SHRI. KESHAV MURTHY,BENGALURU vs. THE INCOME TAX OFFICER, INTERNATIONAL TAXATION, WARD-1(2), BENGALURU

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ITITA 705/BANG/2022Status: DisposedITAT Bangalore28 November 2023AY 2017-185 pages

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

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the assessee's claim that the cash deposited during the demonetization period was sufficiently explained by withdrawals made over time was devoid of merit and to be rejected. The CIT(A) had found that the cash withdrawals from ATMs between November 2013 and September 2015 were of small amounts, often as low as Rs. 300, and were made from various locations, indicating they were for meeting personal expenses. The CIT(A) also noted that these withdrawals stopped abruptly in September 2015 and the manner in which the alleged cash was kept was not explained. The Tribunal agreed with the CIT(A)'s finding that the assessee had put forward a self-serving, preposterous, and unbelievable story. Regarding the argument that section 69 uses 'may' and not 'shall', the Tribunal noted that the assessee had not clearly established the source of the cash deposit from any particular head of income, thus justifying the AO's assessment under section 69. Consequently, the appeal filed by the assessee was dismissed.

What were the facts?

The assessee, an individual, made cash deposits totaling Rs. 28,88,000/- during the demonetization period in Assessment Year 2017-18. The assessee had not filed a return of income. The Assessing Officer (AO) obtained the assessee's bank statement from the State Bank of India and issued a show cause notice. The assessee's explanation for the source of funds, involving cash withdrawn by his father from his brother's account and kept at home, was rejected by the AO. The AO brought the entire deposit to tax as unexplained investment under section 69 of the Income Tax Act, 1961, and applied the special tax rate under section 115BBE. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who also rejected the explanation and dismissed the appeal. The assessee then filed the present appeal before the Income Tax Appellate Tribunal (ITAT).

What were the issues?

1. Whether the cash deposits of Rs. 28,88,000/- made by the assessee during the demonetization period can be treated as unexplained investment under section 69 of the Income Tax Act, 1961, despite the assessee's explanation regarding the source of funds. Assessee's contentions: - The cash deposited was accumulated from amounts withdrawn by the assessee's father from the assessee's brother's bank account, which in turn received funds transferred from outside India by the assessee. - These funds were intended for the purchase of property. - The assessee's sole source of income is salary earned from employment outside India, and he carries on no business or profession in India. - The provisions of section 69/69A of the Act use the word 'may' and not 'shall', implying discretion in application. Revenue's contentions: - The Standing Counsel supported the orders of the AO and CIT(A).

Which sections of the Income-tax Act were involved?

Section 69,Section 115BBE,Section 250,Section 133(6),Section 144,Section 271AAC(i)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE

Before: SHRI GEORGE GEORGE K

For Appellant: Shri. V. Srinivasan, Advocate
For Respondent: Shri. Ganesh R Ghale, Standing Counsel for Revenue
Hearing: 22.11.2023Pronounced: 28.11.2023

This appeal at the instance of the assessee is directed against CIT(A)’s order dated 25.02.2022, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.

2.

Brief facts of the case are as follows:

Assessee, an individual, had made cash deposits during the demonetization period amounting to Rs.28,88,000/-. The assessee, for the relevant Assessment Year, had not filed his return of income. The AO on notice issued under section 133(6) of the Act to State Bank of India called for the bank statement of the assessee. On receipt of the same, assessee was issued show cause notice to explain the source of cash deposits. In response to the show cause notice, assessee filed a reply through email dated 24.09.2019. The reply filed by the assessee was rejected. The AO

IT(IT)A No.705/Bang/2022 Page 2 of 5

brought to tax the cash deposit amounting to Rs.28,88,000/- as unexplained investment under section 69 of the Act. The AO applied a special rate of tax as per the provision of section 115BBE of the Act. The relevant finding of the AO in making the addition under section 69 of the Act reads as follows:

“6. On perusal of the submission made by the assessee in response to the show cause notice dated 05.12.2019, it is noticed that the assessee has given explanation for all the query. However, assessee has not provided valid explanation for source for the Cash deposited during de-monetization period is not acceptable as assessee submits, his father Shri. Ganesh G. C who is about 72 years operates Rajesh (assessee's brother) CITI bank account in India and because of assessee's father's age and health condition, most of the money transferred in small deposits from the US bank accounts was withdrawn from CITI bank of India account on a regular basis and kept at home. On perusal of bank statement of assessee's father Shri. Ganesh G. C account no. #######1636, there are no withdrawals by cash as explained by the assessee's father, it is also seen no much cash withdrawals are made from assessee's bank account no. #######1441# 33432. Further, as assessee submits, that his father has withdrawn cash from Rajesh's (assessee's brother) CITI bank account and keeps at home and deposited the accumulated cash into assessee's bank account. It is pertinent to note here, when the cash in withdrawn from the account of assessee's brother Rajesh, there is no reason why the alleged Accumulated cash was deposited into assessee's bank account. Hence, it shows that the assessee doesn't have valid explanation for the cash deposited during the demonetization and hence source for the same remains unexplained and accordingly . the deposited cash during the demonetization period Rs. 14,38,000/- and Rs.14,50,000/- in A/c No. 65274533432 of State Bank of India on 15-11-2016 and 19-11-2016 respectively, totalling to Rs.28,88,000/- is brought to tax as Unexplained investment u/s.69 of the I.T. Act,1961. Accordingly, penalty is initiated u/s 271AAC(i) of the IT Act, 1961.”

