NARANBHAI SAMATBHAI BHARWAD THROUGH LEGAL HEIR DEVRAJBHAI NARANBHAI BHARWAD,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-6(1)(1), AHMEDABAD

The facts of the case are that the assessee filed return of income on 10.11.2017 declaring total income of Rs.2,09,270/-. The case has been taken up for complete scrutiny by the revenue authorities and addition of Rs.68,50,000/- has been made on account of cash deposits in bank account.

Aggrieved, assessee filed an appeal before the Ld.CIT(A), who has affirmed the order of the Assessing Officer (AO) by observing as under: “6.3 I have considered the issue at hand and the submission by the appellant. The appellant has not adduced any further material during the appeal proceedings other than the one filed during the assessment proceedings. He is reiterating that the confirmation from Pritam Enterprises and Bhaktinandan Trading Co. are being produced. This is an unacceptable proposition as despite lapse of such huge time is unable to adduce any evidence to establish His claim of earning agricultural income through sale to certain parties. Furthermore, he has not adduced any evidence on record to even prove that he owned any Etios car which was purportedly sold. Even otherwise he has not brought even a shred of evidence other than his claim that the aforesaid property was sold to some Arvindbhai Prajapati. He states that a confirmation has been attached but no such document was attached in the appeal proceeding. There is no sale deed made to prove that transfer of such immovable property had happened. In fact it appears that the said property is in the name of some Tejas Patel and how he became the owner of the property is Asst.Year 2017-18 - 3– not known. Furthermore, the appellant has not adduced any shred of cogent credible and contemporaneous evidence in support of the cash flow statement it has furnished for the period 2012-13 to 2015-16. During appeal no cash flow statement for the period 01.04.2016 to 08.11.2016 was adduced. The appellant is showing huge amount of cash deposits in his bank account and withdrawals therein. It is not possible for any individual to continuously withdraw huge amount and keep it in his custody loosing interest at the risk of security. Therefore, I do not find that the appellant has been able to adduce sufficient evidence to explain the nature and source of huge amount of deposits during the demonetization period in his bank accounts. Therefore, I confirm the addition of Rs. 68,50,000/- as undisclosed income of the appellant deposited in the bank account u/s 69A rws 115BBE of the Act. The appellant has raised the issue that the AO has not mentioned application of Sec. 115BBE in the assessment order which appears to be an inadvertent slip as the tax is calculated by applying special rate u/s 115BBE of the Act. Grounds of appeal 1 to 4 are dismissed.”

Being aggrieved by the order of the Ld.CIT(A), the assessee filed appeal before us.

Before us, assessee submitted cash flow statement from the year 2012-13 to 2015-16 to substantiate the cash deposits made during the demonetization period and argued that there has been a closing cash balance of Rs.1,82,11,228/- which has been deposited during the Financial Year (FY) 2016-2017.The cash flow statement prepared by the assessee is as under: FY Opening Cash Inflows Cash Outflows Closing Cash Cash Cash Agricultural Other cash Cash Agricultural Other cash Balance Balance withdrawals Income (as inflows deposited expense (as outflows from bank per ITR) in bank per ITR) 2012-13 2,32,187 3,94,99,941 15,74,800 - 1,51,74,500 5,70,424 73,50,776 1,82,11,228 2013-14 1,82,11,228 14,27,439 19,38,119 13,00,000 3,14,000 7,75,247 2,50,000 2,15,37,539 2014-15 2,15,37,539 23,73,146 24,42,167 7,40,790 89,42,140 9,18,110 10,27,894 1,62,05498 2015-16 1,62,05,498 7,85,000 15,95,066 7,31,000 96,05,650 5,90,330 12,21,998 78,98,586 4,40,85,526 3,40,36,290 Asst.Year 2017-18 - 4– 7. The Ld.Counsel for the assessee submitted that there has been cash withdrawal from the bank for FY 2012-13 to the tune of Rs.3.94 crores and hence no addition on account of cash deposits cannot be made considering the fact that the assessee had continuously held cash in hand from the FY 2012-13 which has been utilized to deposit cash in the year 2016-17. 8. On the other hand, the Ld. DR argued that cash in hand for the year 2012-13 cannot be considered to have been deposited in the year 2016-17 and the argument of Ld. Counsel for the assessee stands without any reason or rhyme to substantiate cash deposits of 2016-17 as from the withdrawals of 2012-13. Further, the Ld. DR argued that by any means of logic it cannot be accepted that the assessee had cash for a period of 4 years lying with him idle and without depositing in the bank account even though the assessee has been continuously having transaction in the bank account and withdrawing cash for the remaining period of 4 years while at the same time keeping in hand cash of Rs.1.82 crores, the assessee continued to withdraw the cash of Rs.14 lakhs in FY 2013-14 and Rs.23 lakhs in FY 2014-15

We have gone through the fact on record and find that the cash withdrawals in the year 2013-14 to the tune of Rs.14,27,439/- and in the year 2014-15 the cash withdrawals to the tune of Rs.23,73,146/- and year 2015-16 the assessee had cash withdrawals of Rs.7,85,000/-. With regard to cash deposits, we find that assessee had cash deposited of Rs.3,14,000/- in the year 2013-14, Rs.89,42,140/- for the year 2014-15 and Rs.96,05,650/- for the year 2015-16. We find that the assessee had rental income of Rs.6,88,000/-, profit from the partnership firm of Rs.1.50 crores, interest income on FDs amounting to Rs.1,42,000/- and agricultural income of Asst.Year 2017-18 - 5– Rs.10,00,004/- during the year. We have examined the detailed cash withdrawals pertaining to FY 2012-13 of Rs.3.94 crores and the same is as under:

We find that the entire cash withdrawals of Rs.3.94 crores took place from 10.12.2012 to 30.03.2013 and the entire withdrawals were out of the transfer of fund. We also find that from 01.04.2014 to 05.03.2015 i.e. almost the entire year there were no transaction in the bank account of the assessee and again there were transactions from 05.03.2015 to 26.03.2015 Asst.Year 2017-18 - 6– wherein the cash has been withdrawn out of the transfer of fund in day or two from date of transfer of fund. The pattern shows that the amounts have been received and withdrawn for a specific purpose but certainly not to keep the amounts withdrawn as cash in hand. We have also gone through the bank account for all the years with regard to the cash deposits and withdrawals which pertains to very short period of duration in the year. We have also given consideration to the argument of the Ld.DR to remand the matter to examine the opening balance of the cash in hand perpetually shown by the assessee. The assessee since expired and the case was represented through legal heir. We have given our considerable thought about the entire fact and find that no useful purpose would be served to enquire into the amounts deposited or withdrawn 12 years back. At the same time, the entire cash deposits also cannot be considered as undisclosed income keeping in view the earning of income to the tune of Rs.1.8 crores by the assessee and it is also a fact that the assessee had agricultural income to the tune of Rs.10 lakhs. The assessee has also received cash as part of sale consideration pertaining to the agricultural land. We are not in agreement with the cash flow submitted by the assessee as cash flow for the period from 10.12.2012 to 29.03.2012 cannot be accepted as the same cash was deposited in the year 2016 in the un-rebuttable evidence that the assessee has been continuously withdrawing cash in the year 2013-14, 2014-15 and 2015-16 also. No further enquiries are feasible as the assessee stand deceased. Hence, keeping in view the entire contents and facts specific to the instant case, we deem it appropriate to determine that the assessee could have had cash in hand of Rs.30 lakhs and the remaining can be treated as undisclosed income. Asst.Year 2017-18 - 7– 11. The next ground raised by the assessee pertaining to invocation of provision of section 115BBE of the Act. The provision of section 115BBE of the Act reads as under:

We find that the issue stands settled by the order of the Hon’ble High Court of Madras in the case S.MI.L.E Microfinance Limited Vs.The Assistant Commissioner of Income Tax. The relevant extract of the order is reproduced as under:

In the aforesaid objects and reasons nowhere it is stated that due to "demonetization" the unaccounted money ought to be charged 60% rate of tax. It only states that step had been taken to curb black money by withdrawing Specified Bank Notes of denomination of Rs.500 and Rs.1000. And also states the people may find illegal ways of converting their black money into black again, hence as per experts advice heavy penalty ought to be levied. From the language of the object "that instead of allowing people to find illegal ways of converting their black money into black again", it is evident that the government is intended to impose the same for future transactions. Especially the use of word "again" in the object would clearly indicate it is for future transactions i.e. from 01.04.2017. Therefore this Court is of the considered opinion that the revenue is empowered to impose 60% rate of tax for the transactions from 01.04.2017 onwards and not prior to the said cut-off date. And for prior transaction the revenue is empowered to impose only 30% rate of tax…”

In the result, the appeal of the assessee is partly allowed.