NT MANIKANDEN,MADURAI vs. ITO, NCW-2(4), MADURAI

The ld. AR Shri D. Anand, Advocate reiterated the same submissions as made before the Assessing Officer as well as the ld. CIT(A). He submits that the assessee made banking transaction of more than 300 transactions, but, out of these, 162 transactions were related to cheque bounces and 83 transactions related to bank charges debited by the HDFC Bank. Further, he submits that the assessee made cash deposits during demonetization period only at the pressure of the creditor M/s. Five Star Business Credits Limited to settle the loan at one time settlement. He argued that the wife of the assessee has taken jewel loan in order to avail one time settlement with M/s. Five Star Business Credits Ltd. Further, he submits that the cash deposits also includes amount from lease agreement, which were in the custody of the assessee and reiterated the submissions reproduced in page 4 to 6 of ld. CIT(A)’s order, particularly, in para 2 d, e & g in pages 4 & 5 of the impugned order.

The ld. DR Ms. R. Anita, Addl. CIT relied on the order of the ld. CIT(A).

Heard both the parties and perused the material available on record. We note from the assessment order vide reply dated 25.10.2019 that the assessee explained that the cash deposits were arising out of jewel loan and furnished gold loan ledger extracts of 24 sheets. The Assessing Officer did not accept the same only on the ground that the assessee could not mention the purpose of availing gold loan. As it is seen from the impugned order that the assessee explained before the ld. CIT(A) that the said jewel loan was obtained by the wife of the assessee in order to clear loan from M/s. Five Star Business Credit Ltd. as one time settlement, hence, we hold that the Assessing Officer is incorrect to hold that no purpose is mentioned in availing the jewel loan. Further, there is no dispute with regard to availing loan from the said Five Star Business Credit Ltd. as it was submitted before the Assessing Officer vide loan statement for house construction. It is clearly stated before the ld. CIT(A) that the assessee settled the said loan by issuing cheque to the tune of ₹.10,65,000/- on 19.11.2016 by availing one time settlement. In reply dated 30.09.2018, it was stated that the assessee deposited cash in HDFC Bank on 17.11.2016 and it was explained that the said cash were arising out of lease agreement, accordingly furnished two unregistered lease agreements before the Assessing Officer. The Assessing officer did not accept the said explanation only for the reason that the said agreements were entered upon in the year of 2013 and 2015. Further, the Assessing Officer observed that it is highly unlikely that any prudent person holds the cash for such a long time. The ld. AR vehemently contended that the assessee secured loans from various financial institutions i.e., Repco, Kotak Mahindra, Bajaj Finserve. We note that due to severe financial crises, the assessee could not honour the EMI’s as issued cheques were bounced back, which is not disputed by the Revenue as it was reflected in the bank statement filed before the Assessing Officer. We find force in the argument of the ld. AR that the assessee has not deposited the lease amount received to the tune of ₹.12,00,000/- by cash from his tenant at that time under the bonafide belief that once cash deposited in the bank account, then the financial institutions would have immediately collected their outstanding EMI’s. We note that the said reasons were explained before the ld. CIT(A), which are reflected in page 4 and 5 of the impugned order, but, however, the ld. CIT(A) had not given any credence to the said explanation despite having all transactions reflecting in bank statements.

We note that the assessee made cash deposits in Syndicate Bank to the tune of ₹.3,50,000/- and HDFC to the tune of ₹.18,00,000/- . The assessee explained that the said amounts were received from his tenants by name Mr. T.C. Mani and Mr. R. Narendra Babu to an extent of ₹.13,00,000/- and ₹.5,00,000/- respectively. It is also explained before the ld. CIT(A) that the said Mr. T.C. Mani paid ₹.12,00,000/- in cash and ₹.1,00,000/- in cheque. Further, as reflected from the orders of the Assessing Officer as well as the ld. CIT(A) that the assessee availed various loans from Repco bank, Bajaj personal loan and Five Star Business Credit loan to an extent of ₹.17,00,000/-, ₹.2,50,000/- and ₹.10,00,000/- respectively. There is no dispute with regard to the purpose of taking loan from the said financial institution as the same were utilized for house construction. Further, it was stated that the amounts were withdrawn and used for building construction. Therefore, the findings of the ld. CIT(A) is not justified that there is no documentary evidence supporting the source for cash deposits were arising out of lease agreement when they are produced before the Assessing Officer. The Assessing Officer accepted the explanation with regard to ₹.5,00,000/- being lease agreement from Mr. Narendra Babu, but, however, no benefit was given to the lease agreement with Mr. T.C. Mani only on the ground that no prudent person would keep money in his custody for long time, therefore, in our opinion, is not justified. Therefore, we find that the assessee explained the source for cash deposits. Considering the submissions made before the ld. CIT(A), which were reiterated before us, we find that the order of the ld. CIT(A) is not justified in confirming the order of the Assessing Officer in making addition on account of unexplained money under section 69A of the Act. Thus, the grounds raised by the assessee are allowed.

In the result, the appeal filed by the assessee is allowed. Order pronounced on 17th July, 2025 at Chennai.