Loading judgment…

RITU DHAKA,JAIPUR vs ITO WD 4(4), JPR, JAIPUR | BharatTax

RITU DHAKA,JAIPUR vs. ITO WD 4(4), JPR, JAIPUR

ITA 2/JPR/2025Status: DisposedITAT Jaipur01 April 2025AY 2017-18Bench: DR. S. SEETHALAKSHMI (Judicial Member), SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member)1 pages

AI SummaryAllowed

Facts

The assessee challenged the CIT(A)'s order confirming an addition of Rs. 17,99,000/- made by the AO on account of unexplained cash deposits during demonetization and other periods. The assessee claimed the deposits were out of various sources including salary savings, mortgage loan, and husband's withdrawals.

Held

The Tribunal held that the assessee had provided sufficient evidence through cash flow statements and related documents to justify the cash deposits. The AO's rejection of the explanation and the addition were deemed not to be based on proper appreciation of evidence and were based on surmises and conjectures.

Key Issues

Whether the addition made under Section 68 of the Income Tax Act, 1961, on account of unexplained cash deposits is justified when the assessee has provided a cash flow statement and related documents, and whether the AO has properly appreciated the evidence.

Sections Cited

143(3), 68, 142(1), 154, 115BBE, 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR

Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 2/JPR/2025

For Appellant: Shri R.S. Poonia, C.A

Hearing: 20/02/2025

fu/kZkj.k o"kZ@Assessment Years : 2017-18 Ritu Dhaka cuke The ITO, C-258, Kardhani Kalwar Road, Vs. Ward-4(4), Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AOCPD7309B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri R.S. Poonia, C.A. jktLo dh vksj ls@ Revenue by : Shri Gautam Singh Choudhary, JCIT lquokbZ dh rkjh[k@ Date of Hearing : 20/02/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 01 /04/2025 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM By way of present appeal, the assessee challenges the order of National Faceless Appeal Centre, Delhi [for short CIT(A)] dated 27.12.2024. The dispute relates to the assessment year 2017-18. Ld. CIT(A) passed that the order because the assessee challenged the order of assessment of income passed u/s 143(3) of the Income Tax Act, 1961 (for short “Act”) dated 29.07.2019 passed by ITO, Ward-4(4), Jaipur [ for short AO] before him.

2.

In this appeal, the assessee has raised following grounds: - “

1. That under the facts and circumstances of the case the Ld. National Faceless Appeal Centre (NFAC) has erred in law and facts in confirming the addition of Rs. 17,99,000/- imposed by the Ld. A.O. on account of unexplained cash deposit u/s. 68 of the I.T. Act, 1961 which is wrong, unwarranted and bad in law. Kindly delete the same.

2. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.”

2.1 Vide application dated 20.02.2025 the assessee raised the three additional grounds which reads as under :

1. 1. That the Ld. A.O. has erred in Law & facts of the case to invoke Section 68 of the I.T. Act, 1961, as the appellant neither maintain any books of accounts nor the Ld. A.O. found any credited in the books of appellant. So, the invocation of Section 68 of the I.T. Act, 1961 is wrong and bad in Law. Kindly delete the addition.

3.

The brief facts of the case are that the assessee was filed with return of income declaring total income of Rs. 3,45,950/- on 22.07.2017. This case was selected for Scrutiny under CASS system. Statutory notices were issued, and the assessee filed submission in response. 3.1 Ld. AO noted that the assessee deposited Rs. 16,35,000/- in cash during demonetization. While explaining the source of money the assessee stated that she has taken a mortgage loan of Rs.15,00,000/- deposited in Axis Bank account No.913010008949167 and withdrawal cash from that loan account. Out of loan amount Rs.8,63,830/- invested and balance amount Rs. 6,36,170/- was made available as cash on hand. As regards the remaining amount of Rs. 9,98,830/- the same was stated to be saving out of salary income earned by her. She also stated that she deposited cash of Rs.5,26,000/- in her account during the financial year 2016-17 for which it was submitted that the same was out of withdrawal from other accounts and this amount may be Ritu Dhaka vs. ITO confirmed with the bank statements. Based on that set of facts the assessee was asked to show cause as to why the cash deposited during the demonetization period of Rs. 16,35,000/- & other cash deposited of Rs. 5,26,000/- be not considered as income. In response to that notice the assessee attended the office of the ld. AO and filed written submission on 19.06.2019. In continuation of the assessment proceeding notice u/s 142(1) of the IT Act was issued to the assessee to furnish detail of investment made during the last 3 years and to disclose source of income, detail of house hold expenses and other expenses incurred during the last 3 years, detail of any social function organized by you during the last 3years and furnish detail of cash in hand during the last 3 years the assessee was asked to explain the reason why the unused huge cash fund leis with her so long period. In response to this notice neither the assessee attended nor filed any written reply in this regard before the ld. AO. 3.2 Further assessee was asked as to why she retain the said amounts three year duration in her pocket? The assessee did not reply to that query and not filed any supporting documentary evidences in her claim. In view of the above facts and discussion Ritu Dhaka vs. ITO made ld. AO made the addition of Rs. 21,61,000/- [ 16,35,000 + 5,26,000 ] u/s. 68 of the Act.

