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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI S. RIFAUR RAHMAN, HONBLE & SHRI SANDEEP SINGH KARHAIL, HONBLEShri Siddharth Kothari Shri Mehul Jain
O R D E R PER S. RIFAUR RAHMAN (AM)
This appeal is filed by the Revenue against order of the Learned Commissioner of Income Tax (Appeals)-53, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 27.01.2021 for the A.Y.2017-18.
Brief facts of the case are, assessee filed its return of income on 31.07.2017 declaring total income of ₹.65,97,970/-. The case was (A.Y: 2017-18) Anuya Jayant Mhaiskar selected for scrutiny through CASS, the assessment proceedings was conducted electronically and all the communication of data and documents took place through electronic mode. Statutory notice u/s.143(2) and 142(1) of Income-tax Act, 1961 (in short “Act”) were issued and served on the assessee along with questionnaire. In response assessee filed the relevant information through e-filing portal.
During assessment proceedings, Assessing Officer observed that at the time of demonetization assessee has made deposit of ₹.1,01,20,000/- when the assessee was asked to furnish the details, in response assessee has submitted as under: - “a) During the year there were cash withdrawal through cheque of Rs. 3,14,00,000/- through four transactions two cash withdrawals of Rs. 1 crore each on 30.04.2016, two cash withdrawal of Rs. 1 crore and Rs. 14 lacs on 23.08.2016. b) Cash of Rs.1.14 crore was withdrawn on 23.08.2016 even as cash in hand on that date was Rs. 2.20 Crores. c) Cash in hand as on 08.11.2016 was of Rs. 3,34,98,301.00 which was attributable to both opening balance and cash withdrawn during the year. Out of this cash-in-hand only Rs. 1,01,20,000/- was deposited.”
The Assessing Officer considered the submissions and observed that the cash was withdrawn in only two instances and observed that generally cash is withdrawn based on the immediate need for it. As per the books of account the cash were withdrawn and not put to any use. He observed
(A.Y: 2017-18) Anuya Jayant Mhaiskar that there is no business rational in these transactions when the cash was withdrawn even though there is still cash in hand. Further, he observed that assessee had cash in hand of ₹.3.34 crores and assessee has not submitted any details why only ₹.1.01 crores was deposited in the bank. By relying on Praveen Kumar v. CIT [2019] 415 ITR 241, Dinesh Kumar Jain v. Ld. Pr.CIT [2018] 407 ITR 65 (Delhi), Sudhir Kumar Sharma v. CIT [2016] 69 taxmann.com 219 (SC), Assessing Officer disallowed the cash deposits made by the assessee in the bank.
Aggrieved assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A) assessee filed detailed submissions and Ld.CIT(A) after considering the detailed submissions of the assessee allowed the ground raised by the assessee with the observation that Assessing Officer made the addition on inference and presumptions, there is no material to hold that the money was not available with the assessee, and he observed as under: - “4.3 I have very carefully considered the matter. There is a deposit of a sum of Rs. 1,01,20,000/- in the bank account of the appellant with Dombivali Nagari Sahakari Bank after demonetization. A sum of Rs. 1,20,000/- was deposited on 23.11.2016 and a further sum of Rs. 1,00,00,000/- was deposited on 13.12.2016. The appellant had opening cash of Rs.20,98,301/- as on 01.04.2016. A sum of Rs. 200,00,000/- was withdrawn from the Dombivali Nagari Sahakari Bank through cheques on 30.04.2016. A further sum of Rs. 1,14,00,000/- was withdrawn through cheque on (A.Y: 2017-18) Anuya Jayant Mhaiskar 23.08.2016. Thus, according to the appellant before demonetization, assessee had cash available of Rs. 3,34,98,301/-. The explanation and submissions made by the appellant before the AO has been reiterated before me. The moot question to be decided is whether the appellant has explained the nature and source of the sum deposited after demonetization came into force. It was on 8th November 2016 that demonetization was announced. Admittedly, there was substantial withdrawal of cash from the bank account of the appellant with Dombivali Nagari Sahakari Bank prior to announcement of demonetization. Apart from opening cash in hand of Rs. 20,98,301/ the appellant had withdrawn Rs.2 crores on 30.04.2016 and a further amount of Rs. 1.14 crores on 23.08.2016, thus