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Facts
The assessee deposited Rs.11,24,000 in cash during the demonetization period, claiming it was out of a housing loan disbursed before the period. The loan was jointly sanctioned to the assessee, his wife, and son. The assessee explained that due to his wife's hospitalization, construction work was suspended, and the cash remained unutilized.
Held
The Tribunal held that while the assessee's explanation for some of the funds being unutilized was supported by partial evidence (medical records, proximity of dates), the claim that the entire amount remained idle was not fully borne out by the evidence. Small and intermittent withdrawals suggested gradual utilization.
Key Issues
Whether the cash deposits made during the demonetization period were sufficiently explained as unutilized loan funds, or if they constituted unexplained money taxable under Section 69A.
Sections Cited
250, 143(3), 69A, 115BBE, 271AAC(1)
AI-generated summary — verify with the full judgment below
Order PER LALIET KUMAR, J.M This appeal by the assessee is directed against the order dated 27.12.2024 passed by the Ld. CIT, Appeal, Addl/JCIT(A)-1, Coimbatore, under section 250 of the Income-tax Act, 1961, for the assessment year 2017-18, arising out of the assessment order dated 09.12.2019 passed u/s 143(3) by the ITO, Rampur. 2. The sole effective ground raised
by the assessee reads as under: “That the Ld. Assessing Officer has erred in adding a sum of Rs.11,24,000/- as unexplained money u/s 69A of the Act. The addition so made and sustained by the Ld. CIT(A) is illegal, arbitrary, and against the facts and circumstances of the case.”
3. Briefly the facts of the case are that the assessee, an individual deriving income from pension and horticulture, filed his return declaring total income of Rs.2,73,150/- and agricultural income of Rs.4,83,116/-. 3.1 During scrutiny, the AO noticed cash deposits aggregating to Rs.11,24,000/- during the demonetization period (09.11.2016 to 30.12.2016) — 2 Rs.2,63,000/- in Canara Bank, Rohru and Rs.8,61,000/- in Punjab National Bank, Rohru. 3.2 The assessee explained that these deposits were out of cash withdrawn from a housing loan jointly sanctioned to him, his wife Smt. Shanti Devi, and son Rajesh Kumar by Canara Bank, Rohru, immediately before demonetization. The chronology of loan and withdrawals was as under:
Amount Date Source Account Particulars (Rs.) 27.09.2016 Loan disbursed to a/c of Rs.9,00,000 withdrawn in cash; Rs.1,00,000 10,00,000 Smt. Shanti Devi transferred to assessee’s account on 05.10.2016 05.10.2016 Mohan Lal Bhapta 1,00,000 Withdrawn in cash (Canara Bank) Transferred to assessee’s account and 17.10.2016 Second loan installment 3,00,000 withdrawn on same day 3.3 The assessee stated that due to serious illness and hospitalization of his wife at IGMC, Shimla, construction work was suspended and the cash remained unutilized. Upon announcement of demonetization, he deposited the unspent sum of Rs.11,10,000/- into his two bank accounts.
The AO rejected the explanation observing that as per banking norms, the second installment of the loan could not have been released without utilization of the first, indicating that the initial funds were already spent. 4.1 He further noted that the assessee made small withdrawals between 28.10.2016 and 11.11.2016, implying that the earlier withdrawals had been utilized. 4.2 The AO held that the explanation lacked corroboration and treated the deposits as unexplained money u/s 69A, taxed u/s 115BBE, and initiated penalty u/s 271AAC(1).
3 5. Feeling aggrieved by the order of the Assessing Officer, the assessee preferred the appeal before the Ld. CIT(A) .The Ld. CIT(A) concurred with the AO, holding that the assessee’s claim of keeping Rs.11,10,000/- in hand was improbable. It was observed that small withdrawals after 27.09.2016 disproved the claim that the entire loan proceeds remained unutilized. Consequently, the addition of Rs.11,24,000/- was upheld in full.
Now the assessee is in appeal before the tribunal on the grounds mentioned in the appeal .
The Ld. AR submitted that the source of the cash deposits stood duly explained through identifiable loan disbursals received from Canara Bank in the months of September and October 2016. It was contended that the proximity between the timing of the loan withdrawals and the subsequent demonetization in November 2016 rendered the assessee’s explanation both reasonable and plausible. The Ld. AR further submitted that the assessee’s wife had suffered a genuine medical emergency during the relevant period and was hospitalized, due to which the construction activity for which the loan had been obtained could not be undertaken, resulting in the cash remaining unutilized. It was further emphasized that there was no contrary material brought on record by the Assessing Officer to establish that the withdrawn loan funds were used elsewhere or that the deposits represented any undisclosed income. The Ld. AR argued that mere suspicion, howsoever strong, cannot take the place of proof, and therefore, the addition made by the Assessing Officer and sustained by the Ld. CIT(A) was unjustified and liable to be deleted.
Per contra, the Ld. Departmental Representative (DR) supported the concurrent findings of the lower authorities and contended that the Assessing Officer as well as the Ld. CIT(A) had rightly drawn adverse inference from the conduct of the assessee. It was submitted that the pattern of small and frequent cash withdrawals made by the assessee clearly indicated that the funds withdrawn from the loan account were being utilized on a continuing basis and 4 were not lying idle as claimed. The Ld. DR further argued that the assertion of the assessee that a sum of Rs.11 lakh remained in cash for nearly two months was highly improbable and contrary to normal human conduct. It was further emphasized that under the provisions of section 69A of the Income-tax Act, the onus squarely lies upon the assessee to satisfactorily explain the nature and source of the money found in his possession, and that in the present case, the assessee had failed to discharge this statutory burden by furnishing any contemporaneous or corroborative evidence. Hence, the addition made by the Assessing Officer and confirmed by the Ld. CIT(A) was fully justified.
I have carefully considered the rival submissions and examined the record. It is an undisputed fact that the assessee was a co-borrower of a housing loan jointly sanctioned by the bank and that a total sum of Rs.13,00,000/- was disbursed shortly before the demonetization period. The assessee’s explanation that, due to the serious illness and hospitalization of his wife, the construction activity was temporarily suspended and the cash withdrawn from the loan account remained unutilized, finds partial support from the medical records placed on record. The proximity in time between the loan disbursement (in September–October 2016) and the cash deposits (in November–December 2016) also lends some probability to the assessee’s claim that at least part of the withdrawn amount could have remained in hand and was subsequently deposited in the bank after demonetization was announced. 9.1 However, the claim that the entire sum of Rs.11,10,000/- remained idle in cash is not fully borne out by the evidence. The bank statements reveal small and intermittent cash withdrawals during October and early November 2016, suggesting that the funds were being utilized gradually. The assessee has not produced any contemporaneous record, such as a cash-flow statement or construction ledger, to demonstrate that the full amount was available in cash on the date of deposit. In these circumstances, while the entire addition made by the Assessing Officer cannot be sustained, it would also not be reasonable to