appellant by : Shri Suresh Otwani Respondent by : Shri Kiran Unavekar, (Sr. DR) Date of Hearing 02.01.2025 Date of Pronouncement 06.01.2025 आदेश / O R D E R PER PRABHASH SHANKAR [A.M.] :- The present appeal emanating from the appellate order dated 27.02.2024 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/ADDL/JCIT(A)-2 Coimbatore [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s. 143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 19.08.2019 for the Assessment Year [A.Y.] 2017-18. P a g e | 2 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani 2. The grounds of appeal are as under:- 1. The FAA i.e, CIT(A) has not considered the submission made in totality in spite of the following facts that: a) The 'A' retired from Railway Accounts Department in the year March 1991 and Appellants brother and full family were and are still in the business of trading of kerosene stove parts ie burners and accessories and even after retirement Appellant continued the said business in a very nominal Scale b) After retirement, the accumulation of all those cash income, surplus, was deposited during the period of demonetization i.e of high denomination notes. At the time of deposit Appellant's age was 83 years and by no imagination it will lead to any activity to earn that Rs 9,00,000/- c) These facts should not be ignored and the purpose of demonetisation was not to trouble the octogenarian i.e, a very Senior Citizen. 2. The FAA i.e, CIT(A) failed to evaluate the above facts. 3. The FAA erred in not accepting the contention, submission regarding source of earning Rs 9,00,000/- which was voluntarily offered under the head “Income from other sources”. 4. The Appeal is filed in time. 5. The Appellant craves leave to add, alter or amend any of the grounds on or before the final date of hearing. 3. In brief, factual matrix of the case are that the assessee a retired official of Railways, filed his return of income for the A.Y.2017-18 on 18/07/2017 declaring total income of Rs. 14,39,190/-. The breakup of income return is as under:- Sr.No. Heads of Income Amount(Rs.) Amount 1 Pension Income 4,29,581/- 2 Income from House Property 1,50,850/- 3 Income from other Sources P a g e | 3 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani FDR Interest Bank Interest Other Income(Cash Deposits) 98,193/- 20,567/- 9,00,000/- 10,18,760/- Gross Total Income 15,99,191/- Less Deduction Under Chapter VI-A 80-C 80-TTA 1,50,000/- 10,000/- 1,60,000/- Total Income 14,39,190/- 3.1 The case was selected for scrutiny and notice u/s. 143(2) was issued followed by notice u/s.142(1). The details submitted by the appellant was examined by the AO. It was noticed during the assessment proceedings that the appellant deposited a total of Rs.9,00,000/- in three bank accounts between 09/11/2016 to31/12/2016. The assessee was asked to give the source of such cash deposits. It was replied that the cash deposits were made out of profit from sale of stove parts. He was requested to provide shop license, copy of GST return, Business commencement certificate etc. to provide proof for business conducted. The appellant filed his reply to the notice. The Assessing officer did not accept the explanation for the following reasons:- “6. The contention of the assessee cannot be accepted for the reasons mentioned hereunder: 6.1 Assessee, in his reply stated that he is doing business of trading of stove parts and the cash deposit made to the account is out of his sales thus made. However, he has not submitted any documentary evidence such as shop license, copy of GST return, business commencement certificate, etc to prove the genuineness of the business carried out during the year under consideration. 6.2 As per the submission of the assessee, he was working in Railway and retired in the year 2011, after which he got into the business with his family members. However, in spite of doing business (as claimed), he has not filed the return of income till AY 2016-17, which should have been done by the assessee. It is also pertinent to mention here that assessee has not shown any such income for subsequent assessment year i.e AY 2018-19 P a g e | 4 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani 6.3 Further, it is stated that the cash deposit is his accumulated earning till 2016-17 and the same is deposited in the bank account. On perusal of bank account statement (as stated in para 4 above), it is noticed that the assessee has deposited old demonetized currency to the tune of Rs 45,000/-in the bank account on every other day starting just after the announcement of demonetization. It is also seen from the table that the assessee is depositing the cash in three different accounts in the tune of Rs 45,000/- every another day. This clearly shows that the amount is being deposited just below the threshold limit of Rs 50,000/- and if it is accumulated earning, as stated by the assessee, the amount was to be deposited at one time only, which is not done.” 3.2 The AO therefore, concluded that the appellant has nothing substantial to prove the geniuses of source of cash deposit and that the source of the cash deposit remain unexplained. Accordingly the sum of Rs.9,00,000/- was treated as income of the assessee u/s.69A of the I.T.Act. and total income was assessed at Rs.23,39,190/-. 