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Income Tax Appellate Tribunal, “SMC - C” BENCH : BANGALORE
Before: SHRI N. V. VASUDEVAN
O R D E R This is an appeal by the assessee against the order dated 20.06.2022 of NFAC, Delhi, relating to Assessment Year 2017-18.
The assessee is an individual. He filed the return of income for Assessment Year 2017-18 declaring a total income of Rs.10,07,080/-. The assessee mainly derives rental income from properties and is a partner in Thirumala Traders from where he gets remuneration and interest on capital. The assessee had deposited cash totaling Rs.12,95,000/- in bank account as per the following details:
Bank Account No Total Cash deposited during the year 201617 0411101047969 Rs.1,25,000 Canara bank Canara bank 0411101062377 Rs.11,70,000 3. The AO called upon the assessee to explain the source of funds out of which the cash deposits were made in the bank account. The assessee submitted before the AO that he derives rental income from 3 properties. Out of the 3 properties, one property is jointly held by him along with Mr. C. H. Patil. The assessee submitted that the rental income and lease deposits from the property jointly held with Mr. C. H. Patil was deposited in Canara Bank account No.0411101062377 and the cash deposit so made was a sum of Rs.11,70,000/-. The assessee submitted that 50% of the aforesaid sum deposited in the bank account was assessee’s share. The Assessee submitted that in so far as his share of approx.Rs.6 lakhs of the cash deposit in joint account is concerned, it can be explained out of cash received from rental receipts from the property jointly owned with C.H.Patil and other properties. The Assessee clearly mentioned that the remaining sum was deposited by the other joint account holder Mr. C. H. Patil. The Assessee also submitted that all the rentals have been offered to tax under the head “Income from House Properties”.
The AO called upon the assessee to furnish copies of rental agreements in respect of the properties let out during the previous year and also confirmation for cash deposited with source. In reply dated 29.08.2019, assessee submitted that some rental agreements were only oral and the written agreements were not readily available. Assessee however filed confirmations from the tenants for having paid rents in cash. PAN of one of the persons who filed confirmation did not tally. The assessee also filed confirmation of cash deposited by C. H. Patil, the co-owner of the property.
The AO, however, held that the assessee failed to furnish evidence of joint ownership of the property and rental agreements. The AO also noticed that the assessee owned 3 properties and the entire rental income has been declared under the head “Income from House Properties” and there is no evidence of any property being held jointly with C.H.Patil. The AO therefore refused to accept the explanation of the assessee with regard to the source of cash out of cash deposits made in the bank account.
The assessee made specific submissions before the CIT(A) which were as follows: (i)_ Explanations of the Assessee regarding source for deposit of Rs.11,70,000/- in bank account No.0411101062377 is jointly held with Shri.C.H.Patil, who is the co-owner of the immovable property support by the following documentary evidence. SI. Document Shows that: No. Bank account extract of Shows that this bank account is joint (i) account No.0411101062377 account held in the name of the assessee — KR Rajanna and Shri. C.H. Patil which is used to deposit the rental incomes received from the co-owned property on site bearing No.596 & 601, Dr. Rajkumar Road, Prakash Nagar, Bengaluru 560010.
Absolute sale deed dated, Shows that the site was purchased jointly (ii). with Shri. C.H. Patil on which the 14/08/2002 in respect of construction was made subsequently and purchase of vacant site presently it is rented out — reference is Nos.596 & 601, Dr. invited to return of income/computation Rajkumar Road, Prakash of total income wherein the rental Nagar, Bengaluru 560010. income is declared to tax.
Shows that the immovable property under Rental agreement dated, (i). 01/08/2008 entered jointly reference is jointly owned and jointly by the assessee (KR rented out. Rajanna) and Shri.C.H. Patil, the co-owner of the property with 50% share in respect of the abovesaid immovable property at No.596 & 601, Dr. Rajkumar Road.Prakash Nagar, Bengaluru 560010 Property tax paid receipt in Shows that the said property is jointly (iv). respect of the above-said owned property for the FY 2018-19 — property tax of Rs.1,23,513/- is paid.
