SHANMUGAM,ERODE V. ITO,WARD-1(2), ERODE

ITA 3115/CHNY/2024

AI Insights

The case involves an appeal by Shanmugam against the order of the Commissioner of Income Tax (Appeals), which confirmed the addition of Rs. 7,02,000 as unexplained money under section 69A of the Income Tax Act, pertaining to the assessment year 2017-18. The addition was initially made by the Assessing Officer following the scrutiny of cash deposits amounting to Rs. 10,28,500 made during the demonetisation period. The Tribunal considered the assessee's submissions, including income tax returns and a cash flow statement, and found that a portion of the deposits could be substantiated by the assessee's past savings and income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 472485 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GOUTHAMI MANIVASAGAM
• Assessee Lawyers: S. BHUPENDRAN; VIRTUAL

Judgement Text

" आयकर अपीलीय अधिकरण, ‘बी’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI श्री जॉजज जॉजज क े, उपाध्यक्ष एवं श्री एस.आर.रघुनाथा, लेखा सदस्य क े समक्ष BEFORE SHRI GEORGE GEORGE K, HON’BLE VICE PRESIDENT AND SHRI S.R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 3115/Chny/2024 ननिाजरण वर्ज / Assessment Year: 2017-18 Shanmugam, 194/2, Samundi Nagar, Extension Thindal Post, Erode – 638 012. [PAN: CFLPS-9824-J] v. Income Tax Officer, Ward -2(1), Erode. (अपीलाथी/Appellant) (प्रत्यथी/Respondent) अपीलाथी की ओर से/Appellant by : Mr. S. Bhupendran, Advocate (Virtual) प्रत्यथी की ओर से/Respondent by : Ms. Gouthami Manivasagam, JCIT सुनवाई की तारीख/Date of Hearing : 25.02.2025 घोर्णा की तारीख/Date of Pronouncement : 06.03.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), Addl/JCIT(A)-1, Pune, dated 04.10.2024 and pertains to assessment year 2017-18. :-2-: ITA. No: 3115/Chny/2024 2. The assessee has raised the following grounds of appeal: “1) The impugned Order is bad, erroneous and unsustainable in law. 2) The Learned First Appellate Authority and the Assessing Officer erred in not considering the explanation furnished by the Appellant properly. 3) Without prejudice, the Learned First Appellate Authority and the Assessing Officer erred in not considering and appreciating that the Appellant had sufficient cash in hand forming the source for cash deposits during demonetization period, when details of income levels of the previous years were furnished. 4) Without prejudice, the Learned First Appellate Authority and the Assessing Officer erred in rejecting the plea of sufficiency of cash in hand out of past years savings solely on the ground that the return of income filed for those years did not reflect it, when, admittedly, the return forms filed did not have columns for showing closing cash balance, thereby prejudicing the Appellant for not doing an impossible act. And, for other reasons that may be adduced later, the Appellant humbly prays that the present appeal may be admitted, duly considered and justice be rendered.” 3. Brief facts of the case are that the assessee is an individual and filed his return of income for the A.Y. 2017-18 on 04.08.2017 admitting a total income of Rs.3,07,670/- by showing income from house property and other sources. After processing the return of income u/s.143(1) of the Act, the case was selected for limited scrutiny for the verification of “Cash deposit during the demonetisation period”. 4. During the assessment proceedings the assessee submitted the bank statements and shown the cash deposit made to the bank accounts to the tune of Rs.10,28,500/- during the :-3-: ITA. No: 3115/Chny/2024 demonetisation period. Further, the assessee shown that an amount of Rs.3,26,500/- has been drawn from Indian Overseas bank on 03.11.2016 i.e. before the announcement of demonetisation. The AO completed the assessment based on the said details and information and passed an order u/s.143(3) of the Act dated 04.12.2019 by making an addition of Rs.7,08,000/- (Difference between Rs.10,28,500/- - Rs.3,26,500/- which has been drawn on 03.11.2016) u/s.69A of the Act as unexplained money. 