2. Judgment of the co-ordinate Bench ofJaipur ITAT in case of Dr. VishanSwaroop Gupta v. ITO Ward 7(3), Jaipur, the relevant para of finding is as follows:- “9. After having gone through the facts and circumstances, we observe that credit in the ‘bank account’ of an assessee cannot be construed as a credit in the ‘books’ of the assessee, for the very reason that the bank account cannot be held to be the ‘books’ of the assessee. Though, it remains as a matter of fact that the ‘bank account’ of an assessee is the account of the assessee with the bank, or in other words the account of the assessee in the books of the bank, but the same in no way can be held to be the ‘books’ of the assessee. We have given a thoughtful consideration to the scope and gamut of the aforesaid statutory provision of Section 68, and are of the considered view that an addition made in respect of a cash deposit in the bank account of an assessee, in the absence of the same found credited in the ‘books’ of the assessee maintained for the previous year, cannot be brought to tax by invoking the provisions of Section 68 of the Act. Therefore, on this count itself the impugned addition made and sustained deserves to be deleted and we direct to delete the same. Since we have quashed the addition on the ground that no such addition could have been validly made U/s 68 of the Act, therefore, we refrain ourselves to decide the other grounds wherein the assessee has assailed on merits the additions sustained by the ld. CIT(A) In the result, appeal of the assessee is allowed.” The addition u/s. 68 is liable to be deleted. Ground No. 2 “That the Ld. A.O. has erred in Law & facts of the case in making addition without following the Principle of Natural Justice & without following the binding instruction of CBDT, instruction No. 20/2015, dated 29.12.2015. So, the addition is bad in law. Kindly delete the same.” The Ld. A.O. did not issue any SCN to make addition u/s. 68 of the Act, therefore the Ld. A.O. did not follow the guidelines of CBDT mentioned in CBDT instruction No. 20/2015, dated 29.12.2015. The relevant Para of CBDT instruction is as follows:- “4. The Board further desires that in all cases under scrutiny, where the Assessing Officer proposes to make additions or disallowances, the assessee would be given a fair opportunity to explain his position on the proposed additions/disallowances in accordance with the principle of natural justice. In this regard, the Assessing Officer shall issue an Ritu Dhaka vs. ITO appropriate show-cause notice duly indicating the reasons for the proposed additions/disallowances along with necessary evidences/reasons forming the basis of the same. Before passing the final order against the proposed additions/disallowances, due consideration shall be given to the submissions made by the assessee in response to the show-cause notice.” The appellant is relying on the following judgments, which are as follows:- 1. Judgment of Orissa High Court in case of ACIT v. M/s. Serajuddin, 454 ITR 312, order dated 15.03.2023, the relevant para of judgment is as follows:- “……24. The above manual is meant as a guideline to the AOs. Since it was issued by the CBDT, the powers for issuing such guidelines can be traced to Section 119 of the Act. It has been held in a series of judgments that the instructions under Section 119 of the Act are certainly binding on the Department. In Commissioner of Customs v. Indian Oil Corporation Ltd. 2004 (165) E.L.T. 257 (S.C.) the Supreme Court observed as under: "Despite the categorical language of the clarification by the Constitution Bench, the issue was again sought to be raised before a Bench of three Judges in Central Board of Central Excise, Vadodara v. Dhiren Chemicals Industries: 2002 (143) ELT 19 where the view of the Constitution Bench regarding the binding nature of circulars issued under Section 37B of the Central Excise Act, 1944 was reiterated after it was drawn to the attention of the Court by the Revenue that there were in fact circulars issued by the Central Board of Excise and Customs which gave a different interpretation to the phrase as interpreted by the Constitution Bench. The same view has also been taken in Simplex Castings Ltd. v. Commissioner of Customs, Vishakhapatnam 2003 (5) SCC 528. The principles laid down by all these decisions are: (1) Although a circular is not binding on a Court or an assessee, it is not open to the Revenue to raise the contention that is contrary to a binding circular by the Board. When a circular remains in operation, the Revenue is bound by it and cannot be allowed to plead that it is not valid nor that it is contrary to the terms of the statute. (2) Despite the decision of this Court, the Department cannot be permitted to take a stand contrary to the instructions issued by the Board. (3) A show cause notice and demand contrary to existing circulars of the Board are ab initio bad (4) It is not open to the Revenue to advance an argument or file an appeal contrary to the circulars."

