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Income Tax Appellate Tribunal, HYDERABAD BENCHES “SMC”, HYDERABAD
Before: SHRI LALIET KUMAR
O R D E R PER LALIET KUMAR, J.M. The appeal of the assessee for A.Y. 2017-18 arises from the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.03.10.2023 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”).
2. The grounds raised by the assessee reads as under :
“1. The order of the ld.CIT(A) is against the law, weight of evidence and probabilities of case.
2. The ld.CIT(A) erred in confirming the addition of Rs.25,97,884/- u/s 69A of the IT Act.
3. The ld.CIT(A) ought to have appreciated that the assessee explained the transactions by filing the cash book and also source of deposit from the earlier withdrawals, therefore, erred in confirming the addition of Rs.25,97,884/-.
4. The ld.CIT(A) ought to have appreciated that the assessee also deposited cash from the earlier withdrawals prior to demonetization period, in respect of which the learned Assessing Officer accepted the transaction, as there is no difference for the source of deposits prior to demonetization and during demonetization, therefore, erred in confirming the additions in respect of deposits during demonetization period.
5. The ld.CIT(A) ought to have appreciated that the Assessing Officer has not brought on record any material to support that the cash withdrawn is utilized by the assessee for any purpose, therefore, erred in confirming the addition of Rs.25,97,884/- u/s 69A of the IT Act.”
Facts of the case, in brief, are that the assessee is an individual, deriving income from house property and other sources, filed his return of income on 08/07/2017 declaring total income of Rs.5,82,530/-. The case was selected for scrutiny for large value of cash deposited during demonetization period and assessee has deposited substantial cash during demonetization period as compared to returned income. Notice is 143(2) was issued and served on assessee. Notices u/s 142(1) of the I.T.Act were issued on 10/07/2019. Thereafter, notice u/s 142(1) of IT Act was issued on 13/08/2019 calling for certain information. In response, the assessee has made his submissions.
3.1. On perusal of the submissions and in order to obtain clarity in respect of the cash payments made against the loan during the demonetization period, a show cause letter dated 18.11.2019 was issued to the assessee, requesting to furnish the explanation to the proposed addition in respect of cash deposits made during the demonetization period. In response, the assessee reiterated the earlier submission dated 21.08.2019 and further stated that the assessee was having certain agricultural lands at Kadtal, Mahbubnagar where a poultry farm was being managed in the earlier years, which later abandoned and he has taken loans only to revive the poultry farm.
3.2. Again, a notice u/s 142(1) of IT Act on 17.12.2019 was issued to the assessee calling for bank statements of account no.1849101003579 and Andhra bank account statement bearing account no.054810025100079 and further assessee was asked to furnish the cash flow statement along with date-wise transaction for the year under consideration by fixing the case on 23.12.2019. As there was no response from the assessee, a final show cause notice dated 26.12.2019 was issued asking as to why the loan was repaid in cash during the demonetization of Rs. 22,91,884/- should not be added to return of income and called for objections if any to the proposed addition. There was no response from the assessee.
3.3. On perusal of submissions and bank statements, Assessing Officer observed that assessee was making partial repayment of loans on multiple occasions of different amounts and major payments were made in the month of during demonetization period. However, on perusal of submissions of the assessee, Assessing Officer rejected the submission of assessee that the cash deposits were out of previous withdrawals, and held as incorrect and unacceptable. Hence, the cash deposits made in the following bank accounts were treated as unexplained money and added to the income returned.
Account No. Amount Deposited 1849793000046 Rs.15,29,108/- 1849793000028 Rs. 7,62,776/- 1849101003579 Rs. 3,06,000/- Total Rs.25,97,884/- Accordingly, the Assessing Officer completed the assessment u/s 143(3) of the Act assessing the total income at Rs.31,80,414/- interalia making addition of Rs.25,97,884/- u/s 69A of the Act and initiated penalty proceedings u/s 271AAC separately.
