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Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI D. KARUNAKARA RAO, AM
ORDER
PER D. KARUNAKARA RAO, AM :
This appeal is filed by the assessee against the order of CIT(A)-3, Pune dated 28.05.2019 for the Assessment Year 2011-12.
The grounds raised
by the assessee are as under :- “1. LD CIT (A) has not appreciated the fact that proceedings initiated U/s 147/148 are bad in law as they are based on the mere information of cash deposit.
2. LD CIT(A) has not appreciated the fact that Learned AO has failed to substantiate the reason to believe that the assessee has any other source of income or the income has escaped assessment while reopening the case u/s 148.
3. LD CIT(A) and Assessing officer has failed in appreciating the fact that assessee has submitted various supporting to substantiate the source of said cash deposit, rejecting the explanation given by the assessee without verifying the genuineness and giving merit to the supporting produced during -2- the assessment proceedings. Their opinion is merely based on their own discretion.
4. The assessing officer has erred in not giving an opportunity of additional submission requested by the assessee in letter dated 10th December 2018.
5. The Assessee craves to leave, add/ amend or alter any of the above grounds of appeal.”
3. Briefly stated the relevant facts include that the Assessing Officer issued a notice u/s 147 of the Act for reassessing the cash deposits in the bank account of the assessee amounting to Rs.13,57,500/- maintained with the ICICI Bank. In the reassessment proceedings, the Assessing Officer asked for the sources of the same. Taking resort to the exempt agricultural income, personal and family savings, gifts from relatives such as husband, father-in-law, two brothers, mother etc, the assessee attempted to explain the sources of the said cash deposits of Rs.13,57,500/-. Rejecting the above explanations of the assessee, the Assessing Officer restricted the addition to Rs.10,07,500/-. The details of the same are tabulated as under :- Sr.No. Particulars Amount (Rs.) 1 Agricultural Income 2,00,000/- 2 Personal and family savings 2,50,000/- 3 Gifts from relatives such as husband, 9,25,000/- father-in-law, 2 brothers, mother
4. The CIT(A) not only confirmed the addition made by the Assessing Officer, but also after granting due opportunity, the CIT(A) enhanced the assessment and determined the assessed income at Rs.12,07,500/-.
5. Aggrieved with the same, the assessee is in appeal before the Tribunal raising the issues of (i) validity of reassessment proceedings and (ii) the addition of Rs.12,07,500/-.
Before me, at the outset, ld. Counsel for the assessee raised the issue of validity of the notice u/s 148 of the Act. Bringing my attention to pages 21 to 23 of the Paper Book (the reasons for issue of notice u/s 148 of the Act and rebuttals thereof), ld. Counsel submitted that the reassessment is not valid in the absence of any tangible material for forming the opinion regarding the escapement of income. Admitting that this is the case where the return of income never filed u/s 139(1) of the Act, ld. Counsel submitted that mere information regarding cash deposits of Rs.13,57,500/- is not a good enough reason for assuming jurisdiction u/s 148 of the Act. 7. On the other hand, ld. DR for the Revenue replied to this legal argument and submitted that when there is no return of income duly filed by the assessee u/s 139 of the Act more so when cash deposit in assessee’s bank account of this magnitude are reported, Assessing Officer is justified in forming the opinion against the assessee regarding the concealment of income. He further submitted that when the explanation of the assessee regarding the sources of this cash deposit is linked to the exempt income like agricultural income etc, the onus is on the assessee to demonstrate the sources of cash deposits are to be intimated to the Department through filing the return of income. Further, mentioning that the assessee responded by filing the return of income in response to notice u/s 148 of the Act disclosing the income of Rs.28,506/-.
On this legal issue, I heard both the sides and find in the absence of return of income originally filed u/s 139(1) of the Act coupled with huge amounts of cash deposits of Rs.13,57,500/- is good enough to contribute the formation of reason to believe that this is a case of escapement of income. As mentioned in the open Court, I proceed to dismiss the legal ground no.1 and 2 raised by the assessee. Accordingly, the grounds no.1 and 2 are dismissed.
