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Facts
The assessee, an individual, filed their return of income for AY 2017-18 and was selected for scrutiny due to cash deposits made during demonetization. The assessee explained cash deposits of Rs. 35,00,000/- on 10.11.2016 and Rs. 4,45,000/- on 28.11.2016 by stating they had withdrawn Rs. 51,00,000/- on 14.07.2016 and Rs. 8,00,000/- on 03.11.2016 for purchasing immovable property. The AO accepted the source for the 10.11.2016 deposit but rejected the 28.11.2016 deposit due to the delay in depositing.
Held
The Tribunal held that the AO and FAA were incorrect in rejecting the source of the Rs. 4,45,000/- cash deposit. Given the significant cash withdrawals exceeding the total deposits, there was no reason to disallow the deposit made on 28.11.2016.
Key Issues
Whether the rejection of the source of cash deposit of Rs. 4,45,000/- made on 28.11.2016 was justified, despite sufficient cash withdrawals by the assessee.
Sections Cited
250, 127, 69A, 234A, 234B, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ (SMC
Before: SHRI GEORGE GEORGE K
आदेश/ O R D E R
This appeal filed at the instance of the assessee is directed against the order of Addl./JCIT (A)-Kolkata, dated 14.10.2024 passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
2 -: 2. There is a delay of 69 days in filing this appeal. The assessee has filed affidavit for condonation of delay stating therein the reasons for belated filing of this appeal. The reasons stated in the affidavit for belated filing is that, the assessee’s father was ill due to Chicken Pox and urinary problem and was hospitalized. It was stated that since the assessee was busy with attending his father in hospital, forget to file the appeal on time. The assessee has also produced the hospital discharge summary in support of his contention. On perusal of the same, I find there is sufficient reason for delay in filing this appeal before the Tribunal. Hence, I condone the delay in filing the appeal and proceed to dispose off the appeal on merits.
The grounds raised
by the assessee read as under:-
1. The order of the CIT(A) is erroneous as the same is opposed to the facts of the case and provisions of law.
2. The order having been passed by the ITO, Ward-1(4), Salem in the absence of an order I notification u/s.127 of the Act, the cIT(A) went wrong in failing to annul the order of assessment.
3. The CIT(A) erred in failing delete the addition of cash deposits u/s.69A of the Act as the AO had accepted the cash balance available with the appellant as on 08.11.2016.
4. The addition of cash deposits of Rs.4,45,000/- as unexplained money u/s.69A of the Act being illegal and contrary to the facts, the CIT(A) erroneously upheld the same.
5. Without prejudice to the ground that the very addition of cash deposits is illegal, the same can be taxed only at the rates applicable for the A.Y.2017-18 and not the enhanced rates @60% as done by the AO.
3 -: 6. The very addition of cash deposits itself being illegal, the levy of interest u/ss.234A & 234B of the Act ought to have been deleted. 7. Any other ground raised at the time of hearing.
Brief facts of the case are as follows: The assessee is an individual. For the assessment year 2017-18, the return of income was filed on 31.03.2018 declaring income of Rs.8,65,070/-. The assessment was selected for scrutiny on account of cash deposits made during demonetization period. During the course of assessment, the assessee was directed the explain the source of cash deposit of Rs.35,00,000/- on 10.11.2016 and Rs.4,45,000/- on 28.11.2016. The assessee submitted that he had withdrawn sum of Rs.51,00,000/- on 14.07.2016 and Rs.8,00,000/- on 03.11.2016. The AO completed the assessment u/s.143(3) of the Act vide order dated 13.12.2019 accepting the source of cash deposit for a sum of Rs.35,00,000/-. However, with regard to cash deposit on 28.11.2016 amounting to Rs.4,45,000/-, the AO did not accept the source solely for the reason that assessee could not explain why he had waited till 28.11.2016 when he was having cash in hand from the initial date of announcement of demonetization.
4 -: 5. Aggrieved, assessee filed appeal before the First Appellate Authority (FAA). The FAA confirmed the view taken by the AO. The relevant finding of the FAA reads as under:- “Regarding the reason for delay in deposit of demonetized cash on 28.11.2016, the Appellant has mentioned that there was huge crowd in the Bank and the government has given time till 31.12.2016 to deposit the amount. No explanation has been given when Rs. 35,00,000/- could be deposited on 10.11.2016, the First Day of Banking after 08/11/2016, what prevented the Appellant from depositing the same on 10.11.2016 or immediately thereafter. The Appellant cannot receive back the advance in cash in demonetized notes after 08.11.2016 as such transfer was illegal. The Appellant has failed to furnish any evidence, Name, PAN, Copy of agreement etc. Hence, such explanation is not acceptable by the law of human test of probabilities.
The Appellant has also stated that cash of Rs 4,45,000/- was kept for some urgent unexpected hospital expenses. This is contrary to the explanation above as there was huge crowd in the bank. The Appellant has uploaded the copies of the Bank statement where I find that the Appellant was doing online transfers regularly through his Bank accounts. Hence, the above explanation is notacceptable and rejected.”
Aggrieved by the order of the FAA, the assessee has filed this appeal before the Tribunal. The Ld.AR submitted that assessee was into the real estate business and Rs.51,00,000/- was withdrawn for the purpose of payment of advance for purchase of immovable property. The withdrawal made on 14.07.2016 amounting to Rs.51,00,000/- is out of maturity of mutual fund. Therefore, it was prayed since assessee was having enough cash balance as on the date of announcement of 5 -: demonetization, the source of cash deposit is to be accepted. It was submitted that assessee retained money of Rs.4,45,000/- due to the reason of any unexpected hospital expenses.
The Ld.DR supported the orders of the AO and the FAA.
I have heard rival submissions and perused the material on record. It is an admitted fact that assessee had withdrawn a sum of Rs.51,00,000/- on 14.07.2016 and further, sum of Rs.8,00,000/- on 03.11.2016. It was stated that assessee had withdrawn these amounts for the purpose of purchase of an immovable property and paid the advance for the same. The assessee had deposited a sum of Rs.35,00,000/- on 10.11.2016 and Rs.4,45,000/- on 28.11.2016. The AO had accepted the source of cash deposits made on 10.11.2016 and rejected the source of cash deposit made on 28.11.2016 solely for the reason that assessee had not deposited the amount within the initial dates of announcement of demonetization. When assessee was having cash withdrawals more than sufficient to cover deposits, there is no reason why cash deposit of Rs.4,45,000/- made on 28.11.2016, the source of same cannot be accepted. The AO does not have a case, the cash withdrawn by the assessee 6 -: amounting to almost Rs.60,00,000/- has been utilized by the assessee for some other purpose other than aforementioned cash deposits. The reason stated by the AO and the FAA for not accepting the source of cash deposit for a sum of Rs.4,45,000/- is not correct when admittedly enough cash withdrawals was there of almost Rs.60,00,000/- and the total cash deposits being only Rs.39,45,000/-. For the aforesaid reason, the addition made u/s.69A of the Act by the AO amounting to Rs.4,45,000/- is deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 1st July, 2025 at Chennai.