Loading judgment…
Facts
The assessee appealed an order confirming an addition of Rs. 13,52,710 for cash deposits during demonetisation. The AO added the difference between cash deposits and declared income, treating unexplained deposits as income. The assessee claimed deposits were out of prior withdrawals.
Held
The Tribunal held that the CIT(A) erred in dismissing the appeal solely on the ground of additional evidence, as the bank statement was already with the AO. On merits, the Tribunal found that only cash withdrawals totaling Rs. 10,50,000 could be considered as substantiating the cash deposits.
Key Issues
Whether the CIT(A) was justified in dismissing the appeal on the ground of additional evidence, and whether cash deposits were sufficiently explained by prior withdrawals.
Sections Cited
143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH : BANGALORE
Before: SHRI PRASHANT MAHARISHI
This appeal is filed by Haralur Narayana Reddy Nagaraj (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the National Faceless Appeal Centre, Delhi (NFAC) [ld. CIT(A)] dated 14.11.2024 wherein the appeal filed by the assessee against the assessment order passed by the ITO, Ward 4[3][4], Bangalore [ld. AO] dated 07.11.2019 making the addition of Rs.13,52,710 towards cash deposits in the bank account during the demonetisation period was confirmed, dismissing the appeal of the assessee, holding that assessee has filed additional evidence before the ld. CIT(A) and no application for admitting such additional evidence was filed. Therefore, the ld. CIT(A) did not consider the additional evidence and dismissed the appeal of the assessee.
Arguing the case for the assessee, the ld. AR submitted that assessee has not submitted any additional evidence before the ld. CIT(A), but has merely relied upon the bank statement of Karnataka Bank which has been considered by the AO for making the addition. Therefore, the ld. CIT(A) is incorrect in holding that there is additional evidence filed by the assessee.
On the merits, it was submitted that the amount of cash deposit in the bank account is out of withdrawal made by the assessee from the same bank account. She submitted summary of cash deposits and withdrawals and submitted that there cannot be any addition in the hands of the assessee, if credit for withdrawals are made.
The ld. DR vehemently supported the orders of the ld. AO and the ld. CIT(A). The ld. DR also submitted that the bank statement was not with the AO, but was produced before the ld. CIT(A) and therefore it is an additional evidence which could not have been admitted by the ld. CIT(A) without there being an application for admission of the same. Thus, there is no fault with the order of the ld. CIT(A).
We have carefully considered the rival contentions and perused the orders of ld. lower authorities. The facts in the present case are that assessee is an individual, who filed his return of income on 24.7.2017 declaring total income of Rs. 2,97,290. This return was picked up for limited scrutiny for examination of cash deposit during the demonetisation period. It was found that assessee has deposited cash of Rs.16,50,000 in his bank account with Karnataka Bank Ltd. The assessee explained that cash is deposited from monies withdrawn earlier. The ld. AO rejected the same stating that assessee has not furnished any documentary evidence to substantiate his claim. However, in para 5 of the assessment order, he held that assessee is found to be the owner of the money appearing in the bank account issued through opening the bank account from the banker. On analysis of the bank account, he found that a sum of Rs.16,50,000 was deposited in cash and assessee has returned income of Rs.2,97,290. He made an addition of Rs.13,52,710 to the returned income and passed the assessment order u/s. 143(3) of the Act on 07.11.2019 determining the total income of assessee at Rs.16,50,000.
When the assessee approached the ld. CIT(A), the assessee submitted that the amount of cash deposit in the bank account is out of cash withdrawal from the same bank account and therefore relying on the bank statement, the assessee submitted datewise cash remittances and withdrawal. The ld. CIT(A) did not consider the same stating that it is an additional evidence and as there is no application from the side of the assessee for admission of additional evidence, it cannot be considered. Accordingly he dismissed the appeal of the assessee. We find that the order of the ld. CIT(A) is not sustainable in view of the fact that addition in the hands of the assessee is made by the AO on the basis of the same bank statement which was obtained by him through bank. Therefore, if the assessee relies on the same bank statement which was before the AO, assessee did not submit any additional evidence and thus dismissal of the appeal on this ground by the ld. CIT(A) is not justified.
Even on the merits of the case, we find that assessee has stated that on 26.5.2016 a sum of Rs.10 lakhs was withdrawn and on 1.7.2016 a sum of Rs.11,91,120 was also withdrawn. Subsequently also there is a withdrawal of Rs.50,000 comprising of 2 withdrawals. Thus, the withdrawal made by the assessee from the bank account covers the cash deposited by the assessee and therefore in absence of any evidence that this cash has been utilized by the assessee for any different purpose than the deposit with the bank account, the addition to that extent should not have been made. On examination of bank statements, we find that only on 26.5.2016, assessee has withdrawn Rs.10 lakhs and further on 11.12.2016 and 19.11.2016, the assessee has withdrawn a sum of Rs.50,000. On looking at the bank statements, these are only 3 withdrawals of Rs.10,50,000 made by the assessee in cash. The other withdrawal which is stated to be made in cash on 1.7.2016 of Rs.11,91,120 is not cash withdrawal but issuance for obtaining a DD. Thus, the only credit that can be given to the assessee is of Rs.10,50,000. Thus out of addition sustained of Rs.13,52,710, assessee
is granted relief of Rs.10,50,000. Thus assessee has failed to substantiate the source of further deposit of cash to the extent of Rs.3,02,710 and thus addition to the extent of Rs.3,02,710 is confirmed, by deleting the addition to the extent of Rs.10,50,000. Ground No.3 of the appeal is partly allowed.
No other grounds are pressed.
In the result, the appeal of the assessee is partly allowed.