Ritu Dhaka vs. ITO That without prejudice to the additional ground No. 1, 2 and ground No. 4, we submits that the Ld. A.O. has not issued specific SCN for charging special rate of tax u/s. 115BBE, the appellant is relying on the Judgment of Hon’ble ITAT, Jodhpur Bench in case of Smt. SurajKanwarDevra v. ITO, Ward 2(2), Udaipur, Date of Order – 23.11.2021. The relevant Para of judgment is as follows:- “ 16.………..the A.O. has not issued any Show Cause Notice before invoking the provision of Sec. 115BBE for taxing the income on higher rate. It was mandatory on the part of the AO to issue the specific show cause notice to this effect asking to the assessee as to why the income should not be taxed u/s. 115BBE before doing so. It is very settled legal position that a person (assessee) is entitled to opportunity to show cause as to why not the income of the assessee is determined and charged or taxed in the manner as proposed by the Ld. A.O. But, in the instant case no such type of opportunity had been provided but the AO has failed to do so, which is against the Principal of Natural Justice and against the Law. This Section 115BBE, is charging of tax at the higher rate and it cannot be applied directly without giving any show cause notice when the issue are disputed that whether the higher rate of tax applicable or not on the alleged income or the nature of income falls us. 68/69 and 115BBE.Hence it was mandatory on the part of the AO to issue show cause before invoking the provision u/s. 115BBE, in absence of the same the rate cannot be charged more than to normal rate of tax, if the addition if any sustained.” So, charging special rate u/s. 115BBE cannot be charged and kindly charge the normal tax rate even if the addition is sustained. Arguments and reliance of case laws on ground No. 4 of the appeal i.e. arguments on merits:- Ground No. 4 “That under the facts and circumstances of the case the Ld. National Faceless Appeal Centre (NFAC) has erred in law and facts in confirming the addition of Rs. 17,99,000/-imposed by the Ld. A.O. on account of unexplained cash deposit u/s. 68 of the I.T. Act, 1961which is wrong, unwarranted and bad in law. Kindly delete the same.”

2. Judgment of Hon’ble ITAT, Jodhpur Bench in case of Smt. Krishna Agarwal v. ITO Ward-1, Pali, Date of Order – 07.09.2021 Ritu Dhaka vs. ITO “15. We further note that the cash withdrawals in the earlier two years have not been disputed by the Revenue and only reason why the explanation of the assessee that cash deposits in the year under consideration is out of earlier years withdrawals has not been accepted is that keeping huge cash at home for such a long period is beyond any imagination. In this regard, we believe that there cannot be any standard yardstick which can be applied and what needs to be examined is the reasonability of the explanation so furnished by the assessee on the touchstone of facts and circumstances of each case. In the instant case, it has been submitted that the cash was withdrawn for the purposes of purchase of another property by the assessee for her son however, the transaction couldn’t fructify and as a result, the assessee decided to re- deposit the amount in the bank account. In an ideal situation, such an explanation is expected to be supported by some documentary evidence however, mere absence of supporting documentation cannot be a reason enough to allege any malafide in the explanation so submitted especially where the assessee has explained and duly disclosed the source of deposits in the bank account out of which the withdrawals have been made and has thus established the necessary linkage and availability of cash in hand. The various decisions of the Coordinate Benches cited at the Bar by the ld AR also lays down a broad proposition that mere time gap between withdrawals and deposits cannot be a sole basis for rejecting the explanation of the assessee regarding availability of cash in hand where there is no material that amount so withdrawn has been utilized somewhere else and thus supports the case of the assessee In the entirety of facts and circumstances of the case, we believe that there is no justifiable basis to hold that the explanation so furnished by the assessee cannot be accepted and find the explanation so furnished is reasonable, appropriate and satisfactory in the facts and circumstances of the present case and hereby direct the addition so made be deleted.” Ground No. 5 General Ground That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.”

