YAZDIN JIMMY MISTRY ,MUMBAI vs. INCOME TAX OFFICER WARD 42(3)(2), MUMBAI

7. Even the scheme of Section 69A of the Act goes to show that in case where the ‘nature and source’ of acquisition of money, bullion etc owned by the assessee is not explained at all, or not satisfactorily explained, then in that eventuality the value of such investment and money not recorded in the books of accounts may be deemed to be the income of the assessee.

4 Yazdin Jimmy Mistry, Mumbai “5.5.4 The Hon'ble Supreme Court in the case of Chuharmal Vs CIT (1988) 172 ITR 250 while affirming the view of the Madhya Pradesh High Court has held that 'the expression 'INCOME' as used in Section 69A of the Act, 1961 had a wide meaning which meant anything which came in or resulted in gain and on this basis, concluded that the assessee had income which he had invested in purchasing article and he could be held to be owner and the value could be deemed to be his income by virtue of Section 69A of the Act.' Following the ratio of the judgement of Hon'ble Supreme Court, in the instant case, the assessee deposited Cash in his bank account which resulted in gain and on the basis can be concluded that the assessee had income to the extent of cash deposit made during the year under consideration appearing in bank accounts and it could be held to be the owner and the Money at its credit could be deemed to be its income by virtue of Section 69A of the Act. Hence, in the facts of this case a legitimate inference can be drawn that the assessee had income which he had deposited in Bank accounts and, as such, that Income was subject to tax.

5.5.5 Further, the Hon'ble Supreme Court in the case of Smt Srilekha Banerjee and others Vs CIT, Bihar & Orissa, reported in 1964 AIR 697, dated 27/03/1963, the Hon'ble Court held that the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source. The relevant finding of the Hon'ble Apex Court is as under:-

The fact of the case are that the assessee had encashed 51 high denomination notes of Rs.1,000/- each in January, 1946. The assessee's explanation in his application for encashment of the notes was that he was a colliery proprietor and contractor, that for conducting the business and for payment to labour which came to about Rs.30,000/- to 40,000/- every 5 Yazdin Jimmy Mistry, Mumbai week he had to keep large sums of money to meet emergency and that the sum of Rs. 50,000/- realised by encashment of the notes was neither profit nor part of profit but was floating capital for the purpose of conducting business. The Income-- tax Officer did not accept this explanation and treated this amount as profit from some undisclosed source and assessed it as assessable income. In Manindranath Das V. Commissioner of Income Tax, Bihar & Orissa, the tax-payer had encashed Notes of the value of Rs. 28,600, which he contended were his accumulated savings. His explanation was accepted in respect of Rs. 15,000, because 15 notes could be traced to a bank, but was rejected in respect of the balance. The Patna High Court pointed out that if an assessee received an amount in the year of account, it was for him to show that the amount so received did not bear the character of income, and the tax-payer in the case had failed to prove this fact in respect of the remaining notes. The Hon'ble Supreme Court has held that 'The cases involving the encashment of high denomination notes are quite numerous. In some of them the explanation tendered by the tax-payer has been accepted and in some it has been rejected. Where the assessee was unable to prove that in his normal business or otherwise, he was possessed of so much cash, it was held that the assessee started under a cloud and must dispel that cloud a to the reasonable satisfaction of the assessing authorities, and that if he did not, then, the Department was free to reject his explanation and to hold that the amount represented income from some undisclosed source.

The Hon'ble Supreme Court further held in the case of Smt Srilekha Banerjee and others (supra) that 'the Department was justified in holding that Rs.51,000/- was assessable income of the assessee from some undisclosed source. It was not correct that the assessee was not required to prove anything and that the burden was entirely upon the department to prove that the amount received from the encashment of high denomination notes was income. The correct position is as follows. If there is an entry which shows the receipt of a sum or conversion of the notes by the assessee by himself, it is necessary for the assessee to establish, if 6 Yazdin Jimmy Mistry, Mumbai asked, what the source of that money was and to prove that it did not bear the nature of income. The department is not at this stage required to prove anything. The fact that there was receipt of money or conversion of notes is itself prima facie evidence against the assessee on which the Department can proceed in absence of good explanation.' 5.5.6 Therefore, in case where assessee deposited huge Cash in his saving bank accounts during the year under consideration, but the sources were neither explained nor such money offered for taxation, the onus is on the assessee' to prove that the Cash deposits made did not bear the character of income. In this case, the assessee had failed to prove this fact. Further, by relying upon the decision of Hon'ble Supreme Court in the cases cited above that there was ample evidence that Cash was deposited in bank accounts, which is prima facie evidence against the assessee that the deposits are undisclosed income on which the Department can proceed in absence of good explanation.

