HARISH RAMCHANDRA JOSHI(HUF),HUBLI vs. ACIT, CIRCLE-1(1) & TPS , HUBLI

The assessee explained that the source for cash deposit are the income declared under the Income Disclosure Scheme, 2016 [IDS] wherein the assessee sold certain capital asset [silver] which was not disclosed earlier and cash consideration received on sale of such capital asset is deposited in the bank account and capital gains arising therefrom was disclosed under the IDS scheme for AY 2009-10. Disclosure was filed in 2016. It was further stated that assessee has got immunity under the IDS declaration. The ld. AO further issued show cause notice which was replied by the assessee stating that source of cash deposit is income declared under the IDS and therefore is assessee is under immunity. Thus assessee reiterated the submission already made.

The ld. AO rejected the contention of the assessee and held that assessee could not establish any connection between the sale of property from which assessee receive cash during AY 2009-10 and capital gain arising thereon which was stated to be the source of cash deposit, as more than 10 years have elapsed. Accordingly the ld. AO held that assessee failed to furnish documentary and other evidence to establish the nexus between the deposit of amount in Oct./Nov. 2016 and capital gain offered for taxation in AY 2009-10 and thus assessee failed to explain the nature and source of acquisition of Rs.1,50,64,500 deposited in the bank account. He added the same as unexplained income u/s. 69A of the Act and passed the assessment order u/s. 143(3) of the Act on 26.12.2019 determining total income of assessee at Rs.1,65,97,015 against the returned income of Rs.15,32,520.

The assessee preferred appeal before the ld. CIT(A) wherein assessee made detailed written submissions which is extracted by the ld. CIT(A)

The assessee is aggrieved with the same and has preferred the appeal.

The ld. AR submitted that assessee has filed a Declaration under IDS, 2016 which is accepted by the Income Tax Department. He submitted that assessee has disclosed the capital gain earned by it and out of the sale consideration this amount was deposited. He submitted that from the sale consideration the money deposited by assessee is the only issue of dispute. The ld. lower authorities have not disputed the Declaration made by assessee under IDS, 2016. He filed a paperbook containing 45 pages which included the Declaration made by the assessee under the IDS. He submitted that assessee has sold Silver of Rs.1,50,64,500, the indexed cost of acquisition of the same was Rs.1,31,15,079 which resulted into capital gain of Rs.19,49,421, on which assessee has paid tax of Rs.8,77,239. He submitted that this was the statement of the assessee before the PCIT, Belagavi during the IDS, 2016. After this, assessee was granted immunity by issuing Form 4 on 27.2.2017. The value of consideration received on sale of Silver was accepted by the Revenue under that Scheme. The sale consideration received by the assessee is now deposited in the bank account and which is disputed on the only reason of time between the realisation of cash and deposit of cash. He said that disclosure was in IDS 2016 for AY 2008-09. Thus cash was available in 2016 as per IDS. So relating it back to the year of capital gain is not proper. He further referred to the Circular No.24/2016 dated 27.6.2016 wherein it was held that source of cash would not be questioned. He specifically referred to the Press Release dated 18.8.2016 wherein in para 3 it was stated that no adverse action shall be taken against the Declaration by Financial Intelligence Unit [FIU] or Income Tax Department solely on the basis of cash deposit made in the bank consequent to Declaration made under the Scheme. He submits that when Govt. of India has given an assurance that cash deposit arising out of the cash generated out of IDS, 2016 Declaration would not be questioned, the addition made by the ld. AO is not correct. He submits that there is no evidence available with the ld. lower authorities that assessee has used this cash for some other purpose and cash deposit in the Bank a/c is not the same. He placed reliance upon the submission made before the CIT(A) which is paced at page 33-45 of the PB. He also referred to the decision of Hon’ble Calcutta High Court in the case of PCIT v. Manju Osatwal dated 11.2.2022 wherein for AY 2014-15, the Declaration made by the assessee under IDS was accepted by the Tribunal and addition deleted was upheld. Though that was a matter u/s. 263 of the Act, but referring to para 17 it was submitted that even the 263 order was quashed which was based on Declaration made by the assessee under IDS, 2016 not accepted by the Revenue for another year. Thus, he submitted that the addition made by the ld. lower authorities is not correct.

With respect to the time period of holding of the cash, the ld. AR submits that there are several judgments of various High Courts and Tribunal wherein it has been held that the source of cash deposit if available to the assessee, only because of the time lag, same cannot be rejected, unless the Revenue proves that the cash was not available with the assessee. He submitted that there is no such finding of the ld. lower authorities. The stand of the assessee is consistent from day one before the AO as well as before the ld. CIT(A) that assessee has cash available out of IDS, 2016 Declaration. In view of this, the addition made by the ld. lower authorities is not correct.

