KUMARI GUNASEKARAN,CHENNAI vs. ITO, NCW 22(2), CHENNAI

Aforesaid appeal by assessee for Assessment Year (AY) 2017-18 arises out of the order of learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A)] dated 05-03-2024 in the matter of an assessment framed by Ld. Assessing Officer [AO] u/s.143(3) of the Act on 25-12-2019. In the assessment order, Ld. AO made addition of Rs.61.93 Lacs for cash deposited by the assessee during demonetization period. The Ld. CIT(A) confirmed the addition against which the assessee is in further appeal before us.

The Ld. AR stated that the assessee sold certain properties in various tranches during earlier years which were offered to capital gains. The sales proceeds thereof were received in cash and the same was deposited in the bank accounts during demonetization period. The Ld. AR also drew out attention to the cash flow statements as placed on record. The Ld. Sr. DR, on the other hand, stated that the explanation of the assessee could not be accepted. Having heard rival submissions and upon perusal of case records, the appeal is disposed-off as under. Proceedings before lower authorities 3.1 It transpired that the assessee filed return of income declaring income of Rs.1.71 Lacs. The assessee was directed to substantiate the source of cash deposits during demonetization period. It was noted that the assessee was holding 4 bank accounts in which cash was deposited for Rs.61.93 Lacs. The assessee stated that the cash was sourced out of sale of certain land and building as detailed on Page No.2 of the assessment order. The Vacant Land measuring 1209 Sq. Ft. was stated to be sold for Rs.32 Lacs on 17-07-2013. Another vacant land measuring 600 Sq. Ft. was stated to be sold for Rs.17 Lacs on 28-02-2014. Finally, certain Land and Building measuring 782 Sq. Ft. was stated to be sold on 30-09-2015 for Rs.20 Lacs. In all, the properties for Rs.69 Lacs were stated to be sold by the assessee during financial years 2013-14 & 2015- 16. The assessee stated that she was widow lady with children and due to adverse family conditions, the cash was retained by her. However, the assessee’s explanation that the cash was retained for such a long period was not accepted by Ld. AO. Accordingly, the deposit of Rs.61.93 Lacs was added as unexplained investment u/s 69. 3.2 During appellate proceedings, the assessee, inter-alia reiterated that cash was retained by her to meet the expenditure on account of illness of one of her daughter and for other social consideration of her other three children including higher studies. It was also stated that capital gains for AYs 2014-15 and 2016-17 was duly admitted in the Income tax returns. The return for AY 2016-17 was accepted in scrutiny assessment. In that assessment order, Ld. AO accepted the source of income offered by the assessee and passed the assessment order accepting the returned income thereby establishing the source of cash deposits. Reliance was placed on various judicial decisions to assail the impugned addition. 3.3 However, Ld. CIT(A), without meeting specific pleadings of the assessee, held that the assessee was not able to file any concrete reasons or explanation for the nature and source of cash deposits and therefore, the action of Ld. AO was upheld. Aggrieved, the assessee is in further appeal before us. Our findings and Adjudication 4. From the record, it emerges that the assessee has filed return of income for AY 2014-15 on 23-12-2016 declaring gross income of Rs.27.56 Lacs. The capital gains so accruing to the assessee against sale of two pieces of land have duly been reflected in this return of income. The assessee has offered capital gains of Rs.17.83 Lacs in this return of income. Similarly, the return of income for AY 2016-17 has been filed on 23-12-2016 declaring gross income of Rs.15.34 Lacs which is nothing but long term capital gain on sale of property. The return of income for AY 2016-17 has duly been scrutinized and an assessment has been framed u/s 143(3) on 29-11-2018 accepting the capital gains as offered by the assessee. It could thus be seen that the capital gains as earned by the assessee has been accepted by Ld. AO. The assessee has sold all the three properties during earlier years and has duly offered the capital gains in respective Income Tax Returns. The cash retention by the assessee has to be seen in the background of the fact that the assessee suddenly lost her husband in the year 2012 leaving behind 4 children. For marriage and education purposes, the cash was withheld by the assessee until the announcement of demonetization by the government when the assessee had no option but to deposit the same in the bank accounts. Accordingly, the assessee has deposited the cash so retained by her and Ld. AO has considered the same as undisclosed income of the assessee. Evidently, the assessee does not have any other source of income. In such a case, in our considered opinion, the explanation of the assessee has to be accepted. In the light of aforesaid facts, we delete the impugned addition of Rs.61.93 Lacs as made by Ld. AO and allow the appeal of the assessee.