3.

Aggrieved by the Assessment Order in making the addition under section 69 of the Act, assessee preferred appeal before the CIT(A). The CIT(A) rejected the contentions raised and dismissed the appeal of the assessee.

IT(IT)A No.705/Bang/2022 Page 3 of 5

4.

Aggrieved by the order of the CIT(A), assessee filed the present appeal before the Tribunal. Assessee has filed a Paper Book comprising of 104 pages enclosing therein copy of the assessee’s employment letter with M/s. Capgemini, bank account statement of Shri. Rajesh Ganesh in Citi Bank for the period from 01.11.2013 to 31.10.2016, absolute sale deed of the property purchased by the assessee, summary of cash withdrawals made by the assessee’s father, case laws relied on, etc. The learned AR has filed a brief written submission reiterating the submissions made before the income tax authorities.

5.

The learned Standing Counsel supported the orders of the AO and CIT(A).

6.

I have heard the rival submissions and perused the material on record. The essence of the assessee’s contention is that cash deposited by the assessee in his bank account during the demonetization period was from the amount drawn by the assessee’s father out of the funds transferred by the assessee from outside India so as to accumulate funds for purchase of the property and thus the same cannot be treated as unexplained considering the assessee’s only source of income is only through salary earned from employment with M/s. Capgemini outside India. It was further submitted that assessee does not carry on any business or profession in India and therefore there is no other ostensible source of earning in India.

7.

Assessee had made cash deposit during the demonetization period in State Bank of India on 15.11.2016 and 19.11.2016 of Rs.14,38,000/- and Rs.14,50,000/- respectively (aggregating to Rs.28,88,000/-). During the course of assessment proceeding, since there was no effective representation, assessment was completed under section 144 of the Act. The CIT(A) during appellate proceedings directed the assessee to furnish a summary of cash withdrawal for explaining the source of cash deposits during demonetization period, which was duly produced on 31.01.2022. The

IT(IT)A No.705/Bang/2022 Page 4 of 5

CIT(A) on perusal of the same held that the cash withdrawals over the period of time from 01.11.2013 to 08.09.2015 is of less amounts and same has been withdrawn from various ATMs of different locations. The CIT(A) has categorically found that these withdrawals of small amounts is nothing but for meeting the personal expenses of the assessee and his family members. The relevant finding of the CIT(A) after extracting the bank statement (as submitted by the assessee) for the cash withdrawals prior to the deposit are as under:

“8. As above it is seen that the assessee is seen withdrawing cash from 1.11.2013 to 8.9.2015. The withdrawals are as low as Rs.300 on some occasions. Withdrawals of average Rs.1,000 are made over a long period of time. Apparently, the withdrawals have stopped sometime during Sep 2015. The appellant claims that these paltry cash withdrawals from ATM were kept and used for cash deposits on a subsequent date. The cash withdrawals have been made in various places in Yeshvathpur, G C Ramaiah, Gokula, HMT, Jalahalli, Tumkur Road and such other branches, From the withdrawals made, it is apparent that the withdrawals have been towards various cash expenses of the assessee and his family for various personal expenses. If the assessee wanted any cash withdrawal for safe keeping or for any deposits, he could have made it directly from the bank in larger denominations. The very pattern of withdrawals over a period of three years from Nov 2013 to Sep 2015 has explained the nature and purpose of these withdrawals. Moreover, the withdrawals have apparently stopped all of a sudden in Sep 2015. Where and how the alleged cash was kept s also not explained. 9. From the above it is apparent that assessee appellant has pushed forward a self-serving, preposterous and unbelievable story to explain the cash deposits made of Rs.28,80,000 during demonetization period. This explanation filed is rejected as unsubstantiated and unreasonable. The grounds of appeal are rejected.”

8.

From the above finding of the CIT(A), it is clear that the assessee’s claim that there is enough withdrawal for making the cash deposit during the demonetization period is devoid of any merits and same is to be rejected.

IT(IT)A No.705/Bang/2022 Page 5 of 5

9.

Assessee has also raised a contention that provisions of section 69/69A of the Act cannot be automatically applied as the words used in the section is ‘may’ and not ‘shall’. In the instant case, the assessee has not been able to clearly establish the source of cash deposit is coming out from any particular head of income. Hence, the AO has rightly assessed the same under section 69 of the Act.

10.

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

Pronounced in the open court on the date mentioned on the caption page. Sd/- Sd/- Sd/- (LAXMI PRASAD SAHU) (GEORGE GEORGE K) Accountant Member Vice President Bangalore. Dated: 28.11.2023. /NS/*

Copy to: 1. Appellants 2. Respondent 3. DRP 4. CIT 5. CIT(A) 6. DR,ITAT, Bangalore. 7. Guard file By order

Assistant Registrar, ITAT, Bangalore.

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