4. Aggrieved, he filed appeal before CIT(A) and his response before him from time to time. Subsequently, the case was transferred to Addl. CIT, Appeals, Unit-2, Coimbatore under the provisions of sub-section (2) of 246(A), as per E- appeals Scheme 2023.In response to the hearing notice issued earlier he has submitted that he wished to go for Vivad se Viswas Scheme-2020, but it is seen that the appellant has not applied for the VSVS. In various grounds, it was contented by the assessee that the AO erred in computation of total income in Para 8 by including Rs 9,00,000/- twice in the computation. Besides, the treatment given to the impugned sum of Rs 9 lakh was agitated. 4.1 With regard to double addition, the ld.CIT(A) deleted the addition added twice by the AO while in respect of the source of Rs.9,00,000/- offered under “Income from Other Sources”, he observed that the assessee did not bring any substantial evidence in support of his claim other than stating that business was done on a very small scale and that cash deposit was made out of accumulation of total earnings of earlier years. The appellant cannot explain away the source of total deposits as from past savings without furnishing P a g e | 5 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani substantial evidence. The addition of the said sum the said sum u/s.69A of the Act was confirmed. 5. Before us, the learned Authorised representative of the assessee repeated the same arguments as made before the authorities below.It is noticed that during the assessment proceeding, the assessee submitted the statement of three bank accounts; one a/c no 4350072000018821 of Navjeevan Co-operative bank, 2nd account no 007310100002743 with Bank of India and third a/c no 0264101009371 maintained with Canara Bank. On going through the bank account statements, it is seen that assessee deposited following cash amounts: Date Navjeevan Bank Bank of India Canara Bank 12/11/2016 Rs. 45,000/- 13/11/2016 Rs. 45,000/- 15/11/2016 Rs. 45,000/- 16/11/2016 Rs. 45,000/- 17/11/2016 Rs. 45,000/- 18/11/2016 Rs. 45,000/- 19/11/2016 Rs. 45,000/- 21/11/2016 Rs. 45,000/- Rs. 45,000/- 22/11/2016 Rs. 45,000/- 23/11/2016 Rs. 45,000/- 24/11/2016 Rs. 45,000/- 25/11/2016 Rs. 45,000/- 28/11/2016 Rs. 45,000/- 29/11/2016 Rs. 45,000/- 01/12/2016 Rs. 45,000/- 02/12/2016 Rs. 45,000/- 03/12/2016 Rs. 45,000/- 05/12/2016 Rs. 45,000/- 06/12/2016 Rs. 45,000/- Total Rs 4,95,000/- Rs 1,80,000/- Rs 2,25,000/- P a g e | 6 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani 5.1 Thus, a total of Rs 9 lakh was deposited in the above mentioned bank accounts during the demonetization period i.e. in between 09.11.2016 to 31.12.2016.The source of these cash deposits, was stated to be profit from sale of stove parts. Consequently, a notice u/s 142(1) dated 02.07.2019 was issued to assessee requesting to provide the shop license, copy of GST return, business commencement certificate, etc, since; he had claimed source of cash deposit is profit from sale of stove parts. He was further confronted by the AO as to why no such income from sale of stove parts has not been offered in the return of income filed for Assessment year 2018-19.In response, the assessee submitted reply dated 12.07.2019 stating that he along with his family members are in the business of trading of stove and stove parts. The operative part of his submission is reproduced as under: “The ‘A’ is an Individual very senior citizen aged about 86 years. He was working in Railway Accounts Department and retired in the year March 1991. His family members, his father as well as all brothers are in the business of trading of stove and stove parts. Their parent Company i.e, M/s. Sona Traders, M/s. Sona Trading Co. and all his younger brothers who are alive are doing the same stove parts business. After his retirement he has been trading in the same line. His son is settled in US. It is correct that he has deposited Rs 900500/- in Bank Account and declared Income from stove parts not in one year but accumulated cash surplus with him after Retirement from the said business. It is correct that no such income is offered to tax since after depositing money in bank earned out of his business, his wife became bed-ridden and ‘A’ stopped moving out of his house as he is very senior citizen. Savings are offered in Income.” 5.2 Even during appeal proceeding before the ld.CIT(A) or before us, the assessee could not submit any documentary evidence to prove the genuineness of the business carried out during the year under- P a g e | 7 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani consideration. However, he has not submitted any documentary evidence such as shop license, copy of GST return, business commencement certificate, etc to prove the genuineness of the business carried out during the year under consideration apart from claiming that he was very senior Citizen aged about 86 years and was working in Railway Accounts Departments and retired in the year March 1991. His Father Late Shri Fatehchand Changlani along with 3 sons except himself was carrying on business in the line of trading of stove and stove parts more than 50-60 years. After his father demised all the 3 brothers got separated and continued to carry on business in stove parts and at the time of Retirement. ‘A’s younger brother also died and other 2 brothers Mr Mohan Fatehchcand Changlani and Mr Biharilal Fatehchand Changlani continued the business and 'A' used to assist in writing their Books of Account. Mr Biharilal Fatehchand Changlani was carrying on two business in the name of M/s. Sona Trading Company and M/s. Sona traders one in his Individual capacity and other in its HUF capacity respectively. Mr. Mohan Fatechchand Changlani demised who was carrying on business in Ambika Industries, A' was carrying on little business on a very nominal scale and the turnover of business was very low and Income was below marginal limit income subject to tax and this cash deposit was accumulation of total earnings till 2016-17 and the same was deposited and offered to tax without claiming deduction though it is saving in AY: 2017- 18. The whole savings offered to tax voluntarily by the ‘A’ should be accepted by you gracefully. He has discharged his tax liability..” 6. As rightly pointed out by the lower authorities, the assessee could not explain the source of cash despots in the bank accounts in any satisfactory manner supported by any concrete evidence. The claim of deposits out of business receipts is devoid of any minimal evidence. However, in spite of doing business as claimed, he has not filed the return of income till AY 2016-17. It is also pertinent to mention here that assessee has P a g e | 8 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani not shown any such income for subsequent assessment year i.e AY 2018-19 as well. Further, the purported claim that the cash deposit is his accumulated earning till 2016-17 and the same is deposited in the bank account, it was rightly pointed out by the Revenue that the assessee deposited old demonetized currency to the tune of Rs 45,000/-in the bank account on every other day starting just after the announcement of demonetization. It is also seen from the table that the assessee is depositing the cash in three different accounts in the tune of Rs 45,000/- every another day which clearly showed that the amount was deposited just below the threshold limit of Rs 50,000/- and if it is accumulated earning, as stated by the assessee, the amount was to be deposited at one time only, which was not done. 6.1 Section 69A of the Act allows the tax authorities to initiate an inquiry into any substantial unexplained cash deposits and subsequently assess them as unexplained income. The onus is on the taxpayer to substantiate the legitimacy of the deposited cash through proper documentation and evidence. \"S. 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, 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 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.\" 6.2 A simple interpretation of Section 69A of the Act reveals that its provisions come into play when there is unaccounted money or assets that are not documented in the taxpayer's books of accounts and are not linked to any reported source of income. If it is found that there was no P a g e | 9 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani corroborative evidence to prove the source of the cash deposit, and the assessee failed to establish a reasonable nexus between the cash deposit during the demonetization period and any evidence of its source, section 69A would come into operation as in this case. 6.3 In view of the above, it is evident that the cash deposited in the bank accounts during demonetization period could neither be treated as business income nor saving of the assessee in absence of any evidence. Assessee miserably failed to bring on record any cogent evidence to support his explanation to prove the genuineness of source of cash deposit made and thus, the source of the above cash deposit of Rs 9 lakh remained unexplained and therefore was rightly added to the total income of the assessee u/s 69A of the Act. The conclusion drawn by the ld.CIT(A) needs no interference and is upheld. 7. In the result, the appeal is dismissed. Order pronounced in the open court on 06/01/2025. Sd/- Sd/- KAVITHA RAJAGOPAL PRABHASH SHANKAR (न्याययकसदस्य /JUDICIAL MEMBER) (लेखाकारसदस्य/ACCOUNTANT MEMBER) Place: म ुंबई/Mumbai ददनाुंक /Date 06.01.2025 Lubhna Shaikh / Steno आदेश की प्रयियलयि अग्रेयिि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant P a g e | 10 ITA No. 2199/Mum/2024 A.Y. 2017-18 Nanikram Fatehchand Changlani 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त / CIT 4. विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. सत्यावपि प्रवि //True Copy// आदेशानुसार/ BY ORDER, उि/सहायक िंजीकार (Dy./Asstt. Registrar) आयकर अिीलीय अयिकरण/ ITAT, Bench, Mumbai. "