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Facts
The assessee deposited cash amounting to Rs. 17,72,500/- in his bank account during the demonetization period. The assessee explained the source of this cash from various sources including opening balance, family savings, father's savings, own savings, and agricultural receipts. The Assessing Officer (AO) rejected these explanations. The CIT(A) granted partial relief by accepting Rs. 2.5 Lacs as explained.
Held
The Tribunal, after considering the submissions and the facts, held that an amount of Rs. 7 Lacs could be attributed to agricultural activities, Rs. 4 Lacs to family savings (father, wife, mother), and Rs. 2 Lacs to 'chandla' received during a sister's marriage and own savings. Thus, a total of Rs. 13 Lacs was treated as explained.
Key Issues
Whether the assessee has reasonably explained the sources of cash deposited in his bank account during the demonetization period, and if not, whether the addition made by the AO is justified.
Sections Cited
69A, 250
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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT. ANNAPURNA GUPTA
(�नधा�रण वष� / Assessment Year : 2017-18) बनाम/ Pinkesh Subhashchandra The Income Tax Officer Patel Ward-1(3)(1), Petlad Vs. 116, Sardar Chowk, Near Dairy, Tal. Petlad, Bharel, Dist. Anand, Gujarat 388480 �थायी लेखा सं./जीआइआर सं./PAN/GIR No. : BGRPP8413J (Appellant) .. (Respondent) अपीलाथ� ओर से /Appellant by : Shri Dhrunal Bhatt, AR. ��यथ� क� ओर से/Respondent by : Shri Prateek Sharma, Sr. DR 04/02/2025 Date of Hearing Date of Pronouncement 30/04/2025 O R D E R The present appeal has been filed by the assessee against the order passed by the Commissioner of Income Tax(Appeals), National Faceless Appeal Centre (NFAC), Delhi (in short ‘the CIT(A)’) under Section 250 of the Income Tax Act, 1961 (in short ‘the Act’) dated 02.02.2024 pertaining to Assessment Year 2017- 18.
The grounds raised in the appeal by the assessee are as under:
“1. In law and in the facts and circumstances of the Appellant's case, the Hon'ble CIT(Appeals) of NFAC has grossly erred in upholding the assessment proceeding which has been carried out in violation to the natural justice and based on assumption presumption more particularly that cash deposit tantamount to be income of the Appellant.
Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 2 – 2. In law and in the facts and circumstances of the Appellant's case, the Hon'ble CIT(Appeals) of NFAC has grossly erred in upholding the addition of Rs. 15,22,500/-under Section 69A of the Act.
In law and in the facts and circumstances of the Appellant's case, the order passed by the Hon'ble CIT(Appeals) of NFAC is cryptic and non-speaking being arbitrary which do not deal with the factual and legal contention raised before him and proceed to uphold the addition of Rs. 15,22,500/- under Section 69A of the Act, based on his own whims and notion, which deserves to be deleted 4. In law and in the facts and circumstances of the Appellant's case, the Hon'ble CIT(Appeals) has grossly neglected erred in not appreciating the fact that cash deposited partially out of the agriculture income which was accepted by the same Id. Assessing Officer in earlier assessment proceeding of AY 2016-17.
5. In law and in the facts and circumstances of the Appellant's case, the Hon'ble CIT(Appeals) had failed to appreciate that except Appellant no one family possessed bank account and considering the "Patel Community" ought to have savings/streedhan by the father and married ladies of the family. Thus, the addition upheld deserves to be deleted..
6. The appellant craves leave to add, alter, amend and/or withdraw any ground or grounds of appeal either before or during the course of hearing of the appeal.”
