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Income Tax Appellate Tribunal, HYDERABAD BENCHES “A”, HYDERABAD
Before: SHRI D. MANMOHAN & SHRI B. RAMAKOTAIAH
PER B. RAMAKOTAIAH, A.M. :
This is an appeal by assessee against the order of the Commissioner of Income Tax (Appeals)-10, Hyderabad, dated 30-06-2017 on the issue of cash deposits in Bank account.
Brief facts of the case are that assessee is a non- resident and for the AY. 2010-11, filed return of income on 28- 12-2010 admitting total income at Rs. 27,580/-. During the course of assessment, Assessing Officer (AO) noticed that there were cash deposits in A/c No. 403309318 maintained with
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Indian Bank, Srinagar Colony, Hyderabad. The details of cash deposits are as under:
Sl.No. Date Particulars Amount (Rs) 1 21-07-2009 Interest 84 2 24-11-2009 By cash deposit 3,27,000 Deposit by self 3 25-11-2009 By cash deposit 3,66,080 Deposit by self 4 26-11-2009 By cash deposit 3,00,000 Deposit by self 5 27-11-2009 By cash deposit 3,00,000 Deposit by self 6 29-11-2009 By cash deposit 3,00,000 Deposit by self 7 28-02-2010 By cash deposit 1,78,800 Deposit by self
2.1. Assessee was asked to explain the sources for the deposits by the AO and in response to the same, assessee explained that the sources were travel cheques and gift from father. In the absence of evidence with regard to travel cheques and sources from father and the lack of nexus between the said sources and the cash deposits in the bank account, AO added a sum of Rs. 17,71,964/- as unexplained credits u/s. 68 of the Income Tax Act [Act].
2.2. Aggrieved by the addition, assessee preferred an appeal before Ld. CIT(A) appeal. During the course of proceedings, assessee filed Paper book on 24-08-2015 enclosing copy of affidavit from Sri Venu Myneni, details of deposits in NRO Account, details of withdrawals made from NRE Account, confirmation from Shri M. Srinivasa Rao, father
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of assessee, ITR and computation of income of Sri M. Srinivasa Rao. Assessee also filed written submissions on the same day explaining the sources for cash credits and relied on the decision of DCIT Vs. Finlay Corporation Ltd., Delhi ITAT to contend that Section 68 cannot be invoked in respect of cash deposits in bank account. Assessee also relied on decisions to contend that gift from father cannot be taxed as per the provisions of Section 56(2)(vii) of the Act. Assessee also contended that withdrawals from NRE account were deposited into the NRO Account. Another contention of assessee was that there were deposits of travel cheques into the bank account for which the source was income earned outside India and relied on the following decisions:
a) S. Hastimal Vs CIT (1963) [49 ITR 273] (Mad); b) Tolaram Daga Vs CIT (1966) [59 ITR 632] (Assam.); c) CIT Vs Daulat Ram Ramatmull, (1973) [87 ITR 349] (SC); d) Sarogi Credit Corporation Vs CIT (1976) [103, ITR 344] (Pat); e) Rohini Builders (2002) [256 ITR 360] (Guj); f) Nemichand Kothari Vs CIT (2003) [264 ITR 254]; g) CIT Vs HS Builders Pvt Ltd (2012) [254 CTR (Raj) 542];
Ld.CIT(A) directed the AO to submit a remand report on the written submissions filed by assessee. With regard to the deposits made on 25-11-2009 and 29-11-2009 in Indian Bank which are claimed to be gifts given by assessee's father, AO stated that letter dt. 16-03-2013 filed during the
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course of appeal proceedings constituted additional evidence and objected to the admission of additional evidence. AO also mentioned that the father of assessee, Shri M. Srinivasa Rao also did not file copy of the bank account from which this amount was given. He concluded that there is no direct nexus between the so called withdrawal of cash by the father and deposit by the son i.e., assessee as there is a long gap of 7 months between the withdrawal of cash and deposit of cash in these bank accounts.
Ld.CIT(A) has sent remand report to assessee for his comments. Assessee vide letter dt. NIL filed on 27-06-2016 reproduced his earlier contentions and relied on various decisions. However, assessee filed letter dt. 27-06-2016 giving additional evidence as per Rule 46A of the Act. In this submission, assessee filed confirmation letter dt. NIL from Sri M. Srinivasa Rao with regard to the gift given to the son i.e., assessee and filed a copy of account with Indian Bank bearing account No. 403288570. Ld.CIT(A) did not accept the submissions of assessee and confirmed the addition by stating as under:
“11.5 The letter submitted by the appellant's father, Sri M. Srinivasa Rao is without any date. 'The appellant also mentioned in the letter dt. 19.06.2017 filed in this office on 28.06.2017 that documents with regard to the cash deposits in the NRO account, withdrawals from NRE Account and gift received from his father were filed for the first time vide letter 27.06.2016 and could not be submitted to the Assessing Officer during assessment proceedings due to paucity of time and requested to admit the same as additional evidence.
