AVANIISH SURYAVADAN MEHTA,SURAT vs. ACIT, CIRCLE 3(1), SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH "SMC", SURAT Before: Shri T. R. Senthil Kumar, Judicial Member & Shri Ratnesh Nandan Sahay, Accountant Member

ITA No: 1004/SRT/2024 Assessment Year: 2016-17

Avaniish Suryavadan Mehta, Vs A.C.I.T., 1014, Alishan Awas Diwali Circle-3(1), Baug, Athwalines, Surat. Surat-395001 (Gujarat) PAN: ADHPM 1728 P (Appellant) (Respondent)

Assessee Represented by : Shri Rasesh Shah, C.A. Revenue Represented by : Ms. Neerja Sharma, Sr. DR Date of hearing : 04/05/2026 Date of pronouncement : 27/07/2026 आदेश/ORDER PER: RATNESH NANDAN SAHAY, AM: 1. This is an appeal filed by the assessee against the order of the learned Addl/JCIT(A), Mysore [In short, ‘the ld. CIT(A)’] dated 31/07/2024 for the assessment year (AY) 2016-17 wherein the assessee has raised following grounds of appeal: "1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A) has erred in confirming the action of Assessing Officer in making the addition of ₹ 15,00,000/- on account of unexplained cash deposits. 2. It is therefore prayed that the above addition made by the assessing officer may please be deleted. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal."

2 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT 2. Facts of the case, in brief, are that the return of income was filed by the assessee on 31/03/2017 declaring a total income of ₹ 17,47,430/-. The case was selected for limited scrutiny under CASS for the reason "Large cash deposits in savings bank account and assessee has also transferred one or more property(ies) during year". Subsequently, notice under Section 143(2) and 142(1) of the Income Tax Act, 1961 (in short, the Act) were issued from time to time. During the assessment year under consideration, the assessee was working with LIC of India and also derived income from other sources. The Assessing Officer on verification of ITS Data of the assessee, noticed that during the year under consideration, the assessee has deposited cash amounting to ₹ 15.00 lacs in his savings bank account No. 051104000049267 maintained with IDBI Bank, Ghod-dod Road, Surat. The assessee has also sold one immovable property for a sale consideration of ₹ 65.00 lacs and purchased another property for a consideration of ₹ 33.00 lacs. The Assessing Officer asked the assessee to explain the source of cash deposits made in the said bank account and also provide the copy of sale deeds in respect of property sold and purchased during the assessment year under consideration. In response to that, the assessee

3 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT submitted the details as required by the Assessing Officer and after given due consideration of the reply filed by the assessee, the Assessing Officer treated the cash deposits of ₹ 15.00 lacs made in the said bank account as unexplained cash deposits on the ground that the assessee has failed to explain the source of that cash deposit. 3. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the ld. CIT(A), who vide the impugned order dated 31/07/2024, dismissed the appeal of the assessee on the ground that the explanation given by the assessee to explain the source of cash deposits was not found to be tenable for want of sufficient evidence. 4. Further aggrieved by the order of the ld. CIT(A), the assessee is in appeal before this Tribunal. 5. During the appellate proceedings before us, the appellant's counsel has submitted as under: "During the year under consideration, assessee received gift from his father and his wife as well as he had sold furniture and other items of personal use in cash to different persons and deposited the same in his saving bank account with IDBI Bank which is reflected in his books of accounts. Further, assessee had sold one immovable property situated at Flat No. 104 First Floor, Ashirwad Palace Building Bhatar, Surat