3. The solitary issue in the present appeal pertains to cash deposited in the bank account of the assessee during demonetization period remaining unexplained. The assessee was noted to have deposited cash amounting to Rs.17,72,500/- and had explained the source of the same as out of opening cash balance available with him, Cash deposit out of streedhan of his wife and mother, cash deposit out of savings of father and from his own savings and out of agricultural receipts. The summary of the same was submitted by the assessee to the Ld. CIT(A) vide letter dated 2nd January, 2024 as under:
Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 3 – Sr. No. Particulars Amount (in Rs.) 1 Cash Deposit out of the available Rs.4,06,100/- cash withdrawal from previous year (AY 2016-17) 2 Cash Deposit out of family savings and streedhan 2.1 Cash Deposit out of the Streedhan Rs.3,60,600/- from her Mother Premilaben who is 60 aged and her wife Sejalben who got married to appellant on 2014. 2.2 Cash Deposit out of savings of Rs.4,00,000/- Father Subhaschandra Patel who 57 aged and has been agriculturist till this time 2.3 Cash Deposit out of the Appellant Rs.1,25,000/- own savings from his vocation work in past 3 Cash Deposit out of the Agriculture Rs.9,01,672/- Receipt Total: Rs.18,33,372
The AO, however, rejected all the explanations given by the assessee finding factual infirmity and inconsistency in the same. The Ld. CIT(A), however, giving a holistic view to the explanation of the assessee, considered the availability of cash with the assessee to the tune of Rs.2.5 Lacs to be reasonable and allowed benefit of the same. Thus while the AO added the entire cash deposit in the bank account of the assessee amounting to Rs.17,72,500/- as being out of unexplained sources, the Ld. CIT(A) gave partial relief to the assessee reducing the addition by Rs.2.5 Lacs.
Before us, Ld. Counsel for the assessee reiterated the contention made before the Revenue authorities.
With regards to the availability of cash as opening balance, he pointed out that the assessment of the preceding assessment year i.e. 2016-17 had taken place and the assessee had been asked to explain the source of cash deposit in his bank account: that Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 4 – while explaining the source, a cash flow has been submitted to the AO reflecting closing balance during said year of Rs.4,06,100/-. The AO, he pointed out had accepted the assessee’s explanation in A.Y. 2016-17 while passing the assessment order and therefore, he contended there can be no reason for rejecting the availability of opening cash with the assessee of Rs.4 Lacs.
Besides, he pointed out, that both in the preceding assessment year and in the impugned assessment year, the assessee had submitted that family was an agricultural family owning agricultural land and had substantiated the same by submitting copies of land records i.e 7/12 and Form No.8. The assessee, he pointed out, had submitted to the AO that his family owned approximately 10 to 12 Bighas of land on which agricultural activity was carried out growing two crops; tobacco and Green Chilly , earning on an average net income of Rs.8 to 10 Lacs. This, he contended, was accepted by the AO while framing assessment for A.Y. 2016-17 and in the impugned year also, the assessee had submitted land records. Therefore, availability of cash from agricultural activity stood sufficiently explained by the assessee.
Similarly, he contended that it is well known that women in the normal keep certain cash and, therefore, Rs.3.6 Lacs attributable to their streedhan is reasonable.
As for the cash deposits from savings of his father, Ld. Counsel contended that these savings were attributable to the Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 5 – agricultural income on account of the agricultural activity being carried out by his father.
He, therefore, contended that the entire source of cash deposit in the bank account stood adequately explained and there was no reason for making any addition.
Ld. DR, however, contended that the AO had given a detailed finding of facts while rejecting every source of cash deposit contended by the assessee. My attention was drawn to para 7 of Assessing Officer’s order as under:
“7. The reply given by the assessee has been perused. The same is found not tenable on the following grounds: i. First of all, the assessees' claim regarding the sources of cash deposits from various sources such as opening cash balance, savings of women, agricultural receipts and from the gift received in cash as per chandla list is not tenable as per following a) The assessee stated that some cash was on hand as opening from earlier years withdrawals. However, it has been noticed that the assessee had claimed these withdrawals for household expenses and other personal expenses during the submission made during the assessment proceedings for previous year ie. A.Y 2016-17. Now the assessee claiming that this was the cash on hand and was kept up to the demonetization is found in contradiction to each other. The assessee is having a family of 5 members. So there must be reasonable expenses, but assessee is claiming each and every withdrawals even of Rs.2,000/- be kept at home to deposit the same during demonetization. Further, the assessee could not justify the storage of cash at home after withdrawing the same from bank. The assessee claimed that all cash after withdrawn was kept in hand and deposited during demonetization, which is not genuine. b) The second source given by the assessee is from savings of family women. Here again the submission given by the assessee are in contradiction to one another. In submission dated 01.11.2019, the assessee stated that the women of the family were having Rs.85,000/- in SBNs/HDNs, but in the submission dated 12.11.2019, the assessee changed this and stated that women having Rs.2,75,000/- in SBNs/HDNs. Thus, again assessee trying to mould the facts as per necessity. The assessee could not give any sources of the such savings.
Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 6 – c) The third claim of the assessee was regarding the agricultural receipts. The assessee given two bills regarding the agricultural receipts. One was of Rs. 3,66,676/- of dated 15.10.2016 from Hirenkumar N. Patel and another one was of Rs.5,40,400/- of dated 10.11.2016 from Pankajkumar D Patel. So far as the receipts of Rs 3,66,676 is concerned regarding the deposition during demonetization, the same is not found acceptable. As the cash received on more than one year before was kept to deposit during demonetization and not used for any agricultural expenses or if was unusable, why the same was not deposited in the bank. Further, in response to the notice issued, the person mentioned in the said bill has not given any ITR, books of accounts, bank statement of any other sources to substantiate the payments mentioned in the bill. Further, regarding the bill submitted by the assessee for Rs.5,40,400/- received during demonetization is concerned the issuer was summoned to the office to get the statement recorded on oath in the statement recorded on oath, the said person stated that he has not given any money to the said person. He stated that he is doing agricultural activities only since last 5 years. He further stated that his father who did the business had been passed away in 2015. Thus, the bills submitted by the assessee are proved bogus and no such cash was received by the assessee. The statement recorded on oath is reproduced hereunder for sake of clarity.
Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 7 – d) Now the last source given by the assessee for cash deposition perused and found false. The assessee stated that some cash was deposited from Chandla received on the occasion of marriage of sister. The assessee uploaded the list of the amount received in cash as gift on the on the marriage of sister on 09 12.2016. It is hard to believe that the assessee would accept the gift in illegal tender on the marriage occasions. However, even if so, on perusal of the list, it has been noticed that most of the notes were in denomination of 100. The amount shown in 500 and 1000 denomination were of Rs.6,000/- only (8 notes of 500 and 2 notes of 1000). Further, at that time i.e. on 09.12.2016, the new legal notes of 500 and 2000 were in circulation. So why would anyone give the illegal currency on the pious occasion of marriage of a woman. Thus, the said source is also not tenable. The assessee also contended that the cash was used to purchase the gold to give on marriage of sister as prevalent in community. However, it is pertinent to mention here that during the marriage in this community peoples gives gold ornaments and not bullion. The assessee, however, purchasing the bullion as evident from the perusal of the details received from Dilipthal & Sons. Thus, the assessee tried to convert the undisclosed cash into bullion. Further, the reason is not that where the cash is going, but is that what are the sources of the cash and the same could not be justified by the assessee. ii. Thus, all the sources given by the assessee are proved false on facts and not on surmise and conjecture. There are many other points which are pertinent to mention here. The assessee claimed that all the cash whether from agricultural receipts, cash of the family members, and claimed his own cash in hand of Rs. 1.25,000/- for future or any other source was kept at home. It is impossible to believe that the all cash was kept at home, when the assessee, himself a bank employee, who is definitely well versed with banking operations and who can easily withdraw the cash as and when in need without bearing any loss of interest on such huge amount. Thus, the claim that the all cash from all sources was accumulated and kept at home is not genuine. iii. Even if the contention of the assessee that the all cash was at home on 08.11.2016 be considered, then why the said cash was not deposited by the assessee in one go le. either on 10.11.2016 or on next day or even on the subsequent day. Here the date wise pattern of the cash deposited is given which shows that the assessee is depositing the cash up to mid of the December. S. Name of the Bank Date Amount (In Rs.) No. 1 Bank of Baroda 14.11.2016 7500/- 2 Bank of Baroda 22.11.2016 4,00,000/- 3 Bank of Baroda 23.11.2016 3,00,000/- 4 Bank of Baroda 08.12.2016 4,00,000/- 5 Central Bank of India 22.11.2016 4,00,000/- 6 Central Bank of India 30.11.2016 2,40,000/- 7 Axis bank 15.11.2016 25000/- Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 8 – Thus, on perusal of the above pattern, it is clear that the cash was not with the assessee as on 08.11.2016, but was received from undisclosed sources during demonetization. IV. The assessees' main contention is that the A.O, is proposed to make addition on surmise and conjecture for which the assessee has quoted various judicial pronouncements. However, the decisions quoted by the assessee are not squarely applicable to the case of the assessee and based on distinguished facts. However, no guess work has been made by the A.O. as evident from the above discussed points. The assessee even failed to prove the sources of cash deposition made on various dates during demonetization. The returns of income were filed by the assessee only after depositing the cash. The assessee filed the ITRs for both A.Y.2016-17 & A.Y. 2017-18 on 28.03.2018 only after depositing the cash during the demonization just to substantiate the cash deposition. Thus, the assessee could not prove the source of the said cash of Rs 17,72,500/- deposited in SBNs/HDNS during demonetization period. Therefore, an addition of Rs. 17,72,500/- as unexplained money as per provisions of section 69A of the Act is hereby made and added to the total income of the assessee. Penalty proceedings u/s 271AAC are initiated.”
