HARDEEP DALAL,SONEPAT vs. ITO WARD 35(5), NEW DELHI

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ITA 3430/DEL/2023Status: DisposedITAT Delhi23 May 2025AY 2017-186 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the appeal. Regarding the addition of Rs. 2,68,000, the Tribunal noted that the case was reopened based on cash deposits, and while the AO rejected the source of cash deposits out of cash withdrawals, the assessee submitted that cash withdrawals of Rs. 24,40,000 were made and re-deposited. The Tribunal observed that the assessee provided an opening cash balance of Rs. 24,40,000 as of 08.11.2016 in the cash book, which was duly deposited. The Tribunal found sufficient cash withdrawals to support the assessee's submissions and stated that if deposits are traceable to recent withdrawals, they cannot be rejected. Therefore, the grounds raised by the assessee were allowed. The Tribunal did not explicitly address grounds 3, 4, 5, 6, and 7 but by allowing the appeal based on the reasoning for the primary additions, it implicitly set aside the consequential aspects.

What were the facts?

The assessee, Hardeep Dalal, filed an appeal against the order of the NFAC, Delhi, for Assessment Year 2017-18. The case was selected for limited scrutiny due to large cash deposits. The Assessing Officer (AO) made an addition of Rs. 2,68,000, considering it as unexplained income arising from a discrepancy between declared opening cash in hand (Rs. 25,88,730 as of 09.11.2016) and total cash available (Rs. 26,12,730 including Rs. 24,000 withdrawn during demonetization). Additionally, the AO added Rs. 24,40,000, representing cash withdrawn from bank accounts between May and October 2016, which the assessee claimed were for relatives' financial needs but lacked documentary evidence. The NFAC upheld these additions. The assessee's appeal to the Tribunal challenges these additions.

What were the issues?

1. Whether the addition of Rs. 2,68,000, representing a difference in opening cash balance as of 09.11.2016, is justified, particularly when the assessee claims a higher cash balance supported by earlier income, savings, gifts, and a Cash Transaction Declaration 2016, and questions the AO's arbitrary consideration of Rs. 24,000 withdrawn during demonetization as a source of deposit (Section 68 of the Income-tax Act, 1961). 2. Whether the addition of Rs. 24,40,000, confirmed by the CIT(A) under Section 68, is erroneous, given the assessee's submission that this cash was withdrawn before demonetization and deposited during the period 09.11.2016 to 30.12.2016, and was declared via Cash Transaction Declaration 2016, supported by cash vouchers, cash ledger, bank book, bank statements, and P&L account. 3. Whether the assessment order is vitiated due to a violation of the principles of natural justice by not providing a fair and meaningful opportunity of being heard. 4. Whether interest levied under Sections 234A, 234B, and 234D, and penalty proceedings initiated under Section 271AAC(1) are sustainable. Assessee's Contentions: The assessee argued that the cash deposits were out of cash withdrawals totaling Rs. 24,40,000 made prior to demonetization, supported by a detailed chart of withdrawals and re-deposits. They also claimed the cash balance was supported by audited books of accounts. The assessee relied on various case laws. The revenue relied on the findings of the lower authorities.

Which sections of the Income-tax Act were involved?

Section 68,Section 234A,Section 234B,Section 234D,Section 271AAC(1)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’: NEW DELHI

Before: SHRIS.RIFAUR RAHMAN

For Appellant: Shri Shivam Gupta, CA
For Respondent: Shri Sanjay Kumar, Sr. DR
Hearing: 12.03.2025

(Assessment Year: 2017-18) Hardeep Dalal, vs. ITO, Ward 35 (5), 901, P2, Ushay Towers, Kundli, New Delhi. Sonepat – 131 028 (Haryana). (PAN : BUFPD8639C) (APPELLANT) (RESPONDENT) ASSESSEE BY : Shri Shivam Gupta, CA REVENUE BY : Shri Sanjay Kumar, Sr. DR Date of Hearing : 12.03.2025 Date of Order : 23.05.2025 O R D E R

1.

The assessee has filed appeal against the order of the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi [“Ld. CIT(A)”, for short] dated 13.10.2023 for the Assessment Year 2017-18.

2.

Brief facts of the case are, the assessee filed return of income on 30.03.2018 declaring total income of Rs.8,11,680/-. The return was processed u/s 143(1) of the Income-tax Act, 1961 (for short ‘the Act’). The case was selected for Limited Scrutiny mentioning: "Large Cash deposits in bank account(s) during the year". While passing the assessment order, the Assessing Officer has made the addition of Rs.2,68,000/- and stated in assessment order that the assessee declared Rs.25,88,730/- as opening cash in hand as on 09.11.2016 and Rs.24,000/- was withdrawn from the bank account during demonetization period. Assessing Officer further observed that it was not understood how assessee deposited cash of Rs.28,80,730/- whereas he own only Rs.26,12,730/- (Rs.25,88,730/- + Rs.24,000/-) during the same period. Hence, Assessing Officer held that differential amount of Rs.2,68,000/- [Rs.28,80,730/- (-) Rs.26,12,730/-] was considered as income of the assessee and added to the returned income u/s 68 of the Act.

3.

