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Income Tax Appellate Tribunal, ‘C’ BENCH : BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
O R D E R
Per Chandra Poojari, Accountant Member
1. This appeal by the assessee is directed against the order of the CIT(A) dated 28/02/2020 for the asst. year 2016-17.
The facts of the case are that the assessee is an individual and it is engaged in real estate activities for a commission or on contract basis which in turn includes buying, selling, renting, appraising real estate on a fee or on contract basis. In the assessment year under consideration, the assessee deposited a sum of Rs.1,11,35,000/- into bank account which has been treated by the AO as unexplained cash credit. Against this, the assessee went in appeal before the CIT(A), who confirmed the same. Hence, the assessee is in appeal before us by way following grounds of appeal.
The order of the Assessing Officer is against the fact and circumstances of the case and bad in law as the Assessing Officer has exceeded his jurisdiction in a limited scrutiny.
2. The order of the Commissioner of Income Tax (Appeals) is perverse the Commissioner of Income Tax (Appeals) miscarried the facts to dismiss the appeal on his own whims and fancy.
3. On the fact and circumstances of the case, and under the provisions of the law, the Assessing Officer erred in making the addition on account of cash deposits in the bank account without obtaining a prior approval of Principal Commissioner of Income-tax, Range 6 for converting limited scrutiny into complete scrutiny as the Appellant Company’s case was selected for limited scrutiny to verify the issue of cash in hand not the cash deposits in the bank account.
On the facts and circumstances of the case, the Assessing Officer erred in making a addition on account of cash deposits made in the bank without providing telescopic for cash withdrawal made from the bank and also without analyzing/appreciating the cash flow of the Appellant during the F.Y 2015-16.
5. On the fact and circumstances of the case, and under the provisions of the law, the Commissioner of Income Tax (Appeals) erred in dismissing the appeal without admitting the additional evidence filed u/r 46A of the Income Tax Rules, 1962 as the proceedings before the Commissioner of Income Tax (Appeals) are co-extensive proceedings of the Assessing Officer.
6. On the fact and circumstances of the case, and under the provisions of the law, the Authorities below erred in making and sustaining the addition of Rs. 1,11,35,000/- u/s 68 of the Income Tax Act, 1961 as the cash deposits in the bank does not amount to cash credit to warrant the application of Sec. 68 of the Income Tax Act, 1961 for making the addition on account of cash deposits made in the bank.
7. On the fact and circumstances of the case, the Commissioner of Income Tax (Appeals) erred in dismissing the appeal without admitting the additional evidences in the form of cash book and bank statement, and without calling for the remind report from the Assessing Officer. Such action of the Commissioner of income Tax (Appeals) is gross violation of the principal of natural justice.
8. The Appellant Company craves leaves, to add, to alter, to amend and to delete any other grounds at the time of hearing.”
At the time of hearing grounds No1 to 3, the is not pressed and these grounds are dismissed as not pressed.
4. Ground Nos. 4 to 7 are with regard to sustaining addition of Rs.1,11,35,000/- u/s 68 of the Act.
The ld.AR submitted that the assessee on the day to day basis deposited the cash into bank account with South Indian Bank bearing account No.1809. The assessee explained that he has repeatedly withdrawn the cash and re-deposited the same into bank account and the ld.AO considered the entire deposit as income of the assessee under the provisions of sec.68 of the Act.
On the other hand, the ld.DR submitted that there was total deposit of Rs.1,14,56,500/- into the bank account of the assessee and it is to be treated as unexplained income of the assessee, as the assessee has not disclosed this amount as business turnover of the assessee.
We have carefully gone through the details of bank account, which is furnished as follows:-
The assessee explained that there were repeated withdrawals and re-deposit of the amount into this account and it cannot be considered as unexplained so as to tax the same. As seen from the above bank account, there is regular withdrawals and redeposit of amount into Bank account and the time gap between these two is very minimal and also the assessee explained the source of deposit as follows:- The cash balance as on 31/03/2020 and the source for the cash deposits made in the bank account during the F.Y 2015- 16 is as under: Opening cash in hand as on 01.04.2015 Rs. 6,23,240/- (+) Cash withdrawal made from bank Rs. 1,73,00,000/- (+) Professional & Consultancy fees received Rs. 50,56,197/- in cash for the F.Y 2015-16 --------------------- Rs.2,29,79,437/- (-) Cash deposits made in the bank Rs.1,14,56,500/- (-) Cash expenditure and cash payment madeRs. 50,56,197/- Rs. 64,66,740/- The amount Rs.64,66,740/- tallies with the cash in hand as on 31/03/2016. Hence, the closing cash balance as on 31/03/2016 stands explained.
Further, the assessee explained as follows:- The closing cash balance as on 31/03/2016 is due to the withdrawal of cash from the bank. The bank balance as on 31/03/2015 was Rs. 50,59,708/- which has been reduced to Rs. 30,005/- as on 31/03/2016. Hence, the reduction in the closing balance at the bank was Rs.50,29,703/- which is resulted into the closing cash balance. Such reduction in the closing bank balance might have led to the increase in the cash balance.