Regarding the issue raised in grounds no.3 and 4, I considered the counsel’s arguments about insufficiency of opportunity granted to the assessee for explaining the details relating to the sources of funds i.e. agricultural income, personal and family savings, gifts from relatives such as husband, father-in-law, two brothers, mother etc. In this regard, I perused the contents of para 6.3 to 6.8 of the order of the CIT(A) and find relevant to extract the same. The same are extracted hereunder :- “6.3. DECISION :- The observations of the AO, submissions of the appellant and the material on record have been considered. 6.4 The case of appellant was re-opened u/s 147 of the Act as the appellant made various cash deposits amounting to Rs.13,57,500/- in account with ICICI Bank during FY 2010-11 and she did not file ITR. The notice u/s 148 of the Act was issued to the appellant on 29.03.2018. The appellant filed return of income on 22-10-2018 declaring income of Rs.28,506. The appellant ssessee was asked to submit source of cash deposit of Rs.13,57,500/- made in account no 646101503101 with ICICI Bank during FY 2010-11. After considering the replies of the appellant, the AO added an amount of Rs 10,07,500/- to the declared income of the appellant. 6.5 During the appellate proceedings, the appellant stated that the source of deposit of the cash was explained as given below: The explanation given by the appellant before i) Agricultural Income of Rs.2,00,000/- ii) Personal and family savings of Rs.2,50,000/-. Out of the above two, AO accepted source of upto Rs1,50,000/- only in place of combined claim of Rs 4,50,000/-. iii) Gift from husband Balaji Wattamvar for Rs. 2 lakhs. Accepted by AO. iv) Gift from Father-in-law Namdeo Wattamvar for Rs. 2 lakhs.
-5- Not Accepted by AO. v) Gift from Mother Premlata Bagave for Rs.2 lakhs. Not Accepted by AO. vi) Gift from brother Sandeep Bagave for Rs. 2 lakhs. Not Accepted by AO. vii) Gift from brother Sachin Bagave for Rs.1.25 lakhs. Not Accepted by AO. 6.6 ………… 6.7 It is also seen that out of explanation of agricultural income of Rs.2,00,000/- and personal and family savings of Rs.2,50,000/-, the AO accepted source of upto Rs.1,50,000/- only in place of combined claim of Rs.4,50,000/-. Regarding family savings, it is seen that the husband had withdrawal an amount of Rs.8.39 lakh in 2 years i.e. FY 2009-10 and FY 2010-11. The withdrawal of husband of 8.39 Lakh in two year means around Rs 35,000/- per month. Apparently this withdrawal was for household withdrawals. Even then the AO accepted that the appellant could have saved Rs 1,50,000/- from such withdrawals. Thus the AO had been very reasonable. However, the AO also accepted the explanation of the appellant that the husband of the appellant also gave a gift of Rs 2,00,000/- from the same withdrawal. This is little farfetched. Vide note sheet entry dated 09-05-2019, the appellant was asked why the explanation of gift of Rs 2,00,000/- from the same withdrawal should be accepted and why income should not be enhanced by an amount of Rs 2,00,000/-. 6.8 The appellant furnished an instruction of CBDT No. 03/2017 saying that in case of cash deposit of upto Rs 2,50,000/- no verification is required to be done by the AO. However, it is seen that this Instruction was issued on 21-02-2017 and it was issued in relation to cash deposits after the announcement of demonetization. Thus, the said instruction is not applicable to the case of the appellant. As already discussed, the explanation given by the appellant that an amount of Rs 1,50,000/- was saved from the withdrawals of Rs 8.39 Lakhs (over two years) made by the husband and another amount of Rs 2,00,000/- was given as gift to the appellant out of the same withdrawals is not credible Accordingly, the income of the appellant is enhanced by Rs 2,00,000/- the addition of Rs 10,07,500/- is enhanced to Rs 12,07,500/, Grounds No 7,8 & 9 of the appellant are DISMISSED.”
From the above facts and extractions of the order of the CIT(A), it is an undisputed fact that the assessee executed transactions of cash deposits amounting to Rs.13,57,500/-. According to the assessee, the agricultural income of Rs.2 lakhs, the personal savings of Rs.2.5 lakhs, gifts of Rs.9.25 lakhs i.e. gift from the husband (Balaji Wattamvar)/gift from the father-in-law (Namdeo Wattamvar)/gift from the mother (Premlata Bagave)/gift from the brother (Sandeep Bagave) and gift from another -6- (Sachin Bagave), constitute the sources of such cash deposits by the assessee in her bank account. Regarding agricultural income as source of cash deposits, after due scrutiny of the evidences furnished by the assessee, the Assessing Officer added the entire agricultural income of Rs.2 lakhs disallowing the claim of the assessee.
