MADHAVAN SURAM,NELLORE vs. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, NELLORE

Aggrieved by the order dated 08/06/2023 passed by the learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Madhavan Suram (“the assessee”) for the assessment year 2017-18, assessee preferred this appeal.

Brief facts of the case are that assessee is aged about 73 years and he retired as Cashier from State Bank of India (SBI) on 31/03/2001. At the time of retirement, assessee got retirement benefit of Rs. 18,00,000/-. He accumulated his savings by giving as hand loans to his friends and relatives. Besides pension from SBI and rents from house property, he is getting interest on his savings from banks and from his friends. During the previous year 2016-17 on receipt of the information with respect to cash deposits of Rs.18,00,000/- in SB account of Nellore Co-operative Urban Bank Ltd, learned Assessing Officer took up the proceedings. Learned Assessing Officer recorded the statement of the assessee on 27/06/2019 and a sworn statement was recorded. The assessee being retired employee and senior citizen of 73 years, he took time to collect the details of cash deposits. Subsequently, the assessee appeared on 17/07/2019 and final sworn statement was recorded.

The assessee had explained the sources of cash deposits for Rs. 18,00,000/-, in the sworn statement. Assessee explained that he has accumulated savings of earlier years and is not able to recollect the correct person to whom he has given and recovered in the past. Learned Assessing Officer accepted the explanation of the assessee for the deposit of Rs. 14.00 lakhs, but added a sum of Rs. 4 lakhs as ‘income from other source’, by stating that the assessee could not explain the sources for cash deposits Rs. 4,00,000/- and also not produced any documentary evidence for the same. Learned Assessing Officer, however, applied the provisions of sec 115BBE of the Act.

Aggrieved by such an action of the learned Assessing Officer, assessee preferred appeal before the learned CIT(A). Learned CIT(A) did not believe the version of the assessee that since the assessee happens to be a senior citizen of 73 years of age as on the date of his examination by the learned Assessing Officer, he could not recollect readily the person from whom he received the amount of Rs. 4 lakhs, but subsequently, having recollected the same, he obtained the confirmation letter from the borrower. Learned CIT(A) observed that except this particular transaction, the assessee remembered every other thing and, therefore, it is unlikely that the assessee could have forgotten this. Further, for want of a formal application under Rule 46A of the Income Tax Rules, 1962 (Rules), learned CIT(A) refused to receive the affidavit of the debtor. According to the learned CIT(A), this version of the assessee cannot be believed. He accordingly confirmed the addition and application of section 115BBE of the Act.

Assessee therefore, filed this appeal contending that the findings of the authorities below are contrary to the material available on record and without apprising the submissions made by the assessee in their proper perspective. Learned AR adverted to the bank account statement of the assessee to submit that the entry dated 15/02/2014, evidencing withdrawal of Rs. 5 lakhs support the contention of the assessee that such withdrawal was lent to one of his friends by name Mr. Varanasi Naga Raju, who paid it back to the assessee on 15/04/2016 and reflected in the bank statement. Nextly, he submitted that in the sworn statement the assessee did not state that Rs. 4 lakhs was his unaccounted money, but he does not remember the details of the deposit because of his advance age and lapse of time between the deposit and this examination. He drew my attention to question Nos. 7, 8 and 9 of the sworn statement and submitted that the assessee never stated that the amount was his other income, but he only stated that since they were not maintaining documentary evidence for their personal savings, he was unable to recollect from whom such amount was collected and, therefore, to buy peace, he was ready to surrender Rs. 4 lakhs. Since subsequently, he could trace out the person, who paid him back the money, obtained confirmation from him and now prays that the addition may be deleted. Learned AR submits that the sworn statement may be taken or rejected in its entirety, but cannot be relied upon partly to suit the case of the Revenue. He, therefore, prays that the assessee cannot be penalised for his poor memory in not recollecting the details relating to Rs. 4 lakhs at his advanced age 73 years, and since he produced the evidence explaining the balance amount of Rs. 4 lakhs also, the same may be deleted.

Learned DR submitted that the learned CIT(A) is justified in rejecting the confirmation affidavit of the person who paid the assessee Rs. 4 lakhs on 15/04/2016 filed by the assessee at a belated stage since it is only an afterthought. Learned DR submitted that when the assessee remembered every other detail, it is difficult to believe that he could not recollect the details of only this Rs. 4 lakhs. He, therefore, prayed to dismiss the appeal.

I have gone through the record in the light of the submissions made on either side. Facts not in dispute are that the authorities below found five deposits in the joint account of the assessee and his wife on 11/04/2016, 16/04/2016, 22/04/2016, 03/06/2016 and 05/10/2016 of sums of Rs. 3 lakhs, Rs. 4 lakhs, Rs. 3 lakhs, Rs. 3 lakhs and Rs. 5 lakhs respectively. Out of these five sums, after examination of the assessee and considering his explanation, learned Assessing Officer satisfied in respect of four amounts and he entertained a doubt only in respect of Rs. 4 lakhs deposited on 16/04/2016. Precisely, this amount is the subject matter of the present appeal.

A perusal of this sworn statement of the assessee vide answers to questions 7, 8 and 9 clearly show that while explaining the deposits, assessee stated that the deposit of Rs. 4 lakhs on 16/04/2016 was out of personal savings of the last one year of the assessee. Assessee nowhere stated in his statement that such an amount was income from other source, but since he was unable to recollect the details, he would offer it as income from other source.

Subsequently, the assessee who traced out the details of the person from whom he received such amount and he also filed the affidavit of such person swearing to such a fact. He also filed the supporting evidence in the form of the bank withdrawal entry dated 15/02/2014 and explains that he lent this amount to one of his friends and received it in the relevant year. As a matter of fact, I do not find it to be something unusual. Answer to question No. 7 of his statement clearly shows that on the plea of inability to recollect the details relating to all the deposits, the assessee sought some time. In his statement, he stated that he is aged 73 years and his wife 68 years and both have pension apart from receiving house property income in cash and some money from their daughter residing in USA. He explained all the deposits to the tune of Rs. 14 lakhs, out of Rs. 18 lakhs and in respect of such Rs. 4 lakhs, he stated that it is out of his personal income, but details could not recollect.

In all fairness, at that stage, he offered the same to tax since he was not recollecting the details. I doubt very much whether such an offer would be irrevocable even after the assessee traces out the source of such deposit and the evidence supporting the same. The act of refusing to look into the evidence produced by the assessee, who has never been found to be a tax evader, on the ground that it is an afterthought is nothing but an act of prejudice. Such evidence should have been examined and if any doubt arises on such examination, then the alternative view could have been taken by the authorities below.

It is pertinent to note that the assessee was aged about 73 years and his wife was 68 years of age. It would be difficult to believe that at such age, the pensioners will have another source of income. Moreover, this deposit of Rs. 4 Lakhs is long prior to the demonetization of Specified Bank Notes. It rules out the possibility of assessee depositing some other’s money in his account. Human memory at that age is not infallible, and while appreciating the facts and circumstances, regard must be had to this fact. Lest, it would amount to penalizing the fading of memory at old age. This is not the purpose of law.

Entry dated 15/02/2014 in the bank passbook, evidencing withdrawal of Rs. 5 lakhs coupled with the plea of the assessee that such an amount was lent to earn interest, and well corroborated by the affidavit of the debtor does not look like a concocted story. Having regard to the common course of natural events, human conduct and public and private business, in their relation to the facts of this case, I do not find anything unusual in the plea taken by the assessee.

Learned DR pleaded that verification of this bank passbook entry and the affidavit may be restored to the file of the learned Assessing Officer. Such an opportunity was available to the authorities below when the assessee came forward with the documents, but now if I restore it to the file of the learned Assessing Officer, I am afraid it will cause hardship to a senior citizen of about 80 years of age by now. It does not look reasonable to me, keeping in view the smallness of the amount. Hence, I examine these entries and am satisfied with the genuineness of the plea taken by the assessee. Hence, I direct the learned Assessing Officer to delete this addition, in view of the plea that the total income of the assessee is less than the threshold limit. Grounds are accordingly allowed.

In the result, appeal of the assessee is allowed.