The brief facts related to the disputes are that for the year under consideration the assessee has filed the return of income declaring total income of Rs. 3,45,950/- on 22.07.2017. This case was selected for Scrutiny under CASS system. Statutory notices were issued, and the assessee filed submission in response to those notices. While examining the record the ld. AO noted that the assessee has deposited Rs. 16,35,000/- in cash during demonetization. While explaining the source of money the assessee stated that she has taken a mortgage loan of Rs.15,00,000/- deposited in Axis Bank account No.913010008949167 and withdrawal cash from that loan account. Out of loan amount Rs.8,63,830/- invested and balance amount Rs. 6,36,170/- was made available as cash on hand. As regards the remaining amount of Rs. 9,98,830/- the same was stated to be saving out of salary income earned by her. She also stated that she deposited cash of Rs.5,26,000/- in her bank account during the financial year 2016-17 for which it was submitted that the same Ritu Dhaka vs. ITO was out of withdrawal from other accounts. In light of that fact ld. AO asked the assessee to show cause as to why the cash deposit of Rs. 16,35,000/- & other cash deposited of Rs. 5,26,000/- be not considered as income. In response assessee filed written submission on 19.06.2019. Thereafter ld. AO also called for detail of investment made during the last 3 years and to disclose source of income, detail of house hold expenses and other expenses incurred during the last 3 years, detail of any social function organized by the assessee during the last 3years and furnish detail of cash in hand during the last 3 years the assessee. The assessee was also asked to explain the reason as to why the unused huge cash fund leis with her so long period. In response to this notice neither the assessee attended nor filed any written reply. Further assessee was asked as to why she retain the said amounts three year duration in her pocket? The assessee did not reply to that query and not filed any supporting documentary evidence in support of her claim. In light of that of the case ld. AO made the addition of Rs. 21,61,000/- [ 16,35,000 + 5,26,000 ] u/s. 68 of the Act.

Ritu Dhaka vs. ITO 6,36,170/- was made available as cash on hand. As regards the remaining amount of Rs. 9,98,830/- the same was stated to be saving out of salary income earned by her and her Husband. She also stated that she deposited cash of Rs.5,26,000/- in her bank account during the financial year 2016-17 for which it was submitted that the same was out of withdrawal from other accounts and therefore, that addition of current year transaction cannot be considered as unexplained. The bench noted that the ld. AO after submission of cash flow he further called for the details of last three year for investment made, household expenditure incurred, abroad travelling and details of the cash on hand. Those details were placed on record with the AO vide letter dated 04.07.2019 [ APB-13]. There is no comment on that information in the orders of the lower authority and thereby rejected the explanation of the assessee merely stating that “Submission and documentary evidence filed by the assessee is not genuine and factual. Thus, the explanation of the assessee though supported by evidence was not considered and there is no reasons as to making the whole cash deposit as unexplained. Looking to the overall explanation so furnished by the assessee we are of the considered view that the assessee has placed on record all the evidence so as Ritu Dhaka vs. ITO to justify the cash available with her where she submitted even the return of income of her Husband, loan documents, expenditure incurred on kids education etc. which are sufficient records to prove the deposit of cash into the bank account but the same were rejected in Lock, Stock and Barrel which is not correct as no addition of income be made based on the surmises and conjectures. The bench also noted from the cash flow statement so filed by the assessee that Rs. 14,84,330/- was opening cash balance, thereby left the amount of Rs. 3,14,670/- was part of income of the assessee and that of her husband and agricultural income cannot be considered as unexplained. As regards the opening balance on the first day or carried forward from the preceding year cannot be added in this year. We get the support of this contention from the decision of our jurisdictional high court in the case of Commissioner of Income-tax v. Parmeshwar Bohra, 131 Taxman 145 (Rajasthan) wherein the jurisdictional high court held that; “7. It appears that the Tribunal has considered the issue regarding assessability of the capital while considering the assessee’s appeal ITA 71(JDP)/99 for the assessment year 1993-94 by order dated 6-12-2001 whereby the Tribunal held that it is not a case of introduction of cash credit but it is a case of unexplained investment under section 69 of the Act of 1961 and the appropriate previous year for inclusion is the relevant financial year and, therefore, the opening capital account Ritu Dhaka vs. ITO cannot be added as an unexplained investment under section 69 of the Act of 1961 for the assessment year 1993-94. The Tribunal also held that the genuineness of the capital introduction has already been adjudicated upon by the assessing authority for the appropriate financial year relevant to assessment year 1992-93. The Tribunal also took note of the fact that the order passed by the assessing authority for the assessment year 1993-94 on the basis of notice under section 148 dated 17-6-1997 has already been quashed by the order dated 6- 12-2001 in the same (JDP)/99. Therefore, on the basis of the above decision dated 6-12-2001, the appeal of the assessee was allowed by the Income Tax Appellate Tribunal. Nothing has come on record what happened to the order dated 6-12-2001 and whether the said order of the Tribunal was ever challenged by the revenue or not. When the revenue itself has accepted the order dated 6-12-2001 wherein it has been held by the Tribunal that it is a case of unexplained investment under section 69 of the Act of 1961 and the appropriