KIRTIKANT VADILAL VORA (DECEASED),MUMBAI vs. INCOME TAX OFFICER - WARD 42(1)(3), MUMBAI

Briefly stated, the facts of the case are that the assessee, Late Shri. Kirtikant Vadilal Vora was deriving income from salary and interest on bank deposits, filed his return of income on 27.07.2017 declaring a total income of Rs.3,96,212. The case was selected for scrutiny under CASS on account of large cash deposits made during the demonetisation period as compared to the returned income. Accordingly, notice under section 143(2) of the Act was issued on 20.08.2018, followed by notices under section 142(1) calling for details of bank accounts, cash deposits and their sources. The Assessing Officer also obtained information directly from the banks by issuing notices under section 133(6) of the Act. During the course of assessment proceedings, the assessee submitted that he was receiving salary through banking channels and regularly withdrawing cash for household expenses and unforeseen medical requirements. It was further explained that the cash deposits were made out of cash balances available from earlier withdrawals. However, the Assessing Officer was not satisfied with the explanation furnished by the assessee, particularly in the absence of supporting evidence establishing the availability of cash on the dates of deposits. Consequently, the Assessing Officer treated cash deposits of Rs.4,44,500 in Union Bank of India account No.355802010085414 and Rs.9,44,600 in Central Bank of India account No.1168663970, aggregating to Rs.13,89,100, as unexplained money under section 69A of the Act. The assessment was accordingly completed determining the total income at Rs.17,85,312.

Aggrieved by the assessment order, the assessee preferred an appeal before the learned Joint Commissioner of Income Tax (Appeals). Before the first appellate authority, the assessee reiterated that the cash deposits in Central Bank of India were made out of the opening cash balance and withdrawals from the bank accounts during the preceding periods. It was also submitted that the sum of Rs.4,44,500 deposited in Union Bank of India belonged to the assessee's wife, Smt. Hansa Kirtikant Vora, who was a joint holder of the said account, and that an affidavit confirming the ownership of the deposits had also been furnished. The learned Joint Commissioner of Income Tax (Appeals), after examining the submissions and the pattern of withdrawals reflected in the bank statements, observed that the assessee was regularly withdrawing cash from his salary account for meeting household and other expenses. The first appellate authority was of the view that the assessee had failed to establish that the amounts withdrawn on earlier occasions had remained unutilised and were available for subsequent deposits. It was further observed that the explanation of retaining substantial cash at home for medical emergencies was not supported by convincing evidence and was inconsistent with the pattern of regular withdrawals. Accordingly, the learned Joint Commissioner of Income Tax (Appeals) upheld the addition of Rs.13,89,100 made by the Assessing Officer and dismissed the appeal. Aggrieved by the said order, the assessee is in appeal before us.

During the course of hearing before us, the learned Authorised Representative (ld.AR) of the assessee submitted that the addition of Rs.13,89,100 comprises two distinct amounts deposited in separate bank accounts and that each amount requires independent consideration. With regard to the sum of Rs.4,44,500 deposited in Union Bank of India, it was submitted that the said account was jointly maintained by the assessee and his wife, Smt. Hansa Kirtikant Vora, and was operated by his wife. The entire cash deposit of Rs.4,44,500 belonged to her and this fact had also been confirmed by her through an affidavit. The ld.AR further submitted that the said bank account and the transactions therein were duly reflected in the return of income filed by the assessee's wife for the assessment year 2017-18. A copy of her return of income filed on 27.07.2017 was also furnished in support of the submission. It was, therefore, contended that the amount belonging to the assessee's wife could not be treated as unexplained money in the hands of the assessee merely because he was one of the joint holders of the bank account. Accordingly, the ld.AR requested that the addition of Rs.4,44,500 be deleted.

With regard to the balance addition of Rs.9,44,600 representing cash deposits in Central Bank of India, the ld.AR submitted that the deposits were made out of cash available with the assessee from the opening balance and cash withdrawn from the bank during the preceding financial years, including the period from 01.04.2016 to 07.11.2016. In support of this contention, the assessee furnished a statement of cash account for the financial years 2014-15 and 2015-16 and for the period from 01.04.2016 to 07.11.2016, showing the opening cash balances, withdrawals, drawings and closing cash balances. It was submitted that the opening cash balance as on 01.04.2014 was Rs.45,000 and that the cash balance had progressively increased to Rs.9,56,634 as on 07.11.2016. According to the ld.AR, the cash available immediately before demonetisation was sufficient to explain the deposits of Rs.9,44,600 made in Central Bank of India. The ld.AR submitted that the assessee, being a senior citizen, had been retaining cash for meeting unforeseen medical emergencies and other requirements and, therefore, no adverse inference was warranted merely because the cash withdrawn from the bank had been retained for some time before being redeposited. The details furnished by the assessee in the cash account are reproduced below:

The learned Departmental Representative (ld.DR), on the other hand, strongly relied upon the orders of the lower authorities and submitted that the learned Joint Commissioner of Income Tax (Appeals) had examined the submissions of the assessee in detail and had given cogent reasons for rejecting the explanation regarding the source of cash deposits. It was submitted that the assessee had failed to establish that the cash withdrawn from the bank accounts on various dates had remained available with him until the demonetisation period. The ld.DR, therefore, submitted that the order of the first appellate authority was self-explanatory and deserved to be upheld.