Confirmation letter from The confirmation letter mentions the (ii). Shri. C.H. Patil dated, PAN number — ABDPR5933K and 05/07/2019 confirms: Joint ownership of the property under reference. Joint bank account bearing No. 0411101062377 in Canara Bank, Rajajinagar, 3rd Block, Bengaluru 560010, which is used to transact all incomes and expenses related to the jointly-held property. That the entire rental income is deposited into the bank account i.e., including the share of the assessee and share of the co-owner, Shri. C.H. Patil.
(ii) Explanation of the Assessee with regard to deposit of Rs.1,25,000 in the bank account No.0411101047969 supported by the following documentary evidence.
SI. Shows that: Document No . Confirmation letter dated, Since the PAN was mentioned (i). 04/12/2019 from Shri. Incorrectly mentioned by Mohammed Yusuf Ali Delvi inadvertence,a fresh wherein the PAN was confirmation letter mentioning incorrectly mentioned as PAN is filed alongwith a ADBPM6301N. acknowledgment of return of income. Confirmation from Shri. K. In confirmation of rent of (ii) Rangaswamy, tenant. Rs.2,16,000/- received for the year.
Confirmation from Shri. C.S. In confirmation of rent of (iii) Rathod and Rental agreement Rs.2,16,000/- dated, 01/10/2008 with received for the Chandra Singh Rathod. year. The rentalagreement originally entered on the said date and the property continues to be rented out to the said person. Lease agreement dated, In confirmation of the tower (iv) 30/03/2005 with M/s. Bharti rent. Cellular Limited.
It was submitted that the assessee has deposited the rental incomes into the bank accounts and the incomes are declared in the return of income filed. It was also submitted that certain documents were not produced before the AO since the time allowed to was very short and the AO has not specified the documents.
The assessee also filed an application for permission to file additional evidence regarding joint ownership of property with Mr. C. H. Patil. The CIT(A), however, upheld the order of the AO observing as follows: “6.1 I have considered the grounds of appeal, statement of facts, the content of assessment order and the written submission filed by the appellant. 6.2 As per details available on record, the assessee made cash deposits totalling Rs.11,70,000/- in his bank account a/c no.0411101062377 and Rs.1,25,000/- in a/c No. 0411101047969 maintained with Canara Bank. During the assessment proceedings as well as appellate proceedings the assessee submitted that he had rental income from 3 properties and the cash deposited in his bank account was out of his saving of rental income received in cash. On perusal of details of deposits, it is found that Rs. 10,00,000/- were deposited in cash on 01/08/2016 and 02/08/2016. The deposit of aforesaid huge cash on two consecutive days is abnormal and does not appear to be from regular rental income. I have perused the computation filed with return of income in case of Mr. Patil C.H. uploaded by the appellant. The gross rental income shown by him during the AY 2017-18 is found at Rs. 3,83,930/-. Therefore, the claim of the assessee that approximately Rs. 6 lakhs cash was deposited by Mr. Patil C.H. in the joint account is not found to be correct on perusal of his return for AY 2017-18 as Shri Patil C.H. has shown total income of Rs. 2,77,740/- only in his return for AY 2017-18. The assessee has claimed to have filed various evidences related to joint property but these documents are not found uploaded. Moreover, no cash flow statement giving entire expenses and investment and personal drawings has been filed by the assessee to prove that any cash was available out of rental income received in cash. In view of above, I do not have any material to interfere with the findings of the AO and addition of Rs. 12,95,000/-.”
8. Aggrieved by the order of the FAA, assessee has preferred the present appeal before the Tribunal. I have considered the rival submissions and other material on record including the evidence of joint ownership of property held by the assessee along with C.H.Patil. The assessee is a senior citizen aged about 71 years and gets only rental income, remuneration from firm and interest income which is declared in the return of income. The assessee has cash withdrawals from bank on different dates and the same has been deposited back to the bank. In the proceedings before the CIT (A), he had issued notice dated 17/01/2022 and in reply the assessee filed written submission on 01/02/2022. In the written submission so filed vide Paragraph-13, the assessee specifically reserved right to produce any other evidence, clarification or the explanation, that may be required by the CIT(A). The CIT (A) issued one more notice dated 08/03/2022 to submit the written submission. The assessee submitted that the reply already filed on 1.2.22 may be treated as reply to the notice dated 8.3.2022. In paragraph 6.2, the CIT(A) has mentioned that the assessee has not filed any evidence related to joint property and also no cash flow statement giving entire expenses and investment and personal drawings has been filed by the assesse.