Regarding the personal savings of Rs.2.5 lakhs, the Assessing Officer accepted the sources of Rs.1.5 lakhs. Assessing Officer added Rs. 1 lakh on this account. Thus, on account of both agricultural income claim and personal savings, there is addition of Rs.3 lakhs. Gifts: We shall now take up the Assessing Officer’s decision with 12. respect to the claim of gifts of Rs.9.25 lakhs from husband, father-in-law, mother and brothers. The contents of para 3.3 to 3.7 of the assessment order are relevant in this regard. The assessee claimed gift of Rs.2 lakhs each from husband, father-in-law, mother and brother (Sandeep Bagave). Further, assessee also received gift of Rs.1.25 lakh from another brother (Sachin Bagave). We shall now examine each of these gifts.
Regarding the gift received from husband, who reported cash withdrawals of Rs.8.39 lakhs over the past years, Assessing Officer accepted the relevant gift of Rs.2 lakhs as genuine one. Thus, the Assessing Officer added sum of Rs.7.25 lakhs on this account out of the said Rs.9.25 lakhs (supra). In para 3.4 to 3.7 of the assessment order, the ITO discussed the reasons for accepting the assessee’s claim. To summarise the logic of the ITO, I find, the absence of withdrawals over the -7- preceding years, absence of any documentary evidence, the explanation centred around afterthought etc, are the reasons for non-acceptance the claim of the assessee. For the sake of completeness, the relevant para 3.4 to 3.7 of assessment order are extracted hereunder :- “3.4 Gift from Father-in-law Namdeo Wattamvar for Rs 2 Lakhs. The AR stated that assessee received Rs 2 Lakhs from Father-in-law in November 2010 as gift. In support of claim, he submitted deed of land sold by Namdeo Wattamvar on 07.12.2010, confirmation from Namdeo Wattamwar and statement of bank account. From deed, it is seen that land was sold for Rs 4 Lakhs out of which Namdeo Wattamwar received Rs 2 Lakhs through Demand Draft. From confirmation submitted, it is found that Namdeo Wattamwar gave gift in November, 2010 and land was sold later. From statement of bank account, it is seen that he did not make any withdrawal during September to November, 2010 from account. No documents in support of amount given by Namdeo Wattamwar in month of November have been submitted. Thus, it is clear that it is an afterthought of assessee. The claim of assessee is not accepted. 3.5 Gift from Mother Premlata Bagave for Rs 2 Lakhs. The AR stated that assessee received Rs 2 Lakhs from her Mother as gift in November, 2010. In support of claim, he submitted deed of land sold by her in 2007, statement of pension account for November, 2017 to January, 2018 and 7/12 extracts of land held by family and confirmation from mother. However, assessee could not submit any document showing that her mother was actually having cash of Rs 2 Lakhs at the time of giving gift to assessee. Hence, claim of assessee is not accepted, 3.6 Gift from brother Sandeep Bagave for Rs 2 Lakhs. The AR stated that assessee received Rs 2 Lakhs from her brother as gift in November, 2010. In support of claim, AR submitted Form - 16 of Sandeep Bagave for AY 2012-13, statements of bank account showing withdrawal of Rs 1,14,000/- from one account from 06.04.2009 to 22.03.2010 and Rs 98,000/- from other account from 07.04.2008 to 31.03.2009. The assessee’s brother has withdrawn amount of Rs 2,12,000/- from account in 3 years, it is not possible that he did not make expenses out of same for 3 years and kept the cash with him for 3 years. Thus, the claim of assessee is not accepted as it is an afterthought. 3.7 Gift from brother Sachin Bagave for Rs 1.25 Lakhs. The AR stated that assessee received Rs.1.25 Lakhs from her brother Sachin Bagave as gift. In support of claim, AR submitted salary slip of Sachin Bagave for current period. No other documents have been submitted. In absence of documents, the claim of assessee is not accepted.”