5. Aggrieved by the order of the AO, the assessee preferred an appeal before the Ld.CIT(A), NFAC, Delhi. Before the ld.CIT(A) the assessee submitted that the return of income for last 3 Assessment years has been filed by the assessee by declaring the following income and shown the availability of cash in hand after reducing the corresponding year’s drawings as detailed below: A.Y. 2015-16 Rs.2,38,202/- A.Y. 2016-17 Rs.2,38,430/- A.Y. 2017-18 Rs.2,67,870/- 6. Further, the assessee stated that he has declared interest on loan given under the income from other sources and refund of loan from the borrowers and his accumulated income from past 3 years given as loans is the source for cash deposits. The assessee also filed the copies of bank statements of earlier A.Ys. 2015-16 & 2016- 17 also. On perusal the reply and submissions of documents by the :-4-: ITA. No: 3115/Chny/2024 assessee the Ld.CIT(A) passed an order dated 04.10.2024 by confirming the addition made by the AO by dismissing the appeal of the assessee and reduced the addition to Rs.7,02,000/- as there was a clerical error in the computation of difference in cash deposit and withdrawal shown in the Assessment order. 7. Aggrieved by the order of the Ld.CIT(A), the assessee preferred an appeal before us. 8. The ld.AR of the assessee stated that the assessee has been regularly filing income tax returns. As there is no requirement of filing the cash flow and other financial statements along with the return of income for small assessee’s and hence the same is not submitted. However, the assessee has submitted the details of return of income filed from A.Y. 2015-16 to 2017-18 along with statement of cash flow showing the net cash surplus of Rs.7.44 Lakhs before the lower authorities. The assessee has been earning interest from lending money and the same has been realized along with interest income. The source of cash deposit was refund of loan from borrowers along with the accumulated cash from assessee’s own source of income which has been offered to income tax. Therefore, the AO and that of the ld.CIT(A) have erred in making the addition of cash deposit as unexplained money and prayed for deleting the same. :-5-: ITA. No: 3115/Chny/2024 9. Per contra, the ld.DR supported the orders of the lower authorities. 10. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. Admittedly, the assessee has filed his return of income and made a cash deposit of Rs.10,28,500/- in his four bank accounts during the demonetisation period. The AO has considered the withdrawal made from the bank account on 03.11.2016 to the tune of Rs.3,26,500/- and considered as explained source for cash deposit. However, the AO has made addition of the balance cash deposit of Rs.7,08,000/- as unexplained as the assessee did not file any evidence in support of the source except the income tax returns of earlier years and stated the source of cash was from past savings. The same has been confirmed by the ld.CIT(A) by reducing the addition to Rs.7,02,000/-. 11. We note that the assessee has furnished the return of income for the A.Y. 2015-16, 2016-17 and 2017-18 and also filed a Cash flow statement for all the 3 years by considering the Income from house property, other sources and by reducing the drawings and other personal expenses. On perusal of the said cash flow statement for past 3 years shows an accumulated surplus of Rs.7.44 Lakhs. Though the entire amount cannot be considered to be held in the :-6-: ITA. No: 3115/Chny/2024 form of cash, in the peculiar facts and circumstances of the case and in the interest of justice 50% is considered as explained source of cash deposit out of Rs.7,02,000/-. 12. In the peculiar facts and circumstances of the case, we are of the considered view that the assessee has explained the source to the extent of 50% i.e. Rs.3,51,000/- and direct the AO to reduce the addition made u/s.69A of the Act as unexplained money to Rs.3,51,000/-. We sustain the addition of cash deposit of Rs.3,51,000/- as unexplained money u/s.69A of the Act. 13. In the result the appeal of the assessee is partly allowed. Order pronounced in the court on 6th , March 2025 at Chennai. Sd/- Sd/- (जॉजज जॉजज क े) (GEORGE GEORGE K) उपाध्यक्ष /VICE PRESIDENT (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखा सदस्य/ACCOUNTANT MEMBER चेन्नई/Chennai, ददनांक/Dated, the 6th , March 2025 JPV आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3.आयकर आयुक्त/CIT 4. पवभागीय प्रनतननधि/DR 5. गार्ज फाईल/GF "