5.6 In this regard, reliance is reliance is placed on the decision of the Hon'ble Delhi High Court in the case of Sunil Jain vs. Income Tax Department[2022] 142 taxmann.com 507 (Delhi) dated 22.07.2022, wherein the Hon'ble Tribunal has upheld the similar addition made by the AO and decided the appeal in favour of the revenue. The head note of the decision is reproduced as under:-

Section 69A, read with section 148, of the Income-tax Act, 1961 Unexplained moneys (Reassessment) - Assessment year 2017-18 - Assessee filed his return of income showing an income of certain amount Case of assessee was selected for limited scrutiny raising queries regarding cash deposit of Rs. 28.75 lakhs made by assessee during demonetisation period in 'C' bank - Further, an assessment order was passed making an addition of Rs. 28.75 lakhs to returned income of assessee - Assessee preferred an appeal against same - During pendency of appeal, revenue issued a reassessment notice on ground that assessee had failed to satisfactorily explain source of fund for cash deposit of Rs. 12.50 lakhs made by assessee in 'PN' bank It was noted that cash deposit of Rs. 7 Yazdin Jimmy Mistry, Mumbai 12.50 lakhs was not adjudicated upon during original scrutiny proceedings In income-tax return, assessee had only mentioned detail of cash deposited in 'C' bank account and had not mentioned cash deposits in any other bank accounts Whether, on facts, impugned reopening notice issued against assessee was justified Held, yes [Paras 13, 15, 16 and 19] [In favour of revenue] 5.7 Reliance is further placed on the decision of the Hon'ble ITAT, Raipur Bench in the case of Adim Jati Seva Sahkari Samiti Maryaditvs.Income-tax Officer[2024] 159 taxmann.com 8 (Raipur Trib.) dated 18.09.2023, wherein the Hon'ble Tribunal has upheld the similar addition made by the AO and decided the appeal in favour of the revenue. The head note of the decision is reproduced as under:-

Section 69A of the Income-tax Act, 1961 Unexplained moneys (Bank deposit) - Assessment year 2017-18 - During demonetization period, assessee-society deposited certain sum in its bank account - Since assessee didn't respond adequately to several notices issued by AO, said cash deposit was treated as unexplained income under section 69A On appeal, Commissioner (Appeals) had afforded sufficient opportunities to assessee to put up its case on merits before him, but no material/evidence was placed on record by assessee to substantiate sources of credit in its bank account Commissioner (Appeals) thus sustained addition made by A.O. under section 69A Held, yes Whether considering facts of instant case, there was no infirmity in view taken by lower authorities who had rightly sustained addition and accordingly, same was to be upheld - Held, yes [Paras 15, 18 and 20] [In favour of revenue] 5.8 It is relevant to refer to the Decision of Hon'ble ITAT Hyderabad in the case of Mir Basheeruddin Ali Khan v. ITO 42 taxmann.com 69 wherein it is held as under:

"14. We have heard the submissions of both the parties and perused the material on record as well as the orders passed by the revenue authorities. Undisputedly as revealed from the bank account, the assessee has made cash deposit of 8 Yazdin Jimmy Mistry, Mumbai Rs.6,50,000/- on 8-9-2004. It is the contention of the that the aforesaid deposits were out of the cash available with him from withdrawals made by him earlier from the SBI from February, 2002 to September, 2003. However, such explanation of the assessee is against human probability and totally unbelievable. When the assessee is having a bank account, it is beyond human probability and totally incomprehensible that the assessee would keep quite a substantial amount of Rs.6,50,000/- in cash with him for a period of over one year without depositing into the bank account. The assessee has also not shown any valid reason as to why he kept so much cash with him for over a period of one year when he was holding a bank account. In the absence of any cogent reason backed by sufficient evidence, the explanation of the assessee is only a make-believe story and hence cannot be accepted. The decisions relied upon by the learned AR will also be of no help to the assessee as in the present case the assessee has failed to prove the source of deposit with valid reasons and proper evidence. In this view of the matter, we do not find any infirmity in the order of the CIT (A) in sustaining the addition of Rs.6,50,000/-. Accordingly, we uphold the order of the CIT (A) by dismissing the ground raised by the assessee.

5.9 It is also relevant to refer to the Decision of Hon'ble ITAT Bangalore in the case of Karan Sharma v. ITO in wherein it is held as under:

"6. The assessee has explained that Rs.92,54,462 is out of previous withdrawals and sale of garments and pleaded that it is to be excluded from the taxation. The assessee has not furnished any evidence to establish the nexus between the earlier withdrawals and deposits into various bank accounts. In such circumstances, we are not in agreement with the assessee's counsel that it is from the earlier withdrawals. In our opinion, these receipts are to be considered as from unknown sources to bring into taxation. Therefore, these deposits of Rs. 92,54,462 to be considered as unexplained 9 Yazdin Jimmy Mistry, Mumbai deposits from 'income from other sources. It is ordered accordingly.