Feeling aggrieved with the order of Assessing Officer, assessee filed an appeal, which was later migrated to the ld.CIT(A), NFAC, Delhi, who confirmed the addition made by the Assessing Officer by holding as under :
“5.2. Now before me in the appellate proceedings, written submission has been filed. It has been stated that cash has been withdrawn by the appellant worth Rs.50,59,000/- out of the proceeds of loan account and interest on deposits for the revival of poultry form. I have gone through the cash book filed by the appellant. The cash withdrawal and cash deposits have not been correlated. The Assessing Officer has held in para-9 of the assessment order that loan to revival the project abandoned earlier and the project was not materialized. It has been further held by the Assessing Officer that loan of Rs.10,00,000/- on 24.10.2016 which was repaid on 15.11.2016 hence the appellant did not explain the source of the cash before the Assessing Officer and before me in the appellate proceedings. Hence the Assessing Officer is correct in making addition u/s.69A of the Income Tax Act of cash deposits worth Rs. 25,97,884/-. Hence the addition of the Assessing Officer is confirmed and the appeal of the appellant is dismissed.”
Before me, ld. AR submitted that during the period from April 2016 to December, 2016, assessee has withdrawn Rs.50,59,000/- from his various bank accounts after utilizing the loan facility from the bank. The assessee thereafter, was contemplating to utilize the funds for renovation and improvement of poultry farm. Because of the non-availability and other technical support, assessee has not utilized the funds for the purpose of carrying out the improvement and renovation of the poultry farm. It is also the case of the assessee that the loan was taken by the assessee on the FDRs deposited with the bank. The assessee had produced the cash flow statement which is available at page 7 of the paper book. It was submitted that the Assessing Officer had made the addition of Rs. 25,97,884/- in the hands of the assessee on the ground that in general a prudent person withdraws the amount if the earlier withdrawn amount was exhausted or utilized and the Assessing Officer rejected the contention of the assessee that cash deposits were made to clear the loan amounts during the demonetization out of the earlier withdrawals. It is the contention of the assessee before us that once the funds were available with the assessee prior to demonetization then the Revenue authorities cannot question the same. He further submitted that onus is on the assessee to prove the source of the cash. For the above said purposes, he relied on the following decisions :
Kavitaben Chintanbhai Patel Vs. ITO (ITAT Ahmedabad).
ACIT, Central Circle-1, Gurugram Vs. M/s. Omaxe Forest SPA and Hills Developers Ltd in dt.18.08.2023. 3. Ajit Bapu Satam Vs. DCIT, Circle – 2(1), Mumbai in ITA No.1599/Mum/2021 dt.29.08.2022. 4. Pawan Meena Vs. ITO in ITA No.410/JPR/2022 dt.17.03.2023.
5.1. ld. AR produced the Cash Book for the period from 01.40.2016 to 31.03.2017 which to the following effect :
T KRISHNA MURTHY CASH BOOK 01.04.2016 TO 31.03.2017 Date Particulars Vch Type Vch Debit Cash Credit / Cash Closing Balance No. Withdrawal / Deposit in Hand Rental Income 01.04.2016 Opening Balance 52500.00 52500.00 10.04.2016 Rental Income Receipt 2 6000.00 58500.00 Rent 12.04.2016 Andhra Bank Contra 1 15000.00 208500.00 05410025100079 Being cash withdrawn 22.04.2016 Canara Bank Contra 2 6000.00 202500.00 1849101003579 03.05.2016 Andhra Bank Contra 3 20000.00 402500.00 05410025100079 Being cash withdrawn 10.05.2016 Rental Income Receipt 7 6000.00 408500.00 Rent 18.05.2016 Canara Bank Contra 4 1500000.00 1908500.00 1849101030462 Being cash withdrawn 04.06.2016 Andhra Bank Contra 5 20000.00 1928500.00 05410025100079 Being cash withdrawn 10.06.2016 Rental Income Receipt 14 6000.00 1934500.00
