NACHIMUTHU JAYAKUMAR,TIRUPUR vs. DCIT, CENTRAL CIRCLE-2,, COIMBATORE

The brief facts relating to the case are that the assessee is an individual engaged in the business of manufacture, purchase and sale of gold and silver jewellery and conducts his business under the name and style of M/s J.K. Jewellery. The assessee filed the return of income declaring a total income of ₹56,47,780/- on 01.08.2017. Thereafter, a survey under Section 133A of the Income-tax Act, 1961 (for the sake of brevity, “the Act”) was conducted on 20.02.2018, wherein books of account and other documents were impounded by the survey department. Under scrutiny, notices under Sections 143(2) and 142(1) of the Act were issued, and the AO completed the assessment by determining the total income of the assessee at ₹1,62,51,306/-, inter alia, making addition on account of fixed deposit and cash deposits vide order dated 27.12.2019 passed under Section 143(3) of the Act. Having been aggrieved by the said order of the AO, the assessee preferred an appeal before the Ld. CIT(A). The assessee filed written submissions, and the Ld. CIT(A) adjudicated the issues raised by the assessee based on the statement of facts and written submissions, which is evident from para No. 4 of the impugned order. The Ld. CIT(A) directed the AO to verify as to whether the father of the assessee had alone made deposits in the Tirupur Housing Society Ltd., and whether the same were transferred in the name of the assessee in the year under consideration, which is evident from para No. 6.3.3. of the impugned order. Having been aggrieved by the order of the Ld. CIT(A), the assessee is before us.

Ld. AR, Mr. R. Venkataraman, CA, submits that the AO proceeded on the erroneous assumption that the assessee had made fixed deposits with Tirupur Housing Credit Society during the year under consideration. He argued vehemently that the very documents as relied upon by the AO establish that no such investment was made by the assessee during the year under consideration. He drew our attention to page Nos. 1 to 3 of the paper book and submitted that, while referring to the second table on page No. 2, the said dates concerning the deposits were all relating to FY 2013-14 (AY 2014-15) and argued vehemently that the dates of deposits mentioned therein admittedly pertain to financial years 2013-14, 2014-15 and 2015-16 and the very factual foundation on which the addition has been made is demonstrably incorrect. Further, he submits that the said fact was brought to the notice of the Ld. CIT(A) and, having accepted the said factual position, drew our attention to para No. 6.3.3. of the impugned order and argued vehemently that the Ld. CIT(A) has categorically recorded that the dates of fixed deposits relate to FYs 2013- 14, 2014-15 and 2015-16 and remanded the matter to the file of the AO, which is not justified. Further, he argued that the invocation of Section 69 of the Act is not attracted, wherein it can only be invoked where the assessee is found to have made investments which are not recorded in the books of accounts, if any, maintained by him and no satisfactory explanation regarding the nature and source of such investment. He argued vehemently that the primary condition precedent for invoking Section 69 of the Act is that the investment must have been made by the assessee and, in the present case, no such investment was made by the assessee, wherein his father made such investments several years earlier. He argued that the Ld. CIT(A) recorded a clear finding that the deposits were originally made by the assessee’s father and directing the AO for verification whether such deposits were disclosed in the return of income or books of accounts of his father is legally unsustainable. He submits that the burden shifted upon the Revenue to establish by cogent evidence showing the assessee made investments during the year under consideration. He argued that, having no evidence showing the assessee in making such investments, the direction of the Ld. CIT(A) is itself not justified and prayed to allow Ground Nos. 2(a) to 2(c) of the assessee.

Ld. DR, Mr. N. Madan Kumar, Sr. DR, relied on the order of the Ld. CIT(A).

Heard both the parties and perused the relevant material available on record, we note that the AO computed the income of the assessee based on the material impounded during the course of survey, which is evident from para No. 2 of the assessment order, wherein it is clear that the AO proceeded to add an amount of ₹54,50,000/- on account of fixed deposits in the Tirupur Housing Society Ltd. with reference to statements collected under Section 133(6) of the Act from banks and societies. On perusal of the impugned order, the Ld. CIT(A) reproduced the letter dated 18.01.2017 addressed to the Tirupur Housing Credit Society requesting to transfer the deposits to the name of the assessee, being a legal heir of his deceased father. The Ld. CIT(A) was satisfied with the explanation offered by the assessee in respect of the dates of deposits, which are reproduced in tabular form in para No. 6.3.2 of the impugned order. On perusal of the same, we note that admittedly, the said deposits vide FD Nos. on respective dates show that they were made in FYs 2013-14 and 2015-16, relating to AYs 2014-15 and 2016-17, respectively. Further, we note that the said deposits were transferred in the name of the assessee during the year under consideration and, admittedly, no such investments were made by the assessee, as the cogent evidence shows that the said investments were made by the father during the FYs 2013-14 and 2015-

Further, with reference to making addition under Section 69 of the Act, we note that once it is accepted that the investments were made by the deceased father in the earlier years, in our opinion, the inquiry regarding the father’s source of funds becomes wholly relevant for the purpose of making an addition under Section 69 of the Act in the hands of the assessee. To make it clear, if at all, it can be assessed only in the hands of the person who made the investment alleged to be on account of unexplained investment under Section 69 of the Act. Therefore, the addition made in the hands of the legal heir, i.e. assessee, merely because the asset subsequently devolved upon him by inheritance and through a letter issued requesting the said society to transfer the said deposits in the name of the assessee, is not justified. Therefore, we find force in the argument of the Ld. AR when the dates of investments admittedly fall in the FYs 2013-14 and 2015-16 and no addition could have been made in AY 2017-18 taking into account the source of deposits. We find, admittedly, the assessee offered an explanation in respect of the addition made by the AO under Section 69 of the Act and no evidence whatsoever was brought on record by the Revenue to establish by concrete evidence that the assessee made such investments. Thus, the order of the Ld. CIT(A) in directing the AO for verification is not justified and is set aside. Thus, Ground Nos. 2(a) to 2(c) raised by the assessee are allowed.

