MRS. SARAH NUSRATH KHALEEL,MANGALURU vs. THE DEPUTY 'COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, MANGALURU

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ITA 715/BANG/2022Status: DisposedITAT Bangalore06 February 2023AY 2018-195 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

For AY 2016-17, the tribunal dismissed the appeal as the assessee failed to provide evidence for the source of income. For AY 2018-19, the tribunal remanded the issue to the AO to consider cash withdrawals from the bank account in the preceding year as a potential source for the deposits.

What were the facts?

During a search operation in the assessee's husband's case, proceedings under section 153C were initiated against the assessee. The Assessing Officer (AO) questioned cash deposits in the assessee's bank account for AY 2016-17 and AY 2018-19. The AO partially accepted the assessee's explanation regarding income from tuition and tailoring classes, making additions for unexplained cash deposits.

What were the issues?

Whether the AO correctly made additions for unexplained cash deposits without considering past cash withdrawals, and whether the assessee provided sufficient evidence for income from tuition and tailoring classes.

Which sections of the Income-tax Act were involved?

Section 132,Section 153C,Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC - A” BENCH : BANGALORE

Before: SHRI N. V. VASUDEVAN

For Appellant: Smt. Sheethal Borkar, Advocate
For Respondent: Shri. Ganesh R. Ghale, Standing Counsel
Hearing: 01.02.2023Pronounced: 06.02.2023

O R D E R These are 2 appeals by the assessee against 2 orders both dated 23.05.2022 passed by CIT(A)-2, Panaji, relating to Assessment Years 2016-17 and 2018-19.

2.

The assessee is an individual. There was a search and seizeure operation conducted under section 132 of the Income Tax Act, 1961 (hereinafter called ‘the Act’), in the case of Shri.Ibrahim Kaleel, husband of the assessee. Proceedings under section 153C of the Act was initiated on the assessee based on the material found in the course of search in the case assessee’s husband. In the course of assessment proceedings under section 153C of the Act, the AO called upon the assessee to explain the source with regard to cash deposits made in SB A/c. No.10981069697 maintained by the assessee with SBI, Fort Road, Mangalore. In Assessment Year 2016- 17, the cash deposits were made during the months January to March, 2016, totaling Rs.18,70,000/-. The assessee explained the source of cash deposited in the bank account was earlier withdrawal of cash from the very same bank account to the tune of Rs.12,75,000/- and this explanation was accepted by the AO. With regard to the remaining sum of Rs.5,95,000/- assessee relied on the circumstances that she had income of Rs.5,58,511/- as per the return of income filed and that the source of income declared was from tuition and tailoring classes. The AO added a sum of Rs.4 lakhs accepting in part the explanation of the assessee, observing as follows:

1.

“4.2 It was further submitted that the income returned by the assessee may also be considered. As per the return of income, the assessee had shown the gross receipt of Rs. 8,98,650/- from tuition and tailoring and had estimated the net income @ 62.15% at Rs. 5,58,511/- and paid tax on the same. The assessee had obviously not maintained any books of accounts. Therefore, the monthly net income amounts roughly to Rs. 47,250/-. Even after assuming very liberally that about four month's net income was available with the assessee, there exists shortage of source to the tune of about Rs. 4,00,000/-. 4.3 The assessee was again opportunity to explain the source for the unexplained amount of Rs. 4,00,000/-. It was submitted that past years savings may also be available for the same. However, this explanation is not acceptable. No evidence is produced to prove that past years savings are kept as cash. In fact, while calculating the unexplained portion, four month's average income has already been given credit to without considering the personal expenditures or other outflows. Therefore, after considering the facts of the case, the assessment is completed as here under by making the additions of Rs. 4 lakhs, as the unexplained investment u/s. 69, to the total income returned u/s. 153C: - Total assessed income (5,58,510 + 4,00,000) = Rs. 9,58,510/-”

3.

In Assessment Year 2018-19, the assessee had deposited cash in the very same bank account a sum of Rs.3 lakhs on 04.08.2017. The source of funds was explained by the assessee as cash withdrawal from the same bank account earlier to the deposits. The AO, however, observed that there was no cash withdrawal during the previous year up to the date of cash deposit. The other explanation with regard to the income from tuition and tailoring was partly accepted by the AO and the AO made the addition of Rs.1,50,000/- observing as follows:

“9.As per the return of income, the assessee had shown the gross receipt of Rs. 9,75,050/- from tuition and tailoring and had estimated the net income ai Rs. 4,45,111/- and paid tax on the same. The assessee had obviously not maintained any books of accounts. Therefore, the monthly net income amounts roughly to Rs. 37,090/-. Even after assuming very liberally that about four month's net income was available with the assessee, there exists shortage of source to the tune of about Rs. 1,50,000/-.

10.

The assessee was again given an opportunity to explain the source for the unexplained amount of Rs. 1,50,000/-. It was submitted that past years savings may also be available for the same. However, this explanation is not acceptable. No evidence is produced to prove that past years savings are kept as cash. In fact, while calculating the unexplained portion, four month's average income has already been given credit to without considering the personal expenditures or other outflows. Therefore, after considering the facts of the case, the assessment is completed as here under by making the additions of Rs. 1.50 lakhs, as the unexplained investment u/s. 69, to the total income:- Total assessed income (4,45,111 + 1,50,000) = Rs. 5,95,111/-.”

4.

On appeal by the assessee, the CIT(A) confirmed the additions made in both Assessment Years. The learned Counsel for the assessee submitted that the source of income in the form of conducting tuition classes and tailoring ought to have been accepted. In so far as Assessment Year 2018- 19 is concerned, the learned Counsel for the assessee pointed out that earlier to the previous year relevant to Assessment Year 2018-19, the assessee had withdrawn cash from the bank account and the availability of such cash withdrawals ought to have been considered by the Revenue authorities.

5.

I have considered the rival submissions. In so far as the income derived from imparting tuition and tailoring is concerned, admittedly no evidence whatsoever has been filed by the assessee regarding availability of the said income for cash deposits and therefore the said plea raised by the assessee cannot be accepted. In so far as Assessment Year 2018-19 is concerned, there have been withdrawals from the very same bank account during the previous year relevant to Assessment Year 2017-18 and the availability of those withdrawals as source for cash deposits made in the previous year relevant to Assessment Year 2018-19 ought to have been considered by the Revenue authorities, if it has not been explained as a source for any other purpose. It is clear from the order of the AO that he has considered withdrawals only in the previous year relevant to Assessment Year 2018-19. I, therefore, deem it proper for consideration afresh after affording the assessee opportunity of being heard. Accordingly, the appeal of the assessee for Assessment Year 2016-17 in is dismissed while for Assessment Year 2018-19 in is treated as partly allowed for statistical purposes.

6.

In the result, appeals in is dismissed and is treated as allowed for statistical purposes.

Pronounced in the open court on the date mentioned on the caption page.

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