Rent 18.06.2016 Canara Bank Contra 6 980000.00 2914500.00 1849101003579 Being cash withdrawn 04.07.2016 Canara Bank Contra 7 150000.00 3064500.00 1849101003579 Being cash withdrawn 04.07.2016 Loan Canara Payment 12 15000.00 2914500.00 Bank 1849793000028 Loan repaid 10.07.2016 Rental Income Receipt 18 6000.00 2920500.00 Rent 02.08.2016 Canara Bank Contra 8 20000.00 2900500.00 1849101003579 Being cash deposit 06.08.2016 Andhra Bank Contra 9 206000.00 2694500.00 05410025100079 Being cash deposit 10.08.2016 Rental Income Receipt 23 6000.00 2700500.00 Rent 03.09.2016 Andhra Bank Contra 10 25000.00 2950500.00 05410025100079 Being cash withdrawn 10.09.2016 Rental Income Receipt 29 6000.00 2956500.00 Rent 16.09.2016 Andhra Bank Contra 11 600000.00 3556500.00 05410025100079 Being cash withdrawn 10.10.2016 Rental Income Receipt 32 60000.00 3562500.00 Rent 21.10.2016 Andhra Bank Contra 12 50000.00 3612500.00 05410025100079 Being cash withdrawn 24.10.2016 Canara Bank Contra 13 1000000.00 4612500.00 1849101003579 Being cash withdrawn 04.11.2016 Loan Canara Payment 17 600000.00 4012500.00 Bank 1849793000028 Loan repaid 7 07.11.2016 Loan Canara Payment 18 200000.00 3812500.00 Bank 1849793000028 Loan repaid 10.11.2016 Rental Income Receipt 39 6000.00 3818500.00 Rent 15.11.2016 Loan Canara Payment 19 1006027.00 2812473.00 Bank 1849793000054 Being Loan repaid 18.11.2016 Loan A/c Payment 20 1529108.00 1283365.00 1849793000046 Being loan repaid by cash 19.11.2016 Canara Bank Contra 14 20000.00 1263365.00 1849101003579 Being cash deposit 23.11.2016 Canara Bank Contra 15 20000.00 1283365.00 1849101003579 Being cash withdrawn 24.11.2016 Canara Bank Contra 16 49000.00 1234365.00 1849101030462 Being cash withdrawn 24.11.2016 Canara Bank Contra 17 186000.00 1048365.00 1849101003579 Being cash deposit 24.11.2016 Loan Canara Payment 21 762776.18 285588.82 Bank 1849793000028 Loan repaid 03.12.2016 Canara Bank Contra 18 150000.00 135588.82 1849101030462 Being cash deposited 03.12.2016 Canara Bank Contra 19 50000.00 8588.82 1849101003579 Being cash deposit 03.12.2016 Canara Bank Contra 20 20000.00 10588.82 1849101003579 Being cash withdrawn 09.12.2016 Canara Bank Contra 21 14500.00 91088.82 1849101030462 8
Being cash deposited 09.12.2016 Canara Bank Contra 22 15000.00 106088.82 1849101030462 Being cash withdrawn 10.12.2016 Rental Income Receipt 42 6000.00 112088.82 Rent 19.12.2016 Andhra Bank Contra 23 10000.00 122088.82 05410025100079 Being cash withdrawn 26.12.2016 Canara Bank Contra 24 20000.00 142088.82 1849101030462 Being cash withdrawn 26.12.2016 Canara Bank Contra 25 20000.00 162088.82 1849101003579 Being cash withdrawn 03.01.2017 Canara Bank Contra 26 20000.00 182088.82 1849101030462 Being cash withdrawn 09.01.2017 Andhra Bank Contra 27 24000.00 206088.82 05410025100079 Being cash withdrawn 10.01.2017 Rental Income Receipt 48 6000.00 212088.82 Rent 16.01.2017 Canara Bank Contra 28 20000.00 232088.82 1849101003579 Savings interest 18.01.2017 Canara Bank Contra 29 10000.00 242088.82 1849101030462 Being cash withdrawn 19.01.2017 Andhra Bank Contra 30 24000.00 266088.82 05410025100079 Being cash withdrawn 10.02.2017 Rental Income Contra 53 6000.00 272088.82 Rent 14.02.2017 Canara Bank Contra 31 24000.00 296088.82 1849101030462 Being cash withdrawn 02.03.2017 Canara Bank Contra 32 50000.00 346088.82 1849101030462 9
Being internal transfer 02.03.2017 Canara Bank Contra 33 40000.00 386088.82 1849101003579 Being cash withdrawn 02.03.2017 Andhra Bank Contra 34 24000.00 410088.82 05410025100079 Being cash withdrawn 08.03.2017 Canara Bank Contra 36 50000.00 360088.82 1849101003579 Cash deposit 10.03.2017 Rental Income Receipt 58 6000.00 366088.82 Rent 5365500.00 4999411.18 Closing Balance 366088.82 5365500.00 5365500.00
