MUNIYAPPA MANJUNATH,BENGALURU vs. INCOME TAX OFFICER, WARD-3(3)(2), BENGALURU

Brief facts of the case are assessee being an individual filed his return of income for the Assessment Year 2017-18 on 17.07.2017 declaring a total income of Rs.4,80,000/-. The case was subsequently selected for limited scrutiny through CASS. Accordingly, notice under section 143(2) of the Act was issued on 04.09.2018 and served on 06.09.2018. The limited issue for which scrutiny was taken is with respect to cash deposited during demonetization period. Assessee filed his response electronically through e-proceedings. Thereafter, notices under section 142(1) of the Act on 17.05.2019, 19.08.2019 and 28.11.2019 calling for information. It was noticed that assessee has made cash deposits during demonetization period amounting to Rs.15 lakhs (Rs.10 lakhs in SBI A/c No.62249258468 and Rs.5 lakhs in Kotak Mahindra Bank A/c No.242010014483). The assessee stated that the source for cash deposit arise from the past savings and gift from mother. However, no documentary evidence was provided in support of his statement. The assessee further submitted that Rs.10 lakh cash was given by his mother Smt. Munirathna and in support of the same, assessee filed the copy of the return of income of his mother declaring the income for the Assessment Year 2017-18 from rental receipts. Similarly, the assessee also submitted that the assessee, being a karta of HUF was receiving rental income for the Assessment Years 2015-16 and 2016-17 which was duly supported by the return of income by the HUF. The learned AO being not satisfied with the source provided by the assessee, proceeded to add an amount of Rs.15 lakhs under section 69 r.w.s. 115BBE of the Act.

On being aggrieved by the Order of the learned AO, assessee filed the appeal before the learned CIT(A). Similar submissions were made before the learned CIT(A). The learned CIT(A) being not satisfied with the reply of the assessee, dismissed the appeal.

On being aggrieved by the Order of the learned CIT(A), the assessee is in appeal before us by raising the following grounds:

Ground Nos.1 and 5 are general in nature, needs no adjudication. Grounds 2, 3 and 3.1 relates to the addition sustained by the learned CIT(A) under section 69 of the Act. On this issue, the learned AR submitted that the assessee has provided the copy of the return of income, gift deed and bank statements of the mother and the HUF for the source of cash deposits given to the assessee as gifts. He also further submitted that the assessee’s mother is regularly filing the return of income and has declared income from house property amounting to Rs.3,25,920/- for Assessment Year 2016-17 and Rs.3,11,674/- for Assessment Year 2017-18. Similarly, he also submitted that HUF also received rental income of about Rs.2,80,000/- for Assessment Year 2015-16 and Rs.2,94,000/- for Assessment Year 2016-17. He therefore pleaded that since sufficient source for the cash has been established by the assessee, addition made by the learned AO and sustained by the learned CIT(A) is not justifiable.

Per contra, the learned DR relied on the Order of the Revenue authorities.

We have heard the rival contention and perused the material available on record. It is an admitted fact that assessee has received cash gift of Rs.10 lakhs from his mother which was deposited into the bank of the assessee during demonetization period. Further, it was also supported by the return of income filed by the mother for Assessment Years 2017-18. The AO has not doubted the rental receipts declared by his mother but concluded that it is an afterthought of the assessee. Similarly, from the return of income filed for the HUF, the HUF has also declared rental income of Rs.3 lakhs per annum. The contentions of the learned AO are that the gift deed and information have not been backed by plausible explanations. The Revenue has not disputed the return of income filed by assessee’s mother and HUF. The learned AO has also perused the bank statements of the mother and contended that there were no sufficient withdrawals in the bank account for making the gift to the assessee. The contention of the assessee is that his mother has accumulated savings of Rs.10 lakhs which was being deposited into the assessee’s account instead of his mother’s account during demonetization period. The learned AO has scrutinized the bank statements and has observed that there was no sufficient withdrawals from the bank account but has failed to enquire on the accumulated cash balance held by his mother. It is also noticed that the assessee’s mother has been filing return of income admitting a total income of Rs.3 lakhs per annum. In these circumstances, we are of the view that assessee’s mother would have had accumulation of cash for making the gift to the son even though it was not established by the assessee that there were sufficient withdrawals from the bank account in the respective Assessment Year. We, therefore, are of the view that the source for the cash deposit of Rs.10 lakhs as gift by his mother is justified and hence, we direct the learned AO to delete the addition of Rs.10 lakhs. Similarly, the assessee in the capacity of HUF was receiving rental income of about Rs. 3 lakhs per annum which was also disclosed in the return of income filed by the assessee. Assessee has established the onus cast upon him by proving the resources for cash deposited during demonetization. The Revenue has also not disputed the rental income furnished by the assessee. We are therefore of the view that the amount of Rs.5 lakhs deposited by the assessee in Kotak Mahindra Bank arise out of the cash balance available with him in the capacity of HUF and therefore direct the learned AO to delete the addition of Rs.5 lakhs received from HUF. Accordingly, the ground stands allowed. With respect to ground No.3.2, assessee has disputed the rate of tax @60% under section 115BBE of the Act. Since the additions have been deleted, assessee succeeds on the appeal in quantum, adjudicating this ground is merely academic in nature.

In the result, appeal filed by the assessee is allowed.