ESWARAWAKA SUDHAKAR REDDY,TIRUPATI vs. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1), TIRUPATI

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.25.08.2023 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”).

“1. The Learned First Appellate Authority is not justified in deciding the appeal without affording the appropriate and fair opportunity to the appellant.

2. The Learned First Appellate Authority, is not justified in confirming the addition of Rs.18,05,200/- as unexplained cash credit u/s.69A made by the Ld. Assessing Officer.

3. The Learned First Appellate Authority, is not justified in confirming the action of the Ld. Assessing Officer in making the addition of Rs.18,05,200/- u/s.69A of the I.TAct and bringing the same to tax u/s.115BBE of the I.T. Act. 4. The Learned First Appellate Authority is not justified not considering the evidences submitted by the appellant for sources to explain the deposits in the bank accounts. 5. The Learned First Appellate Authority is not justified not considering the fact that the appellant had sources to explain the deposits in the bank accounts.”

3.1. After examining the details and submissions furnished by the assessee, Assessing Officer observed that assessee has made cash deposits of Rs.18,05,200/- on various dates throughout the financial year 2016-17 starting from 11.04.2016 through 28.03.2017 into his bank accounts and that the same are not properly explained by the assessee. Assessing Officer further noticed that the assessee has filed his return of income for AY 2016-17 after the demonetization period. Finally, Assessing Officer opined that the cash deposited in bank accounts of the assessee stands unexplained. Therefore, Assessing Officer held that the amount of cash deposits by the assessee are from undisclosed sources. Accordingly, the Assessing Officer added the entire amount of Rs.18,05,200/- to the total income of the assessee and brought to tax as “Unexplained Money” u/s 69A r.w.s. 115BBE of the Income Tax Act,1961 and thus, completed the assessment u/s 143(3) dt.24.11.2019.

Addition of Rs.10 lakhs :

With respect to cash gift from wife Dr.J. Radha of Rs.10 lakhs is concerned, ld.CIT(A) in page 7 of his order has decided as under :

“1. Cash gift from wife Dr. J. Radha of Rs.10.00 lakhs: During the appellate proceedings, appellant mentioned that appellant wife Dr. J Radha is a qualified doctor employed in SV Medical College, Tirupati working as professor in anesthesia department having 25 years of experience in that department. Further, appellant mentioned that her wife is also a partner in M/s Appollo multi speciality hospital, from the partnership firm also she is deriving an income. Appellant has submitted the ITR of his wife & confirmation letter from his wife and mentioned that he has taken gift of amount of Rs.10 lakh to meet his financial commitment of repayment of bank loan. Further, Appellant mentioned that the cash deposits are made shortly before issuing the cheques. On perusal of ITR of assessee, it is seen that Dr. J Radha has shown gross total income of Rs.2296219/- which include income under salary of Rs.18,46,670 and PGBP income of Rs.478213/-. Hence, the Dr. J Radha, wife of appellant has the capacity to gift Rs.10 Lakhs. However, assessee has not been able to prove the genuineness of receipt of gift of Rs.10 Lakhs. The primary onus is on the assessee to prove that the cash deposits made did not bear the character of income. Further, no gift deed has been submitted by the appellant in this regard. In this connection, assessee has not submitted the bank statement of him & his wife to substantiate the genuineness of cash available with his wife. On the basis of submission and explanation given by appellant, it can not be ascertained whether appellant has received the cash of Rs.10 lakh from his wife during the year under consideration. As the primary onus of the same lies with assessee and the assessee has not submitted the documentary evidence to substantiate the receipt of gift of cash deposit, I find that the AO is justified in disallowing the alleged cash deposit of Rs.10 lakh.”

9.1. In this regard, the assessee has submitted that the wife of the assessee was an income-tax assessee and was working as Professor in Anesthesia Department of S.V. Medical College, Tirupati and was drawing a salary from there and besides that she was also a partner in M/s. Apollo Multispecialty Hospital. The ld.CIT(A) has disallowed the cash gift received by the assessee from his wife on the pretext that the onus is on the assessee to prove that the cash deposit did not bear the character of income. In my view, by filing confirmation from his wife and also the return of income showing the gross total income of Rs.22,96,219/- during the assessment year under consideration, assessee discharged his onus. In the said confirmation, the wife of the assessee had submitted that Rs.10 lakhs were given by her to her husband as gift. In my opinion, the wife of the assessee falls within the exempt category of ‘relative’ as mentioned under section 56(2)(vii) of the Act and even otherwise, once the wife admits to have given the cash of Rs.10 lakhs to her husband, the Revenue cannot object to the said gift. As the Revenue cannot disbelieve the confirmation given by the wife and moreover, the Revenue had accepted the return of income filed by the wife of the assessee showing Rs.10 lakhs as cash gift to her husband. In view of the above, the addition of Rs.10 lakhs is deleted.

“2. Cash gift from father Rs. 2.40 lakhs: The appellant claimed to have received a cash gift of Rs. 2.40 lakh from his late father as an act of love and affection. However, the appellant failed to provide substantial evidence to authenticate the genuineness of the cash gift. Despite the appellant's self- declaration, there is a lack of documentation such as a gift deed to support the claim. The burden of proof rests on the appellant to establish that the cash deposits are not of an income nature. The appellant's submission doesn't conclusively establish the receipt of the Rs. 2.40 lakh cash gift from his father during the relevant year. Given the absence of concrete documentary evidence and the primary responsibility of proof on the appellant, the disallowance of the claimed cash gift by the Assessing Officer appears reasonable. Accordingly, I find that the AO is justified in disallowing the alleged cash gift of Rs.2.40 lakh from his father.”

10.1. In this regard, ld. AR has submitted that the father of the assessee is an agriculturist and was having an agricultural land of Ac.3.79 gts on which he used to cultivate paddy, sugarcane etc and the father of the assessee had given the amount of Rs.2,40,000/- out of love and affection and he further submitted that his father expired recently. I have examined the order passed by the ld.CIT(A) as well as the submissions of the assessee. In the case of the father, admittedly, no return of income has been shown whereby the father of the assessee had shown to given Rs.2,40,000/- as cash gift to the assessee. In the absence of any return of income or any other document to prove the cash gift, it cannot be assumed that the father of the assessee has given Rs.2,40,000/- as gift to the assessee. There is no evidence to show that the father of the 7 assessee had given Rs.2.40 lakhs as a gift to the assessee. The plea of the assessee is self-serving and is not tenable.

10.2. Further, during the course of hearing, though the bench has directed to restrict the addition to Rs.99,000/- being the amount deposited in the prescribed specified bank notes, however, while finalizing the order, the facts of non-filing of return of income and expiry of father of the assessee were noticed however, the said facts were not been brought to my notice previously, and therefore, in the light of the above, I uphold the addition of Rs.2,41,000/- made by the Assessing Officer.

“3. Appellant mentioned that appellant and his wife are only the partners in firm M/s Apollo multi specialty hospital and the appellant had withdrawn money from the firm to meet his commitment. In this connection, appellant has submitted confirmation letter from the firm. However, appellant has not submitted any supporting document to substantiate the withdrawal of Rs.5 lakh from the firm. Further, appellant has submitted that he has deposited Rs.65,200/- from the cash balance in hand for emergencies and contingences. As the primary onus of the same lies with assessee and the assessee has not submitted the documentary evidence to substantiate the receipt of cash deposit, I find that the AO is justified in disallowing the alleged cash withdrawals.”

11.1. In this regard, ld. AR has submitted that the assessee and his wife are only the partners in the aforesaid partnership firm and that assessee had withdrawn money from the firm to meet his commitment and that Assessing Officer and did raise any objection while assessment or in the assessment order about this, however, he simply added the amount to the returned income.

11.2 I have heard the rival contentions and perused the material on record. The Assessing Officer and ld.CIT(A) had not disputed the fact that amount of Rs.5 lakhs were withdrawn by the assessee from the bank account of M/s. Apollo Multispecialty Hospital, (where he was the partner), and thereafter, assessee had deposited the said amount in his account. Even the firm had issued confirmation letter confirming the withdrawing of amount towards the partner account. I find that along with confirmation letter given by the firm, assessee has also shown the financials of the firm wherein the capital account of the firm was debited by Rs.5 lakhs. In view of the explanation given by the assessee, objection raised by the Assessing Officer and ld.CIT(A) in this regard are duly answered, so assessee had proved identity, creditworthiness and source of cash deposit. In view of the above, I do not find any reason to sustain the order passed by the Assessing Officer and ld.CIT(A) and accordingly, the addition of Rs.5 lakhs is deleted.

11.3. Ld. AR further submitted that assessee being an employee used to keep some cash balance in hand for emergencies and contingencies and that deposit of Rs.65,200/- was very small amount when compared to his gross salary income of Rs.17.27 9 lakhs during the year 2016-17 apart from other sources of income admitted in his return of income for A.Y. 2017-18. Ld. AR further submitted that due to work pressure, assessee filed return of income belatedly.

11.4 With respect to the amount of Rs.65,200/-, the opening balance which was disallowed by the Assessing Officer and confirmed by the ld.CIT(A), no documentary evidence was shown by the assessee showing that the amount was available with the assessee. Hence, I do not find any reason to acknowledge the submission of the assessee and accordingly, I uphold the addition of Rs.65,200/-.

Order pronounced in the Open Court on 15th November, 2023.