9. In the written submission filed by the assessee on 01/02/2022 before the CIT (A) in page 4 para 4 the details which I have mentioned in the earlier part of this order have been given. There was clear evidence to suggest that the bank account No. 0411101062377 was a joint bank account with C. H. Patil and that one of the items of immovable property was jointly held by the assessee and C. H. Patil. Absolute Sale deed dated 14/08/2002 in respect of Purchase of property No.596 & 601, present Municipal number 596/601-47, Dr. Rajkumar Road, Prakashnagar, Rajajinagar III Stage, Bangalore was also filed before the CIT(A). Therefore the conclusion of the CIT (A) that the assessee failed to show that property was owned jointly and that there was no joint account is incorrect in the light of the evidence in the form of Sale deed where assessee along with C. H. Patil has purchased the property, BBMP Tax paid receipt and Joint Bank account held by assessee and C. H. Patil at Canara Bank vide A/c.No.0411101062377 pass book where the assessee has withdrawn cash of Rs.7,60,000/- on different dates prior to deposit of cash into the very same bank account. 10. The assessee is bound to explain source of cash only to the extent of 50% of Rs.11,70,000 deposit in the joint bank account with Mr.C.H.Patil in view of C.H.Patil owning 50% of cash deposits in the bank account coupled with the fact that source of cash deposited in joint bank account cannot be explained by one of the joint account holder alone. The assessee along with C.H.Patil made total deposits Rs.12,95,000/- in two bank accounts, on different dates which are as follows:
28/07/2016 Rs. 1,00,000
01/08/2016 Rs. 5,00,000
02/08/2016 Rs. 5,00,000 Rs.11,00,000 The assessee’s share of source of cash deposited comes to Rs.5,50,000/- up to August 2016.
The dates on cash withdrawn on following dates are as follows: 26/04/2016 -Rs.1,00,000-00 14/06/2016 -Rs.3,00,000-00 17/06/2016 -Rs. 60,000-00 20/06/2017 -Rs. 50,000-00 The total cash withdrawals up to the date of deposit comes to 5,10,000/- and 50% share of the assessee will be Rs.2,55,000/-.
Besides the above, the assessee derives rental income. The summary of rent income and cash withdrawals of the assessee is as follows: Cash withdrawals- 50% share Rs.2,55,000 Rent Rs.2,70,000/-50% share(Up to Aug) Rs.1,35,000 Appellant Other Rent-up to Aug Rent) Rs.2,16,000 Rs.6,06,000 Further assessee along with co-owner C.H.Patil has deposited an amount 70,000/- on two different dates that is as follows: 24/11/2016 Rs.45,000 30/11/2016 Rs.25,000 Rs.70,000 Assessee along with the Co-owner has withdrawn a further sum of Rs.2,84,000/- on different dates they are as follows:
20/10/2016 Rs.2,50,000 11/11/2016 Rs. 11,000 19/11/2016 Rs. 24,000 Rs.2,84,000 The assessee’s share comes to 1,42,000/- and the cash deposited by the assessee is only Rs.35,000/-. The reason for depositing cash into the bank account both by the assessee and the Co-owner was to repay the mortgage amount of Rs.10,00,000/- to one of the tenant H.K.Krishnappa at the time of vacating the tenanted premises which was in second floor of the joint property. Payment is made to the tenant through Canara Bank A/c Join: account on 06/08/2016. Even on the mortgage property, the assessee has declared notional rent in the return of income.
The CIT(A) vide para 6.2 has perused the return of income of Co- owner Sri.C.H.Patil and the Co-owner has declared a rental income of Rs.3,83,930/- in his return of income which is 50% of the total rents of Rs.7,48,000/- received from the joint property. The AO considered the entire cash deposit of Rs.12,95,000/- exclusively by the assessee which is factually and legally incorrect as the bank account held is both in the name of the assessee and C.H.Patil the co-owner. In the light of the aforesaid discussion, I am satisfied that the assessee has satisfactorily explained the source of cash deposit which is mainly through rental incomes and withdrawals of cash from the bank and the same was deposited into the bank AO assessing U/s.69 is wrong as unexplained money. The addition made is therefore liable to be deleted and is hereby deleted.
In the result, appeal of the assessee is allowed.
Pronounced in the open court on the date mentioned on the caption page.