SHRI KRISHNA S. CHAMANKAR ,MUMBAI vs. ACIT - 24(2), MUMBAI

The assessee has filed the present appeal against the order of Ld. CIT(A)-36, Mumbai, dated 30.08.2019 for the Assessment Year 2015-16. 2. The assessee has raised the following grounds of appeal:-

The Learned CIT(A) erred in granting only partial relief to the appellant by upholding disallowance to the extent of Rs. 33,34,000/- on account of cash deposited by the appellant.

The learned CIT(A) erred in sustaining the disallowance of Rs. 33,34,000/- in spite of the appellant adequately explaining the source of entire cash deposits in the bank and thus discharging the primary onus cast on him.

The learned CIT(A) erred in partially upholding the addition made by the learned Assessing Officer, which was made purely on the conjectures and surmises without bringing an iota of evidence on record to substantiate existence of undisclosed source of income.

The learned CIT(A) erred in upholding the contention of the learned assessing officer that a difference in denominations of cash withdrawals and cash deposits gives rise to presumption that the cash deposits are not out of cash withdrawals or existing cash balance and represent income from undisclosed sources. The learned CIT(A) failed to appreciate that currency is fungible, can easily get exchanged in the day-to-day transactions and it is difficult to keep track of all denominations of the currency notes.

The appellant craves leave to add, alter or amend any of the grounds of the appeal, at any time before or at the time of hearing.

The brief facts of the case are that assessee filed his return of income on 31.03.17 declaring total income to the tune of Rs. 46,12,070/- for the year under consideration. The return was processed u/s 143(1) of the Act. The case of the assessee was selected for scrutiny and notices u/s 143(2) and 142(1) were issued and served upon the assessee. In response, AR of the assessee submitted the relevant documents as called for. The assessee is a partner in M/s K. S. Chamankar Enterprises which is engaged in the business of civil construction activity.

The assessee replied to the credit as withdrawal and deposit. The assessee was having account in different banks i.e. ICICI banks, NKGSB Co-Op Bank Ltd and Saraswat Bank, which are as under:- ICICI Bank A/c No. 021101004137 Sr. Particulars. ~ Date on which Cash Amount (Rs.) No. Deposited

From the above, cash deposit of Rs. 75,00,000/- was not found justifiable and added the income of the assessee and assessed the total income to the tune of Rs. 1,21,12,074/-.

Feeling aggrieved, assessee filed the appeal before Ld. CIT(A) and Ld. CIT(A) after considering the submission of the assessee restricted the addition to the extent of Rs. 33,34,000/- and partly allowed the claim of the assessee.

Aggrieved with the above, assessee is in appeal before us on the aforementioned grounds.

Ground No. 1 to 4 are inter-related and inter-connected relates to restricting the addition to the extent of Rs. 33,34,000/-, therefore we adjudicate these grounds altogether. Ld. AR appearing on behalf of the assessee argued that withdrawal of cash of specific denomination is not required to match with the deposit of notes of specific denomination.

On the other hand, Ld. DR relied upon the orders passed by the revenue authorities.

Before going through the case of the assessee, we deem it fit to peruse the findings of Ld. CIT(A), which are as under:-