4 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT for sale consideration of Rs. 65,00,000/- and the long term capital loss of Rs. 43,95,522/- arising from such sale was duly disclosed in the return of income for A.Y. 2016-17. Thereafter, assessee purchased one immovable property situated at Flat No. 1204 Shyam Sangini Building, Vesu, Surat for consideration of Rs. 33,00,000/- during the year under consideration. During the course of assessment proceedings, assessing officer observed that assessee had deposited cash amounting to Rs. 15,00,000/- in his saving bank account maintained with IDBI Bank, Ghod Dod Road, Surat. Further assessing officer also observed that assessee had sold one immovable property situated at Flat No. 104 First Floor, Ashirwad Palace Building Bhatar, Surat for consideration of Rs. 65,00,000/- and purchased one immovable property situated at Flat No. 1204 Shyam Sangini Building, Vesu, Surat for consideration of Rs. 33,00,000/- during the year under consideration. On the basis of his observation, assessing officer issued notice u/s 142(1) on 26.10.2018 and in response to the notice issued, the assessee furnished replies on 15.11.2018 and 21.11.2018 on ITBA portal, along with Acknowledgement of return of income and Computation of Total Income and Form- 16 and Bank Statement for the year under consideration. Thereafter, assessing officer issued show cause notice dated 18.12.2018 requesting the assessee to explain the source of cash deposited in his saving account with IDBI Bank. Further, assessing officer also requested assessee to submit the copy of sale deed in connection with immovable property sold at Rs. 65,00,000/- copy of purchase deed in connection with immovable property purchased at Rs. 33,00,000/- during the

5 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT year under consideration. The assessing officer required compliance of the show cause notice by 21.12.2018 and thereby effectively granting only one working day for compliance. In response to the show cause notice, assessee filed various submissions on 19.12.2018 and 21.12.2018. With regard to cash deposits of Rs. 15,00,000/-made with the IDBI Bank, Ghod Dod Road, Surat, assessee filed his reply stating that he had deposited the amount in the bank from personal savings, gift received from father, gift received from wife and sale proceeds received from furniture and other items. The assessee had also furnished PAN cards and Aadhaar cards of various persons to whom assessee sold furniture during the year under consideration on 22.12.2018. However, owing to the extremely short time granted by the assessing officer, assessee could not file confirmation of the person who purchased the furniture. Broadly, assessee explained the source of the cash deposits of Rs. 15,00,000/- as under: Date Source Amount (in Rs.) ₹ 1,95,000/- 01/04/2015 Accumulated past Savings ₹ 1,00,000/- 02/04/2015 Gift from wife Nayana Mehta ₹ 1,90,000/- 03/04/2015 Gift from father Suryavadan Mehta 01/05/2015- Proceeds from sale of ₹ 10,15,000/- 24/06/2015 Furniture Total ₹ 15,00,000/- The Assessing Officer rejected the explanation furnished by the assessee by observing that the no documentary evidence was produced in support of the explanation. He also observed that the assessee made the cash deposits for purchasing new residential property.

6 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT Before the Ld. CIT(A), assessee explained that the deposits were made from the past savings out of the withdrawal from the bank to the tune of ₹1,95,000. The source of ₹1,00,000 was claimed as a gift received from his wife Nayana Mehta, for which assessee filed gift deed and her return of income. As regard to the gift received from his father of ₹1,90,000, assessee stated that his father was not assessed to tax as he was a retired employee of LIC of India. Assessee filed the necessary evidence to prove that his father was an ex LIC employee. The ld. CIT(A), confirmed the action of the assessing officer for not accepting the assessee's plea of savings and gift on the ground that no nexus was proved by the assessee between the cash deposits and source of the cash despite the fact that the assessee had demonstrated the savings out of the past withdrawal made from the bank account and also by the way of the gifts received from his wife and his father. The Id. CIT(A) rejected the assessee's explanation regarding receipt from sale of furniture on the ground that not a single confirmation was filed by the assessee and the flat was sold in 2012 whereas the old furniture was sold in 2015. It is a fact that the assessee was granted an extremely short period of only two days to reply, and after assessee making last submission on 22.12.2018, the portal window was closed and the assessing officer passed the assessment order on 23.12.2018. So, even between the issue of show cause notice on 18.12.2018 and passing of assessment order on 23.12.2018, effectively only four working days were available to the assessee for compliance. Further, it is pertinent to note that the flat was actually sold on 02.07.2015, relevant to the