He, therefore, contended that there being obvious discrepancies and infirmity in the explanation given by the assessee of the source of the cash deposit as noted by the AO, the Ld. CIT(A) was just to have granted relief of Rs.2.5 Lacs to the assessee and there was no scope of any further relief being given to the assessee. He, therefore, heavily supported the order of the Ld. CIT(A).
I have heard the contentions of both the parties and have also gone through the orders of the authorities below. The issue in dispute is whether the assessee had reasonably explained the source of cash deposited in his bank account during demonetization period ,which amounted to Rs.17,72,500/-, out of which, the Ld.CIT(A) had given a relief of Rs.2.5 Lacs to the assessee stating that this much amount can be safely assumed to be available with the assessee considering the entire facts and circumstances of the case.
Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 9 – 14. The facts which are not in dispute that the assessee is an employee in a bank and family is an agricultural family owning agricultural land to the tune of 10 to 12 bighas evidence of which was placed before the Revenue authorities and which has not been controverted at any stage. The assessee grows tobacco and green chilly on the same which is also not disputed. The assessee had stated to the AO during assessment proceedings in preceding year that he had agricultural income of Rs.8 to 10 lacs which undisputedly was accepted by the AO. In the impugned year, the assessee had attributed cash deposited in his bank account arising out of agricultural activity to the tune of Rs.9 Lacs. Considering the entire facts as noted above by us which are not disputed, an amount of Rs.7 Lacs deposited in cash in the bank account can be safely attributed to the agricultural activities carried out by the assessee.
The AO has rejected this explanation of the assessee, since, the assessee has submitted bills of agricultural produce sold as evidence which on further enquiry revealed that one of the bills was a year old while the other bill when enquired into, the purchaser denied buying anything from the assessee. Be that so, the fact that the assessee is the owner of 10 to 12 Bighas of agricultural land and admittedly earning Rs.8 to 10 lacs agricultural income by growing tobacco and green chilly, the source of cash deposit arising from agricultural activities cannot be completely ruled out and I hold cash attributable to agricultural activities deposited in bank to the tune of Rs. 7 lacs to be reasonable.
Subhashchandra Patel vs. ITO] A.Y. 2017-18 - 10 – 16. As for cash attributed to the father, wife and mother of the assessee from their savings, considering the agricultural background of the family an amount totaling to Rs.4 Lacs can be safely attributed to have been sourced from them.
The assessee has also attributed source of cash deposited from the chandla given on the occasion of the marriage of the sister and from out of his own savings. An amount of Rs.2 Lacs can be safely attributable to both of them since the AO has himself noted cash received in SBN notes on the occasion of marriage of his sister of approximately Rs.60,000/- while the balance can be attributed to the savings available with the assessee.
In the light of the above discussion, thus, an amount of Rs. 13 lacs/-- is treated as explained and addition to this extent made to the income of the assessee is directed to be deleted. Thus, the assessee gets partial relief in above terms.
In the result, the appeal filed by the assessee is partly allowed.
This Order pronounced on 30/04/2025