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11.6 As per the reasons given by the Assessing Officer in the remand report, these documents are not admitted as additional evidence. The bank account No. 40330931-8 is already on record and account numbers 406690550, 403307479 are also on record. Copy of the tax return is also available on record. As such, these are not additional evidences and hence, not admitted. The appellant in spite of giving several opportunities did not prove the sources for cash deposits made in the bank account no. 403309318 maintained in Indian Bank, Srinagar Colony, Hyderabad. The so called gift of Rs. 4,93,000/- from father has also not been proved. The confirmation letter filed before the Assessing Officer is not conclusive and not dated. The genuineness of the transaction has not been proved by the appellant. Apart from this letter, no other details/explanation was filed before the Assessing Officer. As already mentioned, the evidence submitted during these proceedings is not admitted in the absence of any justification in terms of Rule 46A of the I.T. Rules, 1962. There is a long time gap between the withdrawal of cash by the assessee and re-deposit of the same in the appellant's account. The source for entire cash deposits added by the Assessing Officer is not proved by the appellant.
11.7 Even if provisions of Section 68 are not applicable, they are to be added under section 69 of the I.T. Act. This does not invalidate the addition made in the absence of sources for the deposits. Therefore, entire addition made by the Assessing Officer is confirmed. In view of the above, ground nos. 2 to 7 are dismissed”.
Contesting the above, assessee has raised as many as 12 grounds.
Explaining the facts of the case and source of the funds, Ld. Counsel placed on record the summary of the explanations given before the authorities as under:
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S. Date Particulars Amount Source Paper No (Rs) Book Page No. 1 31.07.2009 Interest 84 2 24.11.2009 By Self 3,27,000 Out of cash withdrawal 18 & 5,00,000 on 12.11.2009 22 & deposited in 24.11.2009 3 25.11.2009 By Self 3,66,080 Out of cash withdrawal 1 & 17 5,00,000 amount on 12.11.2009, 3,27,000 was deposited in 24.11.2009 balance amount 1,73,000 in 25.11.2009 plus 1,93,000 given by father deposited in bank as on 25.11.09 4 26.11.2009 By Self 3,00,000 Deposited out of savings 24 & i.e., salary earned in US 25 5 27.11.2009 By Self 3,00,000 Deposited out of saving 24 & i.e., salary earned in 25 u/s. 6 29.11.2009 By Self 3,00,000 Cash given by father 1 deposited in bank 7 28.02.2010 By Self 1,78,800 Deposited out of savings 24 & i.e., salary earned in 25 u/s. 17,71,964
Ld.DR, however, relied on the orders of the authorities.
After considering the rival contentions, we are unable to understand how Ld.CIT(A) can reject the evidence furnished by assessee under rule 46A of the Act. In para 11.6 of his order, he gives a finding that these are not additional evidence. At the same time, he rejects the same in terms of Rule 46A. The stand of CIT(A) is not only contrary but also devoid of merits. It is assessee’s contention that he has brought traveler cheques encashed them and deposited the money in the bank accounts. After lapse of time, the details of
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traveler cheques are generally not available with assessee but the fact is that an amount of Rs. 5 Lakhs was out of withdrawal from NRE A/c on 12-11-2009, which is evidenced by Bank entries and even this amount was not given credit by the authorities. A small amount of Rs. 1,93,000/- is stated to be out of the amount given by his father who also withdrew money from his bank account. Just because the confirmation was not dated, the same cannot be rejected, unless the same is proved to be false. Inspite of remanding the matter to AO, no enquiries have been conducted by the AO and without rejecting the evidence filed by assessee, they are simply disbelieved and CIT(A), after sending the evidence on remand, rejects them at a later stage which is also not according to the rules. Having admitted the evidence and sending it on remand to AO under Rule 46A, he cannot go back and refuse the same at a later stage. The procedure followed by CIT(A) is not according to the prescribed procedures and also against the principles of natural justice.
Coming to the merits of the addition, it is very clear that an amount of Rs. 5 Lakhs has been withdrawn from account of assessee’s NRE A/c, to that extent amount should have been given credit by the authorities. An amount of Rs. 10,78,800/- was deposited out of the so called traveler cheques and out of assessee’s own funds, assessee being NRI and having substantial withdrawals from the US and also on the fact that he is a globe trotter being a senior employee. The explanation given by assessee cannot be simply rejected when
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he states that he encashed the traveler cheques and deposited cash in the bank account.
8.1. Considering the facts of the case and evidence furnished on record, we are satisfied that the amounts are explained and hence the addition is not warranted. We are surprised to note that while Ld.CIT(A) accepts that the provisions of Section 68 cannot be invoked, he invokes Section 69 of the Act, which does not apply to the facts of the case. AO has not made out any case of unexplained investments made by assessee. These are simply deposits in the bank account which are generally considered as ‘cash credits’ and provisions of Section 68 are correctly invoked by AO. For the reasons best known to the CIT(A), he invokes Section 69 which does not apply to the facts of the case.
8.2. Be that as it may, since assessee has given proper explanation, we are of the opinion that no addition is warranted. Accordingly, grounds of assessee are allowed. AO is directed to delete the addition.
In the result, the appeal of assessee is allowed.
Order pronounced in the open court on 22nd June, 2018
Sd/- Sd/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMBER Hyderabad, Dated 22nd June, 2018 TNMM
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Copy to : 1. Shri Venu Myneni, Hyderabad. C/o. P. Murali & Co., Chartered Accountants, 6-3-655/2/3, 1st Floor, Somajiguda, Hyderabad.
The ITO (International Taxation)-II, Hyderabad.
CIT(Appeals)-10, Hyderabad.
CIT(IT & TP)-Hyderabad.
D.R. ITAT, Hyderabad.
Guard File.