Loading judgment…
Facts
The assessee filed a return declaring a loss, showing income from house property and other sources. The case was selected for limited scrutiny due to large investment in property and cash deposits during demonetization. The AO added Rs. 25 lakhs to the assessee's income, considering it as unaccounted money.
Held
The Tribunal held that the lower authorities negated the assessee's explanation for the cash deposit without cogent evidence. The gap of three months between withdrawal and deposit of cash does not by itself lead to the conclusion that the explanation was unacceptable. The addition was deemed bad in law and liable for deletion.
Key Issues
Whether the cash deposit of Rs. 25 lakhs, originating from withdrawals made earlier for property renovation, can be treated as unexplained income solely due to a time gap before redeposit.
Sections Cited
143(1), 69A, 115BBE, 271AAC
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, SMC BENCH, LUCKNOW
Before: SHRI. SUDHANSHU SRIVASTAVA
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, LUCKNOW BEFORE SHRI. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER Assessment Year: 2017-18 Urmila Mishra v. The Income Tax Officer E-1/186, KDA Colony Ward 1(1)(5) Dheli Sujanpur, Kanpur Kanpur TAN/PAN:BNDPM1858F (Appellant) (Respondent) Appellant by: Shri Rakesh Garg, Advocate Respondent by: Shri Sanjeev Krishna Sharma, D.R. Date of hearing: 29 01 2025 Date of pronouncement: 25 04 2025 O R D E R
This appeal has been preferred by the assessee against the order dated 03.10.2024 passed by the National Faceless Appeal Centre, Delhi (NFAC) for assessment year 2017-18.
The brief facts of the case are that return, declaring a loss of Rs.1,04,328/-, was filed by the assessee, wherein the assessee had shown income from house property at Rs.4,91,628/- and income from other sources at Rs.26,933/-. After initially processing of the return under section 143(1) of the Income Tax Act, 1961 (hereinafter called “the Act’), the case was selected for Limited Scrutiny through CASS for the reason of – (1) large investment in property and (2) large value of cash deposits during the demonetization period.
2.1 It was observed by the Assessing Officer (AO) that the assessee had deposited Rs.25 lakhs in Old Specified Notes in the year 2016 and had also purchased property for a consideration of Rs.1.50 crores, on which stamp duty of Rs.10.50 lakhs was also paid. In response to the query made by the AO regarding cash deposits, the assessee submitted that she was maintaining Saving Bank account with Allahabad Bank, Shyam Nagar Branch, Kanpur, wherein the cash of Rs.25 lakhs was deposited out of the cash withdrawals made by the assessee, amounting to Rs.34,68,000/- from this bank account itself between 01.04.2016 and 17.11.2016. It was the submission of the assessee that Rs.24,75,000/- had been withdrawn from the bank on 12.07.2016 and 13.07.2016 for the renovation of the property which somehow could not be utilized and in view of demonetization declared by the Government, the cash lying in Old Specified Notes had to be deposited in the bank account itself. However, the AO did not accept the submission of the assessee and observed that it was unbelievable that the assessee had cash lying with her for more than three months. The AO alleged that it was in fact unaccounted money of the assessee which she was compelled to deposit in the bank due to demonetization of currency. Accordingly, the AO proceeded to add an amount of Rs.25 lakhs to the income of the assessee under section 69A of the Act and invoked the provisions of section 115BBE of the Act and also initiated penalty proceedings under section 271AAC of the Act.
Aggrieved, the assessee preferred an appeal before the Ld. First Appellate Authority, challenging the addition, but her submissions and explanations were again not accepted by the Ld. First Appellate Authority and assessee’s appeal came to be dismissed by holding that the assessee had failed to offer any acceptable and cogent explanation regarding the source of cash deposits appearing in the bank account and, therefore, the AO was correct in adding the impugned amount of Rs.25 lakhs to the income of the assessee.
Now the assessee is before this Tribunal, challenging the dismissal of her appeal by the Ld. First Appellate Authority by raising the following grounds of appeal:
1. Because the CIT(A) has erred on facts and in law in upholding the addition of Rs.25,00,000/- under section 69A made by the Assessing Officer on account of cash deposited in bank, which addition is contrary to facts, bad in law and be deleted.
2. Because on a proper consideration of facts and circumstances of the case, the entire amount of Rs.25,00,000/- deposited in bank being out of the withdrawals made by the assessee from her bank account, the authorities below have erred on facts and in law in not accepting the explanation filed by the assessee and disbelieving the same on account of human probabilities, the addition made is bad in law and be deleted.