The ld. DR vehemently supported the order of the ld. lower authorities and submitted that the AO and the ld. CIT(A) are correct in holding that assessee has merely disclosed a capital gain of Rs.19.49 lakhs and has deposited cash of Rs.1.5 crore after a long time and therefore the addition u/s. 69A of the cash deposit in the Bank a/c. is correctly made. It was submitted that it is for the assessee to show that the amount of cash deposited in the Bank A/c. is out of disclosure under the IDS. Thus, no infirmity can be pointed out in the order of the ld. lower authorities.

We have carefully considered the rival contentions and perused the orders of the ld. lower authorities. The facts clearly show that assessee has deposited Rs.1,50,64,500 in his bank account No.xxxx5907 with SBI during the AY 2017-18. When the assessee was asked to show the source of cash deposit, the assessee explained that assessee has disclosed the capital gain of a sum of Rs.19,49,420. Assessee filed Form 2 being a Declaration of undisclosed income under IDS of capital gain of Rs.19,49,421. Declaration was filed on 13.10.2016. Assessee paid the tax on the above sum of Rs.8,77,238 on 22.11.2016 and submitted Form 3 on 10.2.2017. The explanation about the IDS, 2016 Declaration was submitted by the assessee before the PCIT, Belagavi by a letter dated 17.10.2016 and acknowledgement copy of such letter is placed at page 13 of PB. The letter states that along with submission of Form 1 that assessee to come out clean has declared the income of Rs.19,49,421 under the head capital gain. It was specifically mentioned that during the FY 2008-09 relevant to AY 2000-10, assessee has sold Silver, the full value of sale of the capital asset is Rs.1,50,64,500, the indexed cost of acquisition of the same was claimed at Rs.1,31,15,079. Thus capital gain of Rs.19,49,421 was worked out and tax thereon was paid. The IDS, 2016 has certain characteristics which are also mentioned in the Press Release dated 18.8.2016 by the CBDT. According to that, it was mentioned in para 3 that no adverse action shall be taken against the Declarant by FIU or Income Tax Department solely on the basis of cash deposits made in the Banks consequent to declaration made under that Scheme. The same Press Release also stated that the period of holding of assets shall be taken on the basis of actual date of acquisition of such asset. On a plain reading of this Press Release, it is apparent that capital gain was also to be considered as undisclosed income under IDS, 2016. Naturally the capital gain has a component of full value of the consideration and the cost of acquisition. The assessee before the PCIT while justifying his declaration under IDS, 2016 has categorically stated that the full value of consideration is Rs.1.5 crores. Thus, as per the cash flow, the assessee will derive full value of consideration in cash, but will pay tax on the capital gain under IDS, 2016. This is a valid disclosure under IDS, 2016. The assessee has also been granted immunity by issue of Form 4 under that Scheme. On that basis itself, it is improper for the lower authorities to hold that assessee has declared the income in the form of capital gain of Rs.19,49,421 and has deposited the full value of consideration of Rs.1.5 crore. Thus the finding of the ld. CIT(A) to confirm the addition on that ground itself is not proper.

Further, regarding the amount of deposit of Rs.1.5 crore in the Bank A/c, IDS 2016 itself has granted immunity that no adverse action shall be taken against the Declarant by FIU or by the Income Tax Department solely on the basis of cash deposits made in Banks, consequent to declaration made under the Scheme. Thus, it is apparent that assessee filed a Declaration on 29.9.2016 and deposited the cash during the period of Oct. 2016 to Nov. 2016. As per Declaration filed on 29.9.2016, assessee has received full consideration of Rs.1.5 crore which was deposited in the month of Oct. 2016. Thus, though Declaration was made of income for AY 2009-10, but it is apparent that assessee was holding that cash as it was not deposited prior to that Declaration. Thus, the holding of cash could not have been doubted. Further the Press Release dated 18.8.2016 clearly says that no action should be taken against such act, but when the cash is deposited in the month of Oct. 2016, the ld. lower authorities have taken adverse view. This is clearly against the Press Release of CBDT dated 18.8.2016. The IDS, 2016 did not prohibit the assessee to declare income for AY 2009-10 under that Scheme. Therefore also, the ld. lower authorities could not have taken an adverse view of the Declaration made by the assessee for AY 2009-10. Further, if the AO is of the view that the cash declared under IDS, 2016 being consideration received by the assessee is not available with the assessee for deposit in cash in the Bank A/c, it is for the ld. AO to bring on record the evidence that the amount deposited in the Bank A/c of the assessee is not the same cash which would have been available with the assessee on declaration under IDS 2016. For this purpose, the ld. lower authorities have merely made an allegation without any evidence. It is for the authority to prove such allegation by substantiating it with evidence. In this case, there is no such evidence gathered by the AO or is in the possession of the AO. Therefore, the addition is merely on the basis of allegation which could not be substantiated. For this reason, we are of the view that the addition of Rs.1,50,64,500 made u/s. 69A of the Act on account of addition of unexplained money is devoid of merit. Therefore, reversing the order of the ld. lower authorities, we direct the ld. AO to delete the addition. Accordingly ground Nos.1 to 4 of the appeal are allowed.

In view of our above decision, ground No.5 becomes infructuous and hence dismissed.

Accordingly, the appeal of the assessee is partly allowed.