As seen from the fund flow statement produced by the assessee, the total deposit into bank accounts is from earlier withdrawals, consultancy fees received and opening balance of cash and it cannot be said that deposit into bank account is from unexplained sources. Accordingly, we place reliance on the order of the Tribunal in the case of Shri Girish Kidiyappa Nashi in for the assessment year 2015-16 dated 21.12.2021 wherein held as under:-
15.We have heard both the parties and perused the material on record. In the present case, the assessee deposited Rs.1,07,72,650 to various bank accounts from 10.2.2014 to 21.3.2015. During this period, the assessee received rental deposits from various tenants to the tune of Rs.1,54,00,000. The assessee explained that the said amount of Rs.1,07,72,650 was sourced by receipt of rent deposits. According to the CIT(Appeals), there is a long time gap between the receipt of rent deposits and corresponding deposits into various bank accounts. For clarity, we reproduce the receipt and deposit of rent details and deposits to bank accounts as follows:-
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As seen from the above table, the CIT(A) has not disputed the receipt of deposits from various tenants and the only dispute is with regard to time gap between receipt of rent deposits and the deposit into the bank accounts. We have examined the receipt of rent deposits and deposits into bank account which are as follows:-
i) An amount of Rs.46,00,000/- was received during F.Y. 2013-14 (in February and March) from five rental agreements whereas the first cash deposit in the appellant's bank account is dated 01/05/2014 and is of Rs.48,000/-. The total cash deposits in May is only Rs.98,000/-. There is clearly no linkage between the rental deposits received during F.Y. 2013¬14 and the cash deposits in the bank in F.Y. 2014-15. ii) After taking into account the additional cash deposits of Rs.40,23,500/- and the fresh set of rental agreements submitted, it can be observed that the total rental deposits received in the month of June 2014 was Rs.25,50,000/- and the total cash deposits during the same month were Rs.21,80,250/-. iii) After taking into consideration the 2 new rental agreements submitted, it is seen that in the month of August 2014 the total rental deposits received was Rs.45,50,000/- while the total cash deposits during the same month were Rs.20,47,500/-. iv) There were no rental security deposits received during the month of September but there are cash deposits of Rs.10,39,250/-. v) There is only one rental agreement for Rs.7,00,000/- in October 2014 but there are cash deposits of Rs.20,15,000/-. vi) There were no rental security deposits received in November and December 2014 or in January 2015 but there were cash deposits of Rs. 80,250/-, Rs.3,82,000/- and Rs.10,79,000/- in each of these months respectively. vi) There were cash deposits totalling Rs.9,92,300/- in February 2015. There were two rental agreements dated 28/02/2015 totalling Rs.14,00,000/- but the cash deposits on that date were only Rs.1,30,000/-. Hence these rental agreements cannot be used to explain the cash deposits earlier in the month totalling to Rs.8,62,300/-. vii) There were no rental agreements in the month of March 2015 but there were cash deposits of Rs.8,59,100/-.
From the above analysis, the CIT(Appeals) was of the opinion the rent deposits cannot be considered as source for deposit into bank accounts due to time gap between these two. However, the fact is that the assessee actually received rent deposits from various parties to the tune of Rs.1.54 crores and out of this, an amount of Rs.40,95,300 has been given credit towards the deposits in assessee’s wife’s bank account. However, the CIT(Appeals) has not accepted that the balance of Rs.1,08,00,000 is available to the assessee to deposit the same into the bank account of the assessee at Rs.1,07,72,650. The lower authorities have not brought on record any evidence to show
that these rental deposits of Rs.1,08,00,000 have been used by the assessee for any other purpose or used to deposit in any other bank account. Thus, it cannot be said that these rental deposits received from various tenants were used for assessee’s personal purpose or any other investment purpose. In such circumstances, it cannot be disputed that the rent deposits received from various tenants have been used by the assessee for any other purpose than the deposit into various bank accounts. The assessee might have kept the rent deposits received in the form of cash with him and deposited the same into various bank accounts at a later date. It is quite possible that the assessee might have kept the rent deposits received in the form of cash for some purpose and the same remains to be utlised for one reason or the other and the cash balance continued to remain with him for a long period. Later, the assessee deposited into various bank accounts. Some times it may also happen that cash balance with the assessee continues to remain as cash balance even for many months and sometimes received by the assessee might be on the same day. All these probable aspects of the matter cannot be simply ignored or brushed aside. The fact remains that the cash rental deposits have been received by the assessee which is not at all disputed and usage of the same for deposits into various bank accounts cannot be rejected outrightly. Considering the totality of facts and circumstances of the case and in view of the discussion above, in our opinion, the cash deposit into various bank accounts made by the assessee on various dates should be reasonably presumed that it is from the cash rental deposits received by the assessee on various dates. Accordingly, in our opinion, the addition made by the AO and the enhancement of the same by the CIT(Appeals) cannot be upheld and the addition ought to be deleted as there is sufficient sources in the form of rent deposits received by the assessee from various tenants. Accordingly, we are inclined to delete the addition of Rs.1,07,72,650 made by the CIT(Appeals). In the result, the appeal filed by the assessee is allowed.
In view of the above order of the Tribunal, in our opinion, the sources of deposit into bank is duly explained by the assessee and the addition is deleted.