Reversing the Assessing Officer’s decision on the gift from the husband (para 3.3 of the assessment order), the CIT(A) enhanced the -8- Rs.2 lakhs as per discussion given in para 6.8 of his order. On this account, the CIT(A) is of the opinion that the explanation given by the assessee relating to the gift from husband, is farfetched. At the end of the proceedings before the first appellate authority, the addition works out to Rs.12,07,500/- against the addition made by the Assessing Officer at Rs.10,07,500/-. Finding on the Agricultural/Personal Savings as Sources: So far 15. as the addition of Rs.3 lakhs out of Rs.4.5 lakhs on account of cash deposits relating to agricultural income/withdrawals, I find the assessee holds agricultural land admeasuring 1.28 Hector at Village Hadolasi, Dist. Latur. There are 7/12 extracts filed by the assessee before the assessing authorities. There is reference to the crop on these extracts at the relevant point of time. The assessee also evidenced the cash withdrawals from her own account. Considering the above undisputed facts relating to cash deposits of Rs.4.5 lakhs, on ad-hoc basis, the restricting addition of Rs.2 lakhs on this account should meet the ends of justice. Accordingly, out of Rs.4.5 lakhs of cash deposits, the explanation to the extent of Rs.2.5 lakhs is accepted. The Assessing Officer is directed to restrict addition to Rs.2 lakhs on this account. Finding on the Gifts as Sources: Regarding the claim of gifts from 16. husband, father-in-law, mother and brothers etc, following is the donor- wise discussion and the decision.
-9- A. Gift from the Husband: Regarding Rs.2 lakhs gift from husband, it is claim of the assessee that the husband, Balaji Wattamvar reported cash withdrawals amounting to Rs.8.39 lakhs over the preceding two years. The CIT(A) reasoned that the same works out to average withdrawals of Rs.35,000/- per month, which is good enough to meet the household expenditure. As per the CIT(A), no adequate savings is possible with cash withdrawals for giving gift to his wife. Therefore, considering the above explanation, the CIT(A) held that the explanation given by the assessee is farfetched. No additional evidence is brought to my notice during the present proceedings before me. B. Gift from Father-in-law: Regarding the gift of Rs.2 lakhs from father-in-law, Sri Namdeo Wattamvar, it is a fact that Namdeo Wattamvar is a pensioner and retired from the post department. The assessee’s explanation is that the Assessing Officer is barred from examining the ‘source of the sources’. However, no details of payments for his family for household expenditure are given to estimate the likely savings for giving gift to the daughter in law. In any case, it is the case of the Revenue that it is not likely that daughter in law receives cash gifts from the father-in-law. Thus, there is a paucity of evidences and information about the family expenditure and pension income etc. C. Gift from the Mother: Regarding the gift of Rs.2 lakhs from mother (Premlata Bagave), facts are similar to father-in-law and she is also a pensioner through her husband but however, no pension details are furnished before the Assessing Officer. The assessee’s explanation is again -10- Assessing Officer in matters relating to the source of the sources. D. Gift from the Brothers Sandeep Bagave and Sachin Bagave : Regarding the gift of Rs.2 lakhs from brother (Sandeep Bagave), I find the assessee received cash gift of Rs.2 lakhs. Further, I find assessee received the gift of Rs.1.25 lakhs from another brother, Sachin Bagave. Absence of evidences (he could not confirm the payment due to his hospitalization) creditworthiness etc, are the reasons for rejection in both of these brother cases.
From the above factual matrix relating to the gifts, I am of the opinion that gifts are given to the assessee from among the close relatives only. However, these gifts were given with or without any special occasions. The source of sources argument is the only defence from the assessee’s side. However, the assessee failed to discharge the onus cast on him with reference to the credibility of the transactions and creditworthiness of the donors and the documentation furnished by the assessee is inadequate and the explanations given by the assessee are general in nature. It is not the case of the assessee or the AR before me that one more opportunity should be granted to the assessee for furnishing of the evidences in support of the creditworthiness of the transactions. Ld. AR failed to specify or file the additional evidence to be furnished before the I.T. authorities, if an opportunity is granted. Considering the same, I am of the opinion that the decision of the CIT(A) is fair and reasonable. Ld. AR has not made out a case satisfactorily for remanding to the file of the Assessing Officer/CIT(A).