3. Because there being no dispute with regard to the withdrawals made by the assessee from her bank account some time before redeposit of the same in her bank account, the authorities have erred in treating the amount as unexplained and making the addition under section 69A, such addition being contrary to facts, bad in law be deleted.
4. Because the Assessing Officer as well as the CIT(A) have not brought any material on record to dislodge the claim of the assessee that the cash deposited in bank was not out of the withdrawals made by her from her bank account or was utilized elsewhere, the addition made under section 69A be deleted.
5. Because the order passed by the CIT(A) is not sustainable, in as much as, the last date of hearing was 27.09.2022 and the order has been passed after more than two years, which is directly against the mandate of the CBDT's Instruction No. 20/2003 dated 23.12.2003 the appellate order passed be quashed.
The Ld. Authorized Representative for the assessee (Ld. A.R.) submitted that the only dispute in the present appeal was with respect to the source of cash deposits of Rs.25 lakhs. He referred to the copy of bank statement appearing at pages 22 to 25 of the paper book and submitted that the assessee had made withdrawal of Rs.15 lakhs on 12.07.2016, a further withdrawal of Rs.9.75 lakhs on 13.07.2016 and another withdrawal of Rs.3.30 lakhs on 06.09.2016 and that the relevant entries were duly appearing in the bank statement and were not in dispute. It was submitted that out of these withdrawals only, the impugned amount of Rs.25 lakhs had been re-deposited in view of demonetization announced by the Government of India. It was submitted that the amount had been withdrawn for the purpose of renovating the property, but somehow, the same could not the utilized for the simple reason that the sale deed (for purchase of property) was registered only on 29.11.2016 and, therefore, the renovation work could not be undertaken till the assessee had a clear title of the property. It was submitted that the time gap between withdrawals and cash deposits was only about three months and it was also submitted that this explanation of the assessee was neither found to be false nor incorrect but both the lower authorities had proceeded only on the basis of suspicion and assumption which was not permissible under the Income Tax Act. It was emphasized that the AO had not brought any adverse evidence on record to establish that the assessee had utilized the cash withdrawn for some other purposes. The Ld. A.R. submitted that the explanation by the assessee was only doubted but was not found to be false. It was also submitted that admittedly and undisputedly the assessee did not have any other source of income and, therefore, in absence of any evidence to the contrary, the version of the assessee should have been accepted. The Ld. A.R. relied on numerous case laws (placed in the paper book) in support of the contention that the mere fact that there was a gap of some months in re-depositing funds would not by itself lead to the conclusion that the explanation given by the assessee was incorrect.
In response, the Ld. Sr. D.R. relied heavily on the impugned order and submitted that the assessee had failed to explain the source of cash deposits and the explanation of the assessee was only an afterthought to cover up the unaccounted money having been introduced in the books of the assessee. It was prayed that the appeal of the assessee be dismissed.
I have heard both the parties and have also perused the material on record. The only reason for the lower authorities to make the impugned addition is that there was gap of around three months between the time the amount was withdrawn from the bank and the time it was re-deposited. The assessee’s contention is that the cash deposit was out of cash withdrawals made earlier for the purpose of renovating the property which was being purchased and the explanation for not utilizing the withdrawn amount immediately is that since the sale deed could not be finalized and registered earlier, the renovation work could not be carried out. The assessee has also filed copy of the sale deed placed at page 33 of the paper book and has demonstrated that the sale deed came to be registered only on 29.11.206, i.e., after the date of declaration of demonetization. The lower authorities do not seem to have taken cognizance of this fact and have proceeded to tax the impugned amount as unaccounted money only on the premise that it is highly improbable that the assessee would have kept huge amount of cash for three months or so. However, as the Ld. A.R. has rightly pointed out, neither of the lower authorities has established by cogent evidence that the cash deposited in the bank account emanated from some other undisclosed source. Nor has it been demonstrated by the lower authorities that the cash withdrawn by the assessee had been utilized for some other purposes. Therefore, it is my considered view that the lower authorities negated the explanation of the assessee without cogent evidence. The explanation of the assessee cannot be summarily dismissed just for the reason that there was a gap of about three months in re-depositing the funds, as this by itself would not lead to the conclusion that the explanation given by the assessee was unacceptable. Therefore, in view of my above observations, I hold that the impugned addition was bad in law and is liable to be deleted. It is ordered accordingly. Accordingly, grounds No. 1 to 4 stand allowed, whereas ground No.5 is dismissed as not pressed.
In the result, the appeal is partly allowed.
Order pronounced in the open Court on 25/04/2025.