We have carefully considered the rival submissions and perused the material available on record, including the assessment order, the order of the learned Joint Commissioner of Income Tax (Appeals), the grounds of appeal and the documents furnished by the assessee. The issue for our consideration is whether the addition of Rs.13,89,100 made under section 69A of the Act is sustainable in the facts and circumstances of the case. Since the addition comprises cash deposits in two separate bank accounts, we consider it appropriate to examine the explanation furnished by the assessee in respect of each account independently.

With regard to the addition of Rs.4,44,500 representing cash deposits in Union Bank of India, we find that the assessee has consistently maintained that the said amount belongs to his wife, Smt. Hansa Kirtikant Vora, and that the bank account is jointly maintained by them. The assessee has also furnished an affidavit from his wife confirming that the deposits belong to her. In addition, a copy of the return of income filed by Smt. Hansa Kirtikant Vora for the assessment year 2017-18 on 27.07.2017 has been placed before us. On perusal of the same, we find that the sum of Rs.4,44,500 is reflected against Union Bank of India account No.355802010085414. We further find from the assessment order that the Assessing Officer has made the addition of Rs.4,44,500 in the hands of the assessee in respect of cash deposits in the very same bank account. The identity of the bank account number appearing in both the documents, read with the affidavit furnished by the assessee's wife and the admitted fact that the account is jointly maintained by them, supports the assessee's contention that the deposits in question belong to his wife. The mere fact that the assessee is also a joint holder of the bank account does not, by itself, establish that the entire cash deposited therein belongs to him. When the amount in question has been specifically claimed by his wife and reflected in the return of income filed by her, there is no justification for treating the same amount as unexplained money in the hands of the assessee without any material establishing his ownership thereof. We, therefore, hold that the addition of Rs.4,44,500 made under section 69A of the Act in the hands of the assessee is not sustainable. Accordingly, we direct the Assessing Officer to delete the addition of Rs.4,44,500.

Coming to the balance addition of Rs.9,44,600 representing cash deposits in Central Bank of India, we find that the assessee has sought to explain the source of deposits by relying upon a cash statement prepared for the financial years 2014-15 and 2015-16 and for the period from 01.04.2016 to 07.11.2016. As per the statement, the opening cash balance of Rs.45,000 as on 01.04.2014 had progressively increased to Rs.9,56,634 as on 07.11.2016, which, according to the assessee, was sufficient to explain the cash deposits of Rs.9,44,600. However, the statement is not supported by any independent or contemporaneous evidence establishing the actual availability of cash on the dates of deposits. The mere preparation of a statement by reconciling cash withdrawals and drawings over the preceding three years, resulting in a closing balance almost corresponding to the deposits sought to be explained, cannot be accepted as conclusive evidence that the entire cash withdrawn had remained unutilised.

The only explanation offered by the assessee for withdrawing and retaining substantial cash was to meet unforeseen medical requirements. While such an explanation cannot be rejected altogether, the claim that cash amounting to Rs.9,56,634 was accumulated and retained at home over an extended period, without supporting evidence, does not appear convincing. At the same time, the fact that the assessee had withdrawn substantial amounts from his bank accounts during the relevant periods cannot be disregarded. It is reasonably possible that a portion of such withdrawals remained unutilised and was subsequently redeposited. Therefore, neither complete acceptance nor outright rejection of the explanation would be justified. Having regard to the totality of the circumstances, the pattern of withdrawals and the absence of corroborative evidence regarding the entire cash balance claimed, we consider it appropriate to adopt a balanced view and accept the explanation in part. Accordingly, out of the cash deposits of Rs.9,44,600 in Central Bank of India, we consider Rs.4,44,600 as reasonably explained out of earlier cash withdrawals and direct the Assessing Officer to delete the addition to that extent. The balance addition of Rs.5,00,000, for which the assessee has failed to furnish a satisfactory explanation supported by evidence, is confirmed under section 69A of the Act.

In view of the foregoing discussion, out of the total addition of Rs.13,89,100 made by the Assessing Officer and confirmed by the learned Joint Commissioner of Income Tax (Appeals), we direct deletion of Rs.4,44,500 relating to the cash deposits in the joint bank account maintained with Union Bank of India, which have been found to belong to the assessee's wife, and a further sum of Rs.4,44,600 relating to the cash deposits in Central Bank of India, being the amount accepted as explained out of earlier cash withdrawals. Thus, the assessee is entitled to a total relief of Rs.8,89,100, and the addition is restricted to Rs.5,00,000. The Assessing Officer is directed to give effect to our findings accordingly.

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