accounting for total availability of cash of Rs. 3.34 crores. Thus the explanation that deposit of Rs. 1,01,20,000/- was out of available withdrawal made earlier cannot be denied unless there is anything contrary on record. The explanation given by the appellant is supported by the withdrawals made prior to demonetization; if there were no such withdrawals there would be no explanation. In the instant case, the explanation is supported by the books maintained. It is seen that AO has rejected the explanation questioning the rationale for withdrawing and not spending and thereby assuming that cash would have been put to use but not accounted for. But this is only a surmise, a presumption with nothing on record of the AO to support the said conjecture. The appellant has provided explanation and the explanation is supported by books maintained. The action of the AO in rejecting the books on the ground that there is no business rationale in withdrawing large sums without putting same to use or that cash earlier withdrawn might have been used without accounting for the same, is legally not sustainable. As held by the Hon'ble Delhi Tribunal in the case of Gordhan, Delhi, Vs DCIT dated 19/10/2019, unless it is demonstrated by AO that amount in question has been used for any other purpose, no addition can be made under section 68. The same view has been taken in the case of ACIT Vs Baldev Raj Charla 121 TTJ 366 (Delhi) wherein it has been held that merely because of time gap between withdrawal and deposit of cash the explanation of the assessee could not be rejected and addition on account of cash deposit could not particularly be made when there is no finding recorded that apart from depositing cash as explained by the assessee, there was any other purpose it was used for. Thus addition made on inferences and presumptions is bad in law and legally unsustainable. In fact there is no material to hold that this money was not available with the assessee. Such presumption
(A.Y: 2017-18) Anuya Jayant Mhaiskar also cannot form the basis for rejection of books. No specific defects have been pointed out in the accounts as maintained, there is no failure to produce records, nor any lacuna established in the method of accounting followed. Thus when no discrepancies have been pointed out in the books of account, rejection of the books of account u/s 145 of the Act is not as per law. As per section 68 of the Act, a sum credited in the books can be brought to tax when assesee has no explanation about nature and source or where such explanation is not satisfactory in the opinion of the Assessing Officer. As held by the Hon'ble Supreme Court in CIT vs Orissa Corporation Ltd 159 ITR 78, assesee has to prove identity, capacity and genuineness of the transaction done failing which the credit would be brought to tax as deemed income of the concerned year. In the instant case, the appellant has owned up the credit and thus identity is established. Further, as can be seen from the assessment order the creditworthiness of the assessee is not in doubt. The genuineness of the transaction is supported by bank withdrawals of substantial sums anterior to the date of demonetization. The onus on the assessee to explain stands discharged. The factum of entire sum earlier withdrawn not re -deposited back is not a ground for making addition under section 68. What the Act mandates is that a credit in the books has to be satisfactorily explained, its nature and source established. It is held that the necessary ingredients of section 68 are satisfied in this case with respect to the credit of Rs.1,01,20,000/- in the books of appellant. In view of the facts of the case and position in law, addition of Rs 1,01,20,000/- made u/s 68 of the Act in a sum is deleted. Accordingly, this ground of appeal is allowed.”
6. Aggrieved revenue is in appeal before us raising following grounds in its appeal: - 1. "On the facts and in the circumstances of the case, the Ld.CIT(A) has erred in deleting the addition/disallowance of Rs.1,01,20,000/- made u/s 68 of the Act by the AO. 2. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) has erred in law by not appreciating the fact that the onus to explain the source of cash deposited was on the assessee and the same has failed to discharge it.
(A.Y: 2017-18) Anuya Jayant Mhaiskar 3. "The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary."
