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Income Tax Appellate Tribunal, “SMC - B” BENCH : BANGALORE
Before: SHRI N. V. VASUDEVAN
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC - B” BENCH : BANGALORE BEFORE SHRI N. V. VASUDEVAN, VICE PRESIDENT IT(IT)A No.394/Bang/2022 Assessment Year : 2017-18 Shri. Girish Panambur Vs. ITO (International Tax Ward), Venkatraman, Mangaluru. 2-95 Giri Prasad, KulaiHosabettu, Mangaluru – 575 026. PAN : AEQPV 4737 F APPELLANT RESPONDENT Assessee by : Shri. Pramod Shirke, Advocate Revenue by : Shri. Ganesh R Ghale, Standing Counsel for Department. Date of hearing : 28.07.2022 Date of Pronouncement : 10.08.2022 O R D E R
This is an appeal filed by the assessee against order dated 09.03.2022 of CIT(A) - 12, Bengaluru, relating to Assessment Year 2017-18.
The assessee is an individual. He is assessed in the status of a non- resident in Assessment Year 2017-18 as he is employed in Saudi Arabia. He filed return of income in India for Assessment Year 2017-18 disclosing total income of Rs.18,200/-. The return of income was selected for Scrutiny Assessment to verify the source of funds out of which cash of Rs.10,15,000/- was deposited in his Bank A/c with M/s. Axis Bank, Surathkal Branch, during the demonetization period. The cash deposits were made on 14.11.2016, 23.11.2016 and 25.11.2016 of Rs.15,000/- Rs.1,00,000/- and Rs.9,00,000/- respectively.
IT(TP)A No.394/Bang/2022 Page 2 of 10
The assessee explained before he AO that the source of funds for cash deposit in the Bank A/c was withdrawal of cash from the very same Bank A/c in the past. The details of cash withdrawal from this Bank A/c was also given by the assessee to the AO and these details are given as Annexure to this order. The assessee submitted that they wanted to acquire agricultural plot and for that purpose cash was withdrawn but ultimately due to legal constraints, the transaction could not be completed. The cash withdrawn available with the assessee was redeposited by the assessee’s wife Smt. Usha Girish and was the source of funds out of which cash deposits were made in the Bank A/c.
The AO however rejected the explanation of the assessee and brought to tax the sum of Rs.10,15,000/- under section 69A of the Income Tax Act, 1961 (hereinafter called ‘the Act’), on the ground that the assessee did not file evidence to show that the cash withdrawn was for acquiring agricultural plot to construct a farm house.
The CIT(A) confirmed the order of the AO for the following reasons:
“6. The submissions made by the assessee are examined. In this case the appellant deposited a cash of Rs.10,15,000 in his bank account during demonetization. The return filed had been taken up for scrutiny and the source of cash deposited enquired into. Assessee claims that his wife Smt. Usha Girish had withdrawn certain amounts during FYs 2015-16 and 2016-17 and that the same are held back and deposited during demonetization period. The bank account statements of assessee and his wife for the corresponding years is also seen. It is seen that amounts withdrawn were in ATMs in denominations of 5,000 and 10,000
IT(TP)A No.394/Bang/2022 Page 3 of 10 over long periods of time. These cash withdrawals from ATM are obviously for the personal expenses of the assessee’s family living in India. Assessee has sought the benefit of ballooning and telescoping to explain the cash deposits made during demonetization period. However, it is seen that the AO has already accepted assessee's explanation to the extent Rs.1,15,000 in spite of withdrawals in small denominations. No further relief need be given to the assessee considering the facts of the case. The grounds of appeal are rejected.”
6. Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal.