Opening Balance 52,500 Rent till demonetization 48,000 Cash withdrawn till demonetization 4,920,000 Cash in hand 5,020,500
Per contra, ld. DR had relied upon the orders of lower authorities. It was submitted that the normal conduct of a prudent person is required to be considered. It was submitted that once funds were utilized on 12.04.2016 to an extent of 15 lakhs and thereafter again sum of Rs.15 lakhs was withdrawn on 18.05.2016. Thereafter another sum of Rs.9,80,000/- was withdrawn on 18.06.2016. The above said fact has to be examined from the point of view that on 23.05.2016 the assessee has taken loan from Canara Bank, Kadtal Branch to an extent of Rs.15 lakhs. It was submitted that assessee has taken loan of Rs.15 lakhs on 23.05.2016. It is highly improbable and against the conduct of a prudent person that despite the availability of cash with the assessee, the assessee would had taken loan for Rs.15 lakhs on 23.05.2016. It was submitted that the addition was made in accordance with the law and therefore, the appeal is required to be dismissed.
I have heard the rival submissions and perused the material on record. The assessee has filed the copy of cash book from 01.04.2016 to 31.03.2017 and from cash book, the assessee was able to demonstrate that the assessee has withdrawn more than Rs.49,94,411/- during this period. As against the above said amount, the assessee has deposited in the bank account and the Assessing Officer has added the amount of Rs.25,97,884/- to the income of the assessee treating it as unexplained cash deposits by the assessee. The ld.CIT(A) has not accepted the withdrawal of the assessee made on various occasions and confirmed the order of Assessing Officer. It is evident from record that the assessee has withdrawn the cash on 17.04.2016 to an extent of Rs.15 lakhs, similar amount was also withdrawn by the assessee on 18.05.2016. As per the case of the assessee, the assessee withdrawn the cash on various occasions prior to demonetization for the purpose of renovation / improvement of the poultry form. Since the demonetization has taken place, the amount so withdrawn was available and was deposited back by the assessee. In the present case, the Revenue has not brought on record any contrary evidence showing utilization of cash for any other purposes. The Revenue authorities have not doubted taking a loan despite the availability of the cash during the year under consideration.
The ld. AR relied upon the decision of Mumbai Tribunal in the case of Ajit Bapu Satam Vs. DCIT, Circle – 2(1), dt.29.08.2022 and Kavitaben Chintanbhai Patel Vs. ITO wherein it was held by the Benches of Tribunal that once the assessee was able to demonstrate that he has withdrawn the amount and the Revenue has not brought any evidence that the assessee has utilized the amount available with him for any other purpose, then no additions made were required to be deleted. In my view, the above said judgments are required to be applied. However, in the present case, there is a difference as the assessee despite the availability of cash, taken loan on 23.05.2016. In my view, no prudent person take a fresh loan when the cash was available with him. Besides that the assessee has utilized the part of cash in making deposits and the same is clear from the cash book and other corresponding documents produced before me. Considering the totality of the facts and circumstances and the conduct of the assessee, I am of the opinion that the ends of justice would be met, if I restrict the addition to Rs.10 lakhs and thus delete the remaining amount of Rs.15,97,884/- (Rs.25,97,884 – Rs.10,00,000) made in the hands of the assessee. Thus, the appeal of the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the Open Court on 21st December, 2023.