Ground Nos. 3(a) to 3(c) raised by the assessee challenging the action of the Ld. CIT(A) in confirming the order of the AO in making addition under Section 69A of the Act.

Ld. AR drew our attention to para No. 6.4.2. of the impugned order and submits that the assessee had cash withdrawals aggregating to ₹14,15,300/- from various bank accounts prior to the demonetization period. The said withdrawals are duly evidenced from the bank records and are substantially in excess of the disputed addition on account of cash deposits in SBN. He argued that the availability of such cash withdrawals constitutes a credible, plausible and duly substantiated source for the subsequent deposits. He submits, by referring to para No. 6.4.3. of the Ld. CIT(A)’s order, and submits that the mere observation by the Ld. CIT(A) that the cash withdrawn earlier could have been utilized for other purposes is based on conjecture and surmise without any supporting material or evidence on record. He drew our attention to the index of case laws and relied on the order in the case of Ullatil Sillu v. The ITO of SMC Bench of Cochin ITAT. He referred to para No. 6 of the said order and argued that it is a settled position of law that, in the absence of evidence to showing that the amount withdrawn was utilized somewhere else, the amount withdrawn should be deemed to be available for subsequent deposit in the bank account. He submits that the facts and circumstances of the present case are similar to the facts before the Cochin Bench as well as in the cases of Ganapathy Panneerselvam in ITA No. 609/Chny/2025 and Sengdodan Govindarajan reported in [2026] 187 taxmann.com 858 (Chennai-Trib) at page Nos. 9 and 24 of the paperbook, respectively. He argued that when the assessee demonstrated the availability of sufficient cash through earlier withdrawals, the burden shifts to the Revenue to establish by cogent evidence that such cash was no longer available with the assessee. He prayed to delete the addition and allow the grounds 3 (a) to (c) raised by the assessee.

Ld. DR relied on the order of Ld. CIT(A).

Heard both the parties and perused the relevant material available on record. On perusal of the assessment order dated 27.12.2019, we note that, according to the AO, the assessee made cash deposits during the demonetization period to an extent of ₹8,89,020/-, amongst which the cash deposits to an extent of ₹7,41,500/- were in SBNs. The said details are reproduced in page Nos. 2 and 3 of the assessment order. On perusal of the same, we note that the assessee maintains eight accounts in different banks and total credits to an extent of ₹79,90,174/-. The AO made addition to an extent of ₹7,41,500/-, which are in SBNs, for non- substantiating the source of said cash deposits. On perusal of the impugned order, we note that the assessee vehemently contended that cash withdrawals during the period 13.04.2016 to 07.10.2016 were at ₹14,15,300/- and available for deposit. The assessee further contended that the said cash withdrawals far exceeded the cash deposits made in SBNs. However, the Ld. CIT(A) did not accept the said explanation of the assessee but, however, held the said withdrawals were made to meet day-to-day expenses of the assessee and, if that is the case, there could not be any cash left with the assessee to re-deposit in the bank accounts vide para No. 6.4.3 of the impugned order. Admittedly, there is no dispute with regard to cash withdrawal to an extent of ₹14,15,300/- from various bank accounts from April, 2016 till 08.11.2016 and the assessee explained the availability of cash with reference to said withdrawals. We find that there was no evidence brought on record that the availability of cash was not with the assessee and further no evidence was brought on record that the assessee utilized the same for other purposes. Having no such evidence on record by the Revenue, we find force in the arguments of Ld. AR that there is nexus between the withdrawals from 13.04.2016 till 08.11.2016. Coming to the case law as relied on by the Ld. AR, we find on similar circumstances the Cochin ITAT SMC Bench in the case of Ullatil Sillu (supra) clearly held that AO cannot merely reject the explanation offered by the assessee by holding that there was a time gap between cash withdrawal from the bank and it being deposited in the bank account. Therefore, as rightly pointed by Ld. AR, it is a settled position of law that, in the absence of evidence showing that the withdrawals were utilized somewhere else, in our opinion, the amount withdrawn should be deemed to be available for subsequent deposit in the bank account. Further, in the case of Ganapathy Panneerselvam (supra) for AY 2017-18 at Page No. 9 of the case laws, we find on similar circumstances, the Tribunal accepted the submissions of the assessee therein that, in the absence of any contrary evidence or finding by the AO suggesting that the cash withdrawals were used for some other undisclosed purposes, the benefit of earlier withdrawals cannot be denied merely due to the time gap between withdrawals and re-deposit. We find that the facts and circumstances in the present case are similar to the facts before the Cochin and Chennai Benches; therefore, we find the order of Ld. CIT(A) is not justified in confirming the order of AO in making addition under Section 69A of the Act and thus, it is set aside. Ground Nos. 3(a) to 3(c) raised by the assessee are allowed.