7 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT year under consideration and the resultant long-term capital loss after indexation was duly disclosed in the return of income for AY 2016-17 only. The assessing officer reproduced the letter of the assessee dated 21.12.2018 in the assessment order where it was stated that the flat was sold on 02.07.2015. Hence, the observation made by the Ld. CIT(A) is factually incorrect and contrary to the material available on record. Arguments The learned Assessing Officer as well as the Ld. CIT(A) have erred both in law and on facts in making and confirming the addition of Rs. 15,00,000/- on account of alleged unexplained cash deposits without properly appreciating the explanation and evidences furnished by the assessee during the course of assessment as well as appellate proceedings. It is submitted that the impugned addition has been made merely on suspicion, conjectures and surmises without bringing any cogent material on record to establish that the cash deposits represented unexplained income of the assessee. The settled position of law is that suspicion, however strong, cannot partake the character of legal evidence. The assessee had duly explained the source of the cash deposits aggregating to Rs. 15,00,000/-by furnishing a detailed break-up comprising accumulated past savings, gifts received from wife and father and sale proceeds received from furniture and other personal household items. The explanation furnished by the assessee was reasonable, plausible and supported by surrounding circumstances and documentary

8 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT evidences to the extent possible within the limited time granted by the assessing officer. The authorities below failed to appreciate that out of total cash deposits of Rs. 15,00,000/-, an amount of Rs. 1,95,000/- represented accumulated past savings generated from earlier withdrawals from the disclosed bank account of the assessee. Once withdrawals from disclosed bank accounts are not disputed, the source of such savings cannot be rejected merely because the assessee was unable to establish one-to- one correlation between earlier withdrawals and subsequent redeposit of cash. It is a settled proposition of law that when the assessee demonstrates availability of sufficient cash withdrawals and there is no material brought on record to establish that such withdrawals were utilized elsewhere, the benefit thereof ought to be granted to the assessee. In the present case, neither the assessing officer nor the Ld. CIT(A) has brought any material on record to demonstrate that the earlier withdrawals were spent for any other purpose. With regard to the gift received from wife amounting to Rs. 1,00,000/-, the assessee had furnished gift deed as well as return of income of the donor. Therefore, the identity and capacity of the donor as well as genuineness of the transaction stood duly established. Similarly, with regard to the gift of Rs. 1,90,000/- received from father, the assessee furnished evidence demonstrating that his father was a retired employee of LIC of India. Merely because the father was not assessed to tax cannot be a valid ground to reject the gift transaction, particularly when the relationship between

9 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT donor and donee is undisputed and the amount involved is reasonable considering the surrounding circumstances The authorities below further failed to appreciate that the assessee had also explained that cash of Rs. 10,15,000/- was generated from sale of furniture and other personal household items. The assessee had furnished PAN cards and Aadhaar cards of the persons to whom such furniture was sold. However, owing to the extremely short time granted by the assessing officer, the assessee could not obtain and furnish written confirmations from the purchasers. It is submitted that the assessee was granted grossly inadequate opportunity during the course of assessment proceedings. The show cause notice dated 18.12.2018 required compliance by 20.12.2018 and the assessment order came to be passed on 23.12.2018. Thus, effectively only four working days were available to the assessee for furnishing complete details and evidences. The assessment framed in such haste is in clear violation of the principles of natural justice. The Hon'ble Courts have consistently held that reasonable and effective opportunity must be granted to the assessee before drawing adverse inference. In the present case, despite the assessee making substantial compliance and furnishing explanations along with supporting evidences, the assessing officer proceeded to reject the explanation merely because further confirmations could not be furnished within the unreasonably short period allowed. The Ld. CIT(A) has further committed a grave factual error by observing that the flat was sold in the year 2012 whereas the furniture was sold in 2015. The said observation is contrary to

