Loading judgment…
Facts
The assessee, a partner in a firm, filed a return of income declaring Rs. 8,07,740/-. The case was selected for limited scrutiny due to cash deposits during demonetization. The Assessing Officer (AO) made an addition of Rs. 21,40,780/- for unexplained cash deposit.
Held
The Tribunal held that the entire addition made by the AO was not justified, nor could the assessee's claim of sufficient cash be accepted outright. The Tribunal estimated an amount of Rs. 15 lakhs as available for the cash deposit.
Key Issues
Whether the addition of Rs. 21,40,780/- for unexplained cash deposit during demonetization is justified, and if Section 115BBE is applicable.
Sections Cited
143(2), 142(1), 69A, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCH “SMC”, PUNE
Before: SHRI R. K. PANDA & MS. ASTHA CHANDRA
This appeal filed by the assessee is directed against the order dated 05.06.2024 of the Ld. CIT(A) / NFAC, Delhi relating to assessment year 2017-18.
There is a delay of 45 days in filing of this appeal before the Tribunal for which the assessee has filed a condonation application along with an affidavit explaining the reasons for such delay. After considering the contents of the condonation application filed along with the affidavit and after hearing the Ld. DR, the delay in filing of the appeal is condoned and the appeal is admitted for adjudication.
Facts of the case, in brief, are that the assessee is a partner in partnership firm and earns income from profit share in partnership firm and other incomes such as interest, remuneration, rental income etc. He filed his return of income on 09.03.2018 declaring total income of Rs.8,07,740/-. The case was selected under limited scrutiny for the reason “Cash deposit in the bank account during the demonetization period”. Accordingly, statutory notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟) were issued and served on the assessee, in response to which the assessee filed the requisite details from time to time.
During the course of assessment proceedings the Assessing Officer on perusal of the bank statement of the assessee noted that the assessee has deposited cash of Rs.21,40,780/- in his bank account during the demonetization period in old currency on 21.11.2016. The assessee on being questioned by the Assessing Officer to explain the source of income submitted that the cash deposited was out of cash in his hand. However, the Assessing Officer on perusal of the Income Tax Returns of the assessee for the past three years noticed that the column of cash in hand has been left blank. On perusal of the bank statement of the assessee, he noted that no withdrawal of cash was reflected in March, 2016. He, therefore, asked the assessee to submit the Cash Book, if any, to corroborate his claim. From the Ledger Account of the Cash Book filed by the assessee the Assessing Officer noted that opening cash in hand as on 01.04.2014, 01.04.2015 and 01.04.2016 is Rs.15,22,137/-, Rs.18,39,236/- and Rs.22,80,776/- respectively. The Assessing Officer reproduced the comparative chart of cash in hand reflected in the ITR and Cash Book which is as under: A.Y. Filed on Date Income Original/ Closing Cash Closing Cash in Revised in Hand as hand as per Cash per ITR Book 2015-16 30/09/2015 3,20,970/- Original 0/- 18,39,236/- 2015-16 29/03/2017 26,62,260/- Revised - 18,39,236/- 2016-17 29/03/2017 11,14,780/- Original 0/- 22,80,776/- 2017-18 09/03/2018 8,07,740/- Original - 6,38,495/-
The Assessing Officer further noted that initially the assessee filed ITR for assessment year 2015-16 declaring income of Rs.3,20,970/- which was revised on 29.03.2017 i.e. after demonetization period. Further, he noted that income in the revised return increased by almost eight times. However, the assessee has not mentioned the cash in hand as on 31.03.2015. Rejecting the various explanations given by the assessee and relying on various decisions, the Assessing Officer made addition of Rs.21,40,780/- u/s 69A r.w.s. 115BBE of the Act on account of such cash deposit in the bank account during the demonetization period.
In appeal, the Ld. CIT(A) / NFAC upheld the action of the Assessing Officer by observing as under: “Decision: I have gone through the above submissions of the Appellant and have considered the facts and evidence on record. In the present case the appellant filed Return of income declaring total income of Rs. 8,07,740/- on 09/03/2018. Later the AO completed the assessment by assessing the total income at Rs. 29,48,520/- by adding an amount of Rs. 21,40,780/-being unexplained money u/s 69A of the Income Tax Act, 1961 to the total Income of the appellant. Being aggrieved by the same the appellant has preferred instant appeal.
The AO stated that the case was selected under Limited scrutiny for the reason "Cash deposit in the bank account during the demonetization period". On perusal of bank account statement of the appellant it was noticed that appellant has deposited cash of Rs 21,40,780/- in its bank accounts during the demonetization period (9th November, 2016 to 30th December, 2016) in old currency. On perusal of ITR of the appellant for the past three years, it was noticed that column of the cash in hand has been left blank. On perusal of bank account statement no withdrawal of cash reflected in March, 2016. It was noticed that initially ITR for the A.Y 2015-16 has been filed declaring income of Rs. 3,20,970/-. This return has been revised and filed on 29.03.2017 ie after demonetization period. Interestingly, income was increased almost eight times in the revised return. For this reason appellant had to file schedule AL of the ITR. In that schedule it was expected from appellant to mention his cash in hand as on 31.03.2015 but somehow 'NIL' has been mentioned against this column. The appellant stated that he is an individual, a partner in a partnership firms and derives income from house property, income from partnership firms. income from Capital Gains, and income from other sources and deposited cash of Rs.21,40,780/- in Sant Sopan Sahakari Bank Limited during the demonetization period. Entire addition has been made by the AO on account of disbelieving the cash in hand recorded in books of accounts u/s 69A. The deeming fiction u/s 69A can be invoked, where in any financial year assessee is found to be the owner of any money, bullion, jewellery or other valuable articles and such money, bullion, jewellery or valuable articles is not recorded in the books of accounts and the source is not explained by the assessee satisfactorily. In the case of the appellant, there is no dispute with regard to the fact that he has been filing the income tax return wherein source of income has been disclosed. Hence in such a situation it is not possible as to how provision of 69A can be invoked. Right from the financial year 2014-15 to 2016-17, the balance sheets of him reflects cash in hand available with him. Simply because during the period of demonetization amount of cash Rs.21,40,780/- has been deposited in the bank account, it does not mean that the cash in hand as on 31.3.2015 and 31.03.2016 and upto date of deposit, duly shown in the books of account is unexplained. In case cash is deposited out of opening balance or out of withdrawals during the year, one can demonstrate that by preparing a cash book, reflecting the receipts and payments of cash, including such deposit of cash in bank accounts. Disclosure of cash in the books of accounts is also a good evidence of the opening cash available with the appellant. He further stated that these funds were available with him which have been deposited in the bank account. The entire bank statement and source of cash withdrawal/deposits have been furnished during the course of assessment proceeding. Nowhere AO has come out with the finding or has brought any material on record to show that withdrawal of cash from the bank was utilized to procure any asset or has been invested elsewhere rather than deposited in the bank account during the year under consideration and that cash deposited in the account was unaccounted income of the appellant. Thus, in the absence of any contrary information against the submission, it is held that he had deposited the amount in the saving bank account out of rental income received, and regular cash withdrawal from the bank account ie out of the opening cash balance. As the matter pertains to Section 69A the provisions of Section 69A are reproduced: Section 69A - Unexplained Money "Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the4 Assessing] Officer, satisfactory. the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]" The appellant had deposited Cash in the bank account amounting to 21,40,780/- which is treated as unexplained money. Appellant was found to be the owner of the money appearing in bank accounts but has not offered any acceptable and cogent explanation regarding the source of such money found in its bank accounts. Section 69A of the Income-tax Act, 1961, would show that in cases where the nature and source of acquisition of money, bullion, etc., owned by the appellant is not explained at all, or not satisfactorily explained, then, the value of such investments and money or value of articles not recorded in the books of accounts may be deemed to be the income of such appellant. The provisions of section 69A of the Act treat unexplained money, bullion, etc., as deemed income where the nature and source of investment, acquisition as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income covered under the provisions of Section 69A of the Act in view of the scheme of those provisions. The appellant has not submitted bank account statements from which he has withdrawn his money to support his claim. Appellant has not submitted any documentary evidences in support of his claim and the cash deposited in his bank account remain unexplained. In view of the above, these grounds of appeal are, accordingly, dismissed and the addition made by the AO on this account is, hereby, confirmed.
6. In the result, the appeal is dismissed. In the result, the appeal is decided as above.”
Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds:
The learned CIT (Appeals), NFAC, Delhi erred in law and on facts in upholding the additions made by the Assessing Officer under section 143(3) of the Income Tax Act, 1961.
2. The learned CIT (Appeals), NFAC, Delhi erred in confirming the addition of Rs.21,40,780 under section 69A of the Income Tax Act, on the grounds that the appellant did not provide an acceptable and cogent explanation regarding the source of the money found in his bank account, and did not submit supporting documentary evidence or bank account statements. This was done without properly considering the submissions made by the appellant.
3. The learned CIT (Appeals), NFAC, Delhi while upholding the addition made by the Assessing Officer under section 69A of the Act, failed to appreciate the following important facts :- i. The cash deposited in bank was from rental income received regularly. ii. There were withdrawals from the bank accounts. iii. That telescopic benefit of these withdrawals was not accounted for. iv. No corroborative evidence was provided to establish that the cash deposits were unaccounted income of the appellant. 4. The learned CIT (Appeals), NFAC, Delhi failed to appreciate that, as the source of the cash deposits was explained and it is evident that the cash was the appellant's own money deposited into the bank account, the addition of Rs.21,40,780 confirmed by CIT(A) was unwarranted. 5. The CIT(A), in confirming the addition, did not consider that the provisions of Section 69A of the Act are not applicable to cash deposits recorded in the books of account, as these deposits are out of opening cash balance and cash withdrawals as explained by the appellant. 6. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.
The Ld. Counsel for the assessee submitted that the assessee has produced Cash Book before the Assessing Officer wherein the deposit of Rs.21,40,780/- on 21.11.2016 was reflected. Since the assessee has sufficient cash on 21.11.2016 i.e. during the demonetization period, therefore, the Assessing Officer is not justified in making addition and the Ld. CIT(A) / NFAC is not justified in sustaining the addition. Referring to the following decisions, he submitted that when the source is explained from earlier cash withdrawals and when the Assessing Officer has not brought any adverse material, then the same cannot be treated as unexplained and no addition can be made u/s 69A of the Act: a. R.S. Diamonds India (P.) Ltd. vs. ACIT (2022) 98 ITR (T) 505 b. Jet Freight Logistics Ltd. vs. CIT (2023) 146 taxmann.com 349 (Mumbai- Trib.) c. Hasmukh Kanjibhai Tadhani vs. ITO vide order dated 04.09.2023 d. Kishana Ram vs. ITO vide for A.Y. 2017-18 order dated 21.03.2024 e. Preeti Bhardwaj vs. ITO vide ITA No.78/DEL/2024 for A.Y. 2017-18, order dated 22.03.2024
Referring to the following decisions, he submitted that the provisions of section 69A of the Act do not apply when the assessee is not legally bound to maintain the books of account as per the Act: a. CIT vs. Hersh W Chadha vide for A.Y. 2017-18 order dated 12.12.2023 b. Ankit ShankarLal Tanwani vs. ACIT vide for A.Y. 2019-20 order dated 08.06.2022
Referring to the following decisions, he submitted that the provisions of section 115BBE of the Act cannot be applied retrospectively for the transactions prior to 15.12.2016: a. CIT vs. Vatika Township (P.) Ltd. (2014) 367 ITR 466 (SC) b. CIT vs. K. Raheja Hotels & Estate (P.) Ltd. (2014) 51 taxmann.com 258 (SC)
c. CIT vs. Gold Coin Health Food (P.) Ltd. (2008) 304 ITR 308 (SC) d. Govinddas vs. ITO (1976) 103 ITR 123 (SC) e. CIT vs. Sandesh Kumar Jain vide for A.Y. 2017-18 order dated 31.10.2022.