7. I have heard the rival submissions. The learned Counsel for the assessee submitted that the earlier withdrawals of cash have to be accepted as source for subsequent deposits and the Revenue cannot insist on proof of availability or purpose of the earlier withdrawal of cash. The learned Counsel for the assessee in this regard placed reliance on a decision of the Hon’ble Karnataka High Court in the case of Smt. P. Padmavathi Vs. The ITO of 2009 judgment dated 06.10.2010 wherein the question before the Hon’ble Court relating to Assessment Year 2004-05 was whether the findings of the authorities that the source of cash deposited in the loan account is not properly explained in sustainable. The Court held that earlier withdrawal from the same account shall be held to be proper explanation of the source. The following were the relevant observations of the Court:
“11. Question 3: In so far as the cash deposit in two loan accounts as set out above is concerned, the material on record discloses that the assessee had Rs.7,00,000/- in cash on 20.8.2003 having withdrawn the same from his bank account. The said Rs.7,00,000/- has suffered tax. No doubt IT(TP)A No.394/Bang/2022 Page 4 of 10 the deposit in the two loan accounts was made on 29.9.2003 and on 25.11.2003. The authorities have disbelieved the ease of the assessee on the ground that there is a gap of 40 days or more between the withdrawal of the amount from the bank account and re-deposit of the same in the loan account. Secondly, on the ground that, it is risky to keep large amount of cash on hand. Thirdly, they are of the view that the explanation offered such as having borrowed a gold loan, yet another loan of Rs.2,00,000/- and sale of paddy, are not established by proper evidence. It is in this context, it is useful to refer to a judgment of this Court in the case of ‘S.R.Venkataratnam Vs. Commissioner of Income Tax, Karnataka-1 and another’ reported in ITR (127) 1981 Page 807, where a learned Single Judge held as under: "Once the petitioner-assessee disclosed the source as having come from the withdrawal made on a given date from a given bank, it was not for the respondents no.1 and 2, to concern themselves with what the assessee did with the money, i.e., whether he had kept the same in his house or utilised the services of a bank by depositing the same. The ITO has only two choices before him. One was to reject the explanation as not believable for the reason that on his investigation no such pigmy deposit was ever made into the bank. In the alternative, he ought to have called upon the assessee- petitioner to substantiate his claim by documentary evidence. Having exercised neither of the choices, it was not open to the ITO to merely surmise that it would not be probable for the assessee to keep Rs.15,000/- unutilised for a period of two years. The ITO should have given an opportunity to the assessee to substantiate his assertion as to the source of the capital outlay."
In this case, it is not in dispute that the assessee withdrew a sum of Rs.5,00,000/- on 18.8.2003 and Rs.2,00,000/- on 20.8.2003 from her savings account. She is an agriculturist and she had agricultural income. Once she demonstrated that she was in possession of Rs.7,00,000/- cash plus agricultural income on her hands, if after 40 days, a cash deposit is made to the extent of about Rs.5,20,000/- towards loan account, it cannot be said that the source of the said deposit is not properly explained. Merely because there is a delay of 40 days from the date of withdrawal of the money from the bank account to the date of deposit in the loan account. Once money
IT(TP)A No.394/Bang/2022 Page 5 of 10 is shown to be in the account and withdrawn, what the assessee did with that money till it was acutally deposited, is not the concern of the Department. As long as the source is explained and established and when the money is withdrawn from a savings bank account and paid to discharge loan by deposit into a loan account, it is not possible to hold that the source is not explained. In that interregnum period, if the very same money is utilized for other purpose and thereafter, it is appropriated towards discharge of a loan, that cannot be held against the assessee. In that view of the view, the finding recorded by the Tribunal is erroneous and requires to be set aside. Therefore, the said substantial question of law is also held against the revenue and in favour of the assessee.”
The learned DR relied on the order of the CIT(A) and submitted that subsequent withdrawals when cash is already available with the assessee has not been explained. The assessee has also not explained as to why and for what purpose cash withdrawn was kept with the assessee. His argument was that the plea of the assessee is contrary to human probability. He relied on order dated 07.04.2021 of ITAT, Bengaluru SMC Bench in the case of Shri. Mohammed Sharaq Vs. ITO wherein this Tribunal held that availability of earlier withdrawal of cash for the subsequent deposit must be established by the assessee and in the absence of such evidence, the benefit of earlier withdrawal cannot be given to an assessee. He also relied on similar decision rendered by ITAT, Delhi, in the case of Leela Devi Vs. ITO in ITA No.1423/Del/2020 order dated 01.02.2021.
I have considered the rival submissions. The fact that there were earlier withdrawal of cash from the very same bank account is not disputed either by the AO or the CIT(A). The details of the past withdrawals are given as an annexure to this order. The AO/CIT(A) have however
IT(TP)A No.394/Bang/2022 Page 6 of 10 proceeded on the basis that the availability of the earlier withdrawal in the hands of the assessee has not been proved by the assessee. The Hon’ble Karnataka High Court in the case of Smt. P. Padmavathy (supra) clearly laid down that earlier withdrawals of cash from Bank account have to be accepted as available to an assessee to explain a later deposit as source. The Hon’ble Court held that it was not open to the Revenue to contend that the assessee has to explain as to how the cash withdrawn earlier was utilized by an assessee and was still available with the assessee. The decisions cited by the learned DR are contrary to the law laid down by the Hon’ble Karnataka High Court and therefore not binding.
I, therefore, hold that the previous withdrawals are available and source for subsequent cash deposits. The Revenue cannot insist on proof of availability of funds withdrawn or purpose of withdrawal. I, therefore, allow the appeal of the assessee and direct that the addition made be deleted.
In the result, appeal of the assessee is allowed.
Pronounced in the open court on the date mentioned on the caption page.