Further during the assessment proceedings, the assessee submitted that amount of Rs.24,40,000/- was withdrawn during the period from May 2016 to October 2016 from the bank accounts to support the temporary financial needs of close relatives. However, no documentary evidence in support of the claim was furnished by the assessee. Assessing Officer considered the reply of the assessee but not found tenable. Hence, he considered the amount of Rs.24,40,000/- as income of the assessee and added to the returned income u/s 68 of the Act. Accordingly, AO completed the assessment after adding the amount of Rs.2,68,000/- and Rs.24,40,000/- and determined the net taxable income at Rs.35,19,680/-.

4. Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi. Ld. CIT(A) rejected the same by observing that in the absence of any plausible explanation and proper records, sources of cash deposited cannot be accepted. Accordingly, he sustained the addition made by the AO.

5.

Aggrieved assessee filed an appeal before us raising following grounds of appeal :-

“1. That the Ld. Commissioner of Income Tax (Appeals) erred in confirming action of Assessing Officer in law and on facts in determining the total income of the appellant at Rs.35,19,680/- as against declared income of Rs.8,11,680j-in an order of CIT (Appeals) u/s 250 of the Act dated 13.10.2023.

2. That the Ld. Commissioner of Income Tax (Appeals) has erred in additions of Rs.2,68,000j- for difference in opening cash balance held as on dated 09.11.2016. But in reality the assessee has cash balance of Rs.2,92,000/- which was the cash out of earlier income or savings and gift and the same was duly reported by the assessee in Cash Transaction Declaration, 2016. Further the Ld. Assessing Officer has erred in arbitrarily considering Rs.24,000/- withdrawn during demonetization as a source of cash deposit. Hence, addition of Rs.2,68,000/- to the income of the assessee is arbitrary and is liable to be deleted.

3. That the Ld. Commissioner of Income Tax (Appeals) failed to appreciate the facts by confirming additions of Rs.24,40,000/- u/s 68 of the Act without considering the facts that the cash was deposited from cash withdrawal before demonetization and deposited during 09.11.2016 to 30.12.2016. Further the assessee has reported the cash transaction to the Income Tax Department through Cash Transaction, 2016 vide transaction number- 3643596792. The cash transaction declaration 2016 acknowledgement is attached herewith.

4.

During the course of assessment proceeding the CITCA) has failed to acknowledge that Cash Vouchers, Cash Ledger, Bank Book, Bank Statements, Profit & loss Ale supporting the cash in hand that were duly submitted. Hence, addition of Rs.24,40,000/- to the income of the assessee is arbitrary and is liable to be deleted.

5. That the learned Commissioner of Income Tax (Appeals) has erred in framing the assessment without providing to the assessee, a fair, proper, and meaningful opportunity of being heard, violating the principles of natural justice, and thus such an order of assessment is vitiated on both facts and law.

6.

That the learned Commissioner of Income Tax (Appeals) and learned Assessing Officer of Income Tax has erred both in law and on facts in levying interest u/s 234A, section 234B & section 234D of the Act, which interest is not leviable on the facts and circumstances of the case of the appellant.

7.

That the learned Commissioner of Income Tax (Appeals) and learned Assessing Officer of Income Tax has erred both in law and on facts in initiating penalty proceedings u/s 271AAC(1).”

6. At the time of hearing, ld. AR of the assessee brought to our notice above facts on record and submitted that assessee has deposited the cash out of cash withdrawals of Rs.24,40,000/- made by the assessee and he brought to our notice a chart given in the written submissions wherein assessee has withdrawn cash to the extent of Rs.24,40,000/-. For the sake of clarity, the chart given is reproduced below :- S.No. Date of Amount Withdrawn BANK Withdrawal (INR) 1 31.05.2016 2,00,000/- 2 06.06.2016 2,40,000/- 3 11.07.2016 2,00,000/- 4 02.08.2016 4,70,000/- Sub Total (A) 11,10,000/- 5 21.09.2016 3,30,000/- 6 01.10.2016 10,00,000/- Sub Total (B) 13,30,000/- Grand Total (A) + 24,40,000/- (B)

7. Ld. AR also submitted that there are several high value of withdrawals and the same were re-deposited during the year and he prayed that the sources were already declared by the assessee. He further submitted that cash balance duly supported by cash book and books of accounts being audited, no addition is called for. He also relied on various case laws. He prayed that the same addition cannot be made.

8.

On the other hand, ld. DR of the Revenue relied on the findings of the lower authorities.

9.

Considered the rival submissions and material placed on record. I observed that the case of the assessee was reopened on the basis of cash deposits in its bank account and assessee has explained the sources of cash deposits. The AO has accepted the same, however rejected the cash deposits out of cash withdrawals. Before me, ld. AR of the assessee brought to our notice that during the year, assessee has withdrawn cash of Rs.24,40,000/- and re- deposited out of withdrawals. I also observed that the assessee has submitted that the cash withdrawal from the bank accounts were duly recorded in the books of account maintained in regular course of business and it was lying with the assessee himself and as per the cash book, the assessee has an opening cash balance of Rs.24,40,000/- as on 08.11.2016 which was duly deposited in the bank accounts by the assessee. In this regard, assessee submitted relevant extract of cash book kept at page 15 of the paper book. In my considered view, there are enough cash withdrawals made by the assessee during the year and there are re-deposits traceable like cash withdrawn on different dates as shown in the aforesaid chart and re-deposited the same. Therefore, there are sufficient cash withdrawals to support the submissions of the assessee, it is settled position of law that the deposits are traceable to the recent withdrawals, the same cannot be rejected. Accordingly, I am inclined to allow the grounds raised

by the assessee.

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