He also relied on the following decisions: a. CIT Vs. Kulwant Rai (2007) 291 ITR 36 (Del) b. DCIT Vs. Smt. Veena Awasthi vide order dated 30.11.2018 c. Neeta Breja Vs ITO vide order dated 25.11.2019 d. Salem Sree Ramavilas Chit Co. Pvt. Limited Vs. DCIT (2020) Tax Corp (DT) 82042 (HC-MADRAS) e. Kamlesh Kantilal Bhandari Vs ITO vide ITA No.1320/PUN/2016 order dated 29.07.2016 f. ACIT Vs Baldev Raj Charla (2009) 121 TTJ 366 (Delhi) g. DCIT Vs. Karthik Construction Co. vide ITA No.2292/Mum/2016 order dated 23.02.2018 h. Smt. Teena Bethala vs. ITO vide ITA No.1383 and 1384/Bang/2019, order dated 28.08.2019
So far as the decisions relied on by the Assessing Officer are concerned, he submitted that those decisions are distinguishable and are not applicable to the facts of the present case.
The Ld. DR on the other hand heavily relied on the orders of the Assessing Officer and the Ld. CIT(A) / NFAC. He further relied on the decision of the Pune Bench of the Tribunal in the case of Nilesh Popatlal Gada vs. ITO vide for assessment year 2017-18 order dated 20.12.2024 to the proposition that the provisions of section 115BBE of the Act are applicable to assessment year 2017-18.
We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee and the Revenue. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case made addition of Rs.21,40,780/- u/s 69A r.w.s. 115BBE of the Act on the ground that the assessee made huge cash deposits during the demonetization period and could not explain the source of the same. We find the Ld. CIT(A) / NFAC sustained the addition, the reasons of which have already been reproduced in the preceding paragraphs. It is the submission of the Ld. Counsel for the assessee that the assessee had sufficient cash on 21.11.2016, out of which he has deposited an amount of Rs.21,40,780/- and therefore, once the source is explained, no addition u/s 69A of the Act can be made. It is also his submission that the provisions of section 115BBE of the Act cannot be applied retrospectively for the transactions prior to 15.12.2016.
A perusal of the Cash Book from 01.04.2014 to 31.03.2017 produced by the assessee shows that the assessee has shown opening cash balance of Rs.15,22,137/- on 01.04.2014. It is an undisputed fact that the assessee was not maintaining any Cash Book earlier nor has given the cash in hand at the end of each financial year in the return of income. Therefore, the opening cash balance of Rs.15,22,137/- cannot be accepted at face value. Further, if the contention of the assessee that the opening cash balance as on 01.04.2014 was Rs.15,22,137/- and there was sufficient cash available with him as on 21.11.2016 is accepted, then there was no necessity on the part of the assessee to withdraw periodically cash from the bank account. At the same time, it is common knowledge that people keep certain amount of cash in house for meeting unexpected emergencies. Therefore, in our opinion, neither the entire addition made by the Assessing Officer is justified nor the submissions of the assessee that he had sufficient cash available with him can be accepted outright. Considering the fact that the assessee was declaring reasonable income in the last three years and the bank account also reflects certain withdrawals in the preceding months and as mentioned earlier people do keep certain amount of money for meeting emergencies, etc., therefore, considering the totality of the facts of the case and in the interest of justice, we are of the considered opinion that an amount of Rs.15 lakhs can reasonably be estimated as available to the assessee as on 21.11.2016 for making the cash deposit during the demonetization period. We, therefore, modify the order of the Ld. CIT(A) / NFAC and restrict the addition to Rs.6,40,780/- by deleting Rs.15,00,000/-. The grounds raised by the assessee on this issue are partly allowed.
So far as the applicability of the provisions of section 115BBE of the Act is concerned, we find the Co-ordinate Bench of the Tribunal in the case of Nilesh Popatlal Gada vs. ITO vide for assessment year 2017-18 order dated 20.12.2024 has held that the provisions of section 115BBE of the Act are applicable to assessment year 2017-18. No contrary decision was brought to our notice by the Ld. Counsel for the assessee against the decision of the Co- ordinate Bench of the Tribunal relied on by the Ld. DR. Therefore, ground raised by the assessee on this issue is dismissed.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open Court on 9th April, 2025.