DECISION: I have carefully gone through the facts of the case: the views taken by the Assessing Officer, along with the submissions made by the appellant and have arrived at the following view which is as under: 4.1.1 In Ground of appeal Nos. 1 to 3 the appellant has objected to the addition of Rs 75,00,000/- made by the AO u/s 68 on account of difference in the denomination of cash withdrawn and re-deposited as well as the time lag between withdrawal of the cash and the subsequent redeposit. The assessee is an individual and a partner in M/s K.S. Chamankar Enterprises,a partnership firm engaged in the business of civil construction. The assessee filed his return of income 31.03.2017 showing total income of Rs.46,12,070/-. The case of assessee was selected under scrutiny to verify the large cash deposits in saving bank accounts. The AO held that as there was a difference in the denominations of the cash withdrawn and deposited coupled with the fact that the withdrawals were made in denomination of Rs. 1000/- and Rs.500/- which does not match with the cash deposits in the denomination of Rs. 1000/- and Rs. 500A. there was reason to conclude that the deposits to the extent of Rs. 75,00,000/- remained unexplained and therefore added the same u/s 68. 4.1.2 Per Contra: The appellant stated that that the addition is made solely on account of the assumption that the same currency notes should be deposited which have been withdrawn from the bank account. The learned AO did not appreciate that money is fungible. The addition has been made under section 68. It is not in doubt that the Appellant had the requisite cash balance to make the cash deposits that he did. In fact, the cash deposits in themselves were fully explained by the cash balance in the cashbook. What the assessing officer has sought to do is to draw a distinction between the cash that was withdrawn and the cash that was deposited and thereafter, relying on the principle of human probability, drawn a conclusion that since the denominations did not match the subsequent deposits, the deposits were on account of unaccounted income and therefore unexplained. 4.1.3 It is perfectly within the realm of possibility that currency notes which were withdrawn by the Appellant from the bank, got exchanged during the course of day to day transactions,- and it is practically impossible for any person to keep track or record of all the denominations of the currency notes. The Appellant stated that he had purchased 3 agricultural plots at Vengurle for total cost of Rs. 90.00,000/-. He wanted to utilize these agricultural plots for plantation of coconut trees and wanted to purchase about 2000 coconut saplings along with fertilizers and wanted to install drip irrigation and fencing of the land. However, since the deals did not materialize therefore, the amount was re-deposited in her bank accounts by way of cash. He also stated that while making the addition the AO has not given any finding for use of the cash withdrawal for any other purpose, therefore the addition is made only on the basis of presumption and assumption which is not according to law. Further, the addition made by the AO u/s 68 of the IT Act is also not sustainable because the assessee has submitted the proof of source of cash deposited. The appellant relied on the following case laws in support of his contentions: • Supreme Court in case of CIT vs. Mohanakala (2007) 291 ITR 278/161 Taxman 169 • RoshanDi Haiti vs. CIT (1977) 107 ITR 938 (SC) • A. Govindarajulumudaliar vs. CIT (1958) 34 ITR 807 (SC) • Sikri& Co. P. Ltd. vs. CIT 106 ITR 682, 688 CIT vs. The Hon'ble ITAT Delhi in the case ofACJT vs. Baldw Raj Chawla 121 TTJ (Del) 366 has held as under: "We have heard the rival submissions and perused the materiel available on record and have gone through the orders of the authorities below. We find that this explanation of the assessee was found correct that against these five deposits on dt. 14th June. 1996, Rs. 31,000: 21st July, 1997, Rs. 1,27,000/-. 18th Sept.. 1997, Rs. 22,000; 4th Oct., 1997, Rs. 26,000 and on 7th Nov. 1997, Rs. 52.000 there were sufficient cash withdrawals from AWl and from SBL Mayapuri, but this addition has been confirmed by learned CIT(A) on the basis that there is time gap between the assessee's withdrawals from his own partnership M/s AWl or jrom his own bank. There is no finding recorded by the learned AO or by learned CIT (A) that apart from depositing these cash into bank as explained by the assessee. there was any other use by the assessee of these amounts and in the absence of that, simply because there was a time gap, the explanation of the assessee cannot be rejected and hence the addition confirmed by the learned CITCA) is not correct. We, therefore, delete the same. This ground of the assessee is allowed. " 4.1.5 As per the tabular form submitted below by the appellant, I am of the view that the addition should be restricted to Rs. 33,34,000/- (6668 x Rs. 500) on account of shortfall in the currency notes of Rs. 500 deposited on 7 October 2014, assuming that the balance of such notes as on the said date was only 102. Amount No. of notes in No. of notes in Difference (Rs) denomination denomination unreconciled of Rs. 1,000 of Rs. 500 Opening balance of 14,60,000 1460 Nil (assumed) cash (assumed)

On perusal of the above mentioned findings, we noticed that Ld. CIT(A) has restricted the addition to the extent of Rs. 33,34,000/- which did not match with the cash deposits in the denomination of Rs. 1000/- and Rs. 500/- notes. The deposits were made in different dates. It is quite possible to keep the withdrawals of specific denomination of notes for a certain period and specifically the same deposit notes with the bank after some time for any specific period. The disallowance of the claim of the assessee is nowhere seems justifiable on account of withdrawal of specific denomination of notes and on account of deposit of specific denomination of notes and comparing of notes, nowhere seems justifiable. However, the claim of the assessee can be discredited

Considering the above facts and circumstances of the case as well as judicial pronouncements, we noticed that the findings of Ld. CIT(A) is nowhere justified, hence we set aside the order of Ld. CIT(A) and allowed the claim of the assessee. Accordingly, the grounds raised by the assessee are allowed.

In the net result, the appeal filed by the assessee stands allowed.