At the time of hearing, Ld. DR submitted as under: - “i) The Cash book shows only transactions of cash withdrawals and deposits in bank. It shows that the assessee had no use of cash and therefore, he was required to submit the reasons for withdrawing huge cash on 4 occasions inspite of having sufficient cash in hand and no immediate use of cash, as pointed out by the AO in the show cause notice. The assessee failed to provide any reasons or explanation. ii) There is negative balance of Capital Account on Liability side of Balance Sheet and there are huge investments in various businesses on the Asset side. The assessee runs two proprietary concerns too. This shows that assessee intelligently uses funds. available and thus, the explanation that earlier cash withdrawals were never used can't be accepted as true and satisfactory. Thus, assessee fails the test of preponderance of human probability. iii) The importance of providing a valid explanation regarding the reasons for cash withdrawals from bank and holding huge amount of cash in hand becomes very relevant, when the findings of Hon'ble Supreme Court of India in the case of Sreelekha Banerjee v. CIT [1963] 49 ITR 112 (SC) reproduced in the decision of Jurisdictional Hon'ble High Court of Bombay in Narendra G Goradia v. CIT [1998] 234 ITR 571 is considered. The relevant findings are as under: (Page 107 of Assessee's Paperbook) "....In cases of high denomination notes, where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or part of a particular sum in high denomination notes, the assessee prima facie discharges his initial burden when he proves the balance and that it might reasonably have been kept in high denomination notes..." Keeping in mind the above findings, it is inferred that in the present case, the assessee has failed to provide reasons/explanation to justify that the high denomination notes of Rs. 500/1000 were kept in hand for business convenience and thus, the initial burden is not discharged. iv) Reliance is placed on the decision of Hon’ble High Court of Punjab and Haryana in Smt. Kavita Chandra v. CIT, Panchkula [2017] 81 taxmann.com 317. Relevant part is sub-para 16 on 4th page of the order, which was submitted during the hearing.
(A.Y: 2017-18) Anuya Jayant Mhaiskar Reliance is, also, placed on the decision of Hon.ble High Court of Delhi in Dinesh Kumar Jain v. PCIT, New Delhi [2018] 97 taxmann.com 113. Relevant part is Page 5 and Para 9 of Page 7 of the order, which was submitted during the hearing. v) It is further submitted that in all the case laws relied upon by the assessee in the Paperbook are not applicable to the facts of the present case, as in all these cases either the assessee had explained the reasons/justification for withdrawing and holding cash in hand; or the finding of Hon'ble SC in Sreelekha Banerjee v. CIT (supra) were not considered.”
On the other hand, Ld. AR submitted that assessee has withdrawn cash and there is a nexus with the deposits made by the assessee in the bank. The assessee hold sufficient cash balances in hand at the time of making deposit in the bank. The Assessing Officer made the addition with the observation that assessee did no re-deposit the whole amount. He submitted that the assessee has fulfilled creditworthiness and genuineness of the transaction. Therefore, merely making presumptions and applying preponderance of probability, Assessing Officer made the addition. He supported the findings of the Ld.CIT(A) and prayed that the order of the Ld.CIT(A) may be sustained.
Considered the rival submissions and material placed on record, we observe that Assessing Officer noticed that assessee has redeposited cash of ₹.1.012 crores in the bank account during demonetization period. In order to verify the sources for such deposit, he asked the assessee to (A.Y: 2017-18) Anuya Jayant Mhaiskar prove the sources for the same. Assessee submitted the detailed submissions with the cash book, which disclosed the availability of sufficient cash in hand. The Assessing Officer did not accept the details of cash withdrawals declared by the assessee during the year. We observe from the submissions that the assessee has disclosed the sufficient funds available with him to deposit the same. There is no evidence with the Assessing Officer to dispute with the availability of funds with the assessee. We observe that assessee had sufficient funds more than the amount deposited in the bank. Merely because assessee did not explain the reasons for withdrawal and why not deposited full cash available in the cash book is not the proper reasons for the Assessing Officer to make addition. It is for the Assessing Officer to bring on record any contrary evidence that assessee has misused the funds available on the record. What is relevant is the source for the funds deposited in the bank account and assessee has proved that it has sufficient unutilised funds in the books. The availability of funds in the cash book supports the cash deposits in the bank. Therefore, Assessing Officer cannot go beyond the mandate unless he has contrary evidence. Therefore, we do not like to alter the findings of the Ld.CIT(A) and it is not proper for Assessing Officer to apply preponderance of probity in this case. In our
(A.Y: 2017-18) Anuya Jayant Mhaiskar view, the case law relied by the Ld. DR are not relevant for the present case. Therefore, the grounds raised by the revenue are dismissed.
In the result, appeal filed by the Revenue is dismissed.
Order pronounced in the open court on 21st July, 2022