10 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT the material available on record and contrary even to the assessment order itself. The assessee had specifically stated before the assessing officer vide letter dated 21.12.2018 that the flat was sold on 02.07.2015 and the assessing officer himself reproduced the said submission in the assessment order. Further, the resultant long-term capital loss arising on sale of the flat was duly disclosed in the return of income for A.Y. 2016-17 itself. Even if the consideration on sale of the furniture is added to the gross value of sale on flat without claiming any cost, the net result will be loss only as assessee disclosed loss of Rs. 43,95,522/-. Therefore, the finding recorded by the Ld. CIT(A) that the flat was sold in 2012 is factually incorrect and demonstrates complete non-application of mind while adjudicating the appeal. The authorities below also failed to appreciate that the assessee was a salaried employee of LIC of India and there is no allegation whatsoever that the assessee was engaged in any undisclosed business activity or earning unaccounted income. In absence of any incriminating material or contrary evidence, the explanation furnished by the assessee ought to have been accepted. The addition has been made merely because the assessee could not furnish exhaustive documentary evidence in support of each component of the cash deposits within the extremely limited period granted by the assessing officer. It is submitted that income-tax proceedings are quasi-judicial proceedings and the explanation of the assessee cannot be rejected on hyper- technical considerations when the explanation is otherwise reasonable and probable. The reliance is placed on the

11 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT judgement of the Hon'ble Supreme Court in the case of CIT vs. Smt. P.K. Noorjahan - 237 ITR 570 (SC) where it was held that: "The revenue's submission that the word 'may' in section 69 should be read as 'shall' is not acceptable. As pointed out by the Tribunal, in the corresponding clause in the Bill which was introduced in the Parliament, the word 'shall' had been used but during the course of consideration of the Bill and on the recommendation of the Select Committee, the said word was substituted by the word 'may'. This clearly indicates that the intention of Parliament in enacting section 69 was to confer a discretion on the Assessing Officer in the matter of treating the source of investment which has not been satisfactorily explained by the assessee as the income of the assessee and the ITO is not obliged to treat such source of investment as income in every case where the explanation offered by the assessee is found to be not satisfactory. A discretion has been conferred on the ITO under section 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping in view the facts and circumstances of the particular case." Without prejudice to the above, even assuming without admitting that the explanation of the assessee was not fully substantiated, the entire amount of cash deposits could not have been added as unexplained income. The authorities below completely ignored the surrounding circumstances, financial background of the assessee, disclosed sources,

12 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT earlier withdrawals and family relationship with donors while making the impugned addition. In view of the aforesaid facts and circumstances, it is respectfully submitted that the addition of Rs. 15,00,000/- sustained by the Ld. CIT(A) deserves to be deleted in entirety. Alternatively, the matter may kindly be restored to the file of the assessing officer for fresh adjudication after granting adequate and effective opportunity to the assessee to furnish supporting evidences and confirmations. In view of the above, your honours are requested to allow assessee's appeal."

13 ITA No. 1004/Srt/2024 Avaniish Suryavadan Mehta Vs ACIT from accumulated past savings, gifts received from his wife and his father and sales proceeds received from sale of the furniture and personal household items. Thus, we agree to the appellant’s counsel that the explanation furnished by the assessee to explain the source of cash deposits as reasonable. Since, the appellant had already given sufficient explanation to explain the said cash deposits, it was incumbent on the part of the Assessing Officer to conduct further enquiry regarding the explanations offered by the assessee that the source of cash deposits as explained by the assessee was not correct. In the absence of such findings, the addition made by the Assessing Officer and as confirmed by the ld. CIT(A) cannot be upheld in view of the decision of the Hon’ble Supreme Court in the case of CIT Vs P.K. Noorjahan (supra) and accordingly, the addition made on this count is deleted. 8. In the result, this appeal of the assessee is allowed. Order is pronounced under the provisions of Rule 34 of IT(AT) Rules, 1963 on 27/07/2026.

Sd/- Sd/- (T. R. SENTHIL KUMAR) (RATNESH NANDAN SAHAY) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Dated 27/07/2026 *Ranjan

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