ANIL KUMAR KHANDELWAL,HALDWANI vs. INCOME TAX OFFICER, WARD 2(1)(1), HALDWANI

We have heard rival submissions and perused the materials available on record. The assessee is an individual senior citizen, aged about 70 years and deriving income from partnership firm M/s. Kay Sons and income from other source in the form of bank interest and other interest. The income earned from the partnership firm is in the form of interest on capital and remuneration from the firm. During the year under consideration, the assessee has deposited a sum of Rs.12,90,000/- during the demonetization period in demonetized currency. Learned AO directed the assessee to give source for the said cash deposit. The assessee explained that AY: 2017-18 he had sold agricultural land on 02.04.2014 (AY: 2015-16) in cash for Rs.10,59,000/- and the said sum was available with the assessee as cash balance which was deposited during the demonetization period. Further a sum of Rs.2,40,000/- was also kept as cash balance by the assessee out of past savings. The learned AO out of personal savings claimed by the assessee in the sum of Rs.2,40,000/- gave credit of Rs.2 lakhs and concluded that it would be highly improbable for a person to hold a cash of Rs.10,59,000/- for a period of 32 months in hand till the time of deposit in the bank account. Accordingly, out of the total deposit of Rs.12,90,000/-, the learned AO after giving credit of Rs.2 lakhs made an addition of Rs.10,90,000/- as unexplained money under section 69A read with section 115BBE of the Act. This action of the AO was upheld by the learned CIT(A).

Before us, the learned DR vehemently argued that why the sale proceeds that were received by the assessee in cash on 02.04.2014 were not deposited by the assessee in the bank account immediately. This raised a great suspicion and also supports the AY: 2017-18 case of learned AO that it is highly improbable for a person to hold the cash for 32 months before it is deposited in the bank account.

Per contra, the learned AR vehemently argued that there is absolutely no finding by the learned AO or by the learned CIT(A) that the agricultural land sale proceeds of Rs.10,59,000/- received in cash were used by the assessee for any other purposes. Hence, the said sum continues to remain as a cash balance in the hands of the assessee. In any case, the assessee, being 70 years old, had to hold substantial cash for the purpose of meeting the medical emergency. We find lot of force in the argument advanced by learned AR. Moreover, it is not for the Revenue to dictate terms to the assessee as to when and at what point of time he should deposit the cash balance in the bank account and that is purely the prerogative of the assessee. We find that learned AO placed reliance on the decision of the Pune Tribunal in the case of Sunanda Sanjay Chandeliya Vs. ITO, dated 02.05.2019 by also placing reliance on the decision of the Hon’ble Kerala High Court in the case of CIT Vs. K. Sreedharan, reported in (1993) 201 AY: 2017-18 ITR 1010. The relevant operative portion of the order in case of Sunanda Sanjay Chandeliya (supra) is reproduced as under:

In the above case, the funds were available with that assessee through the maturity of the fixed deposits and in the instant case the cash balance arose out of the sale proceeds of the agricultural land and held by the assessee for 32 months. It is not in dispute that the assessee had, indeed, received sale proceeds of agricultural land in cash amounting to Rs.10,59,000/-. In fact, this is accepted by the Revenue. The only grievance of the Revenue is that why the said cash has not been deposited in the bank account immediately by the assessee and why it was deposited after a gap of 32 months by the assessee. This fact is already addressed by us hereinabove and moreover by placing reliance on the aforesaid decision of Pune AY: 2017-18 Tribunal (supra), we hold that the assessee had deposited the money only out of cash balance available with him, which clearly explains the source of cash deposit during the demonetization period. Hence, there is no case for making any addition by the learned AO, when the entire cash deposits remained properly explained. Accordingly, the ground raised by the assessee is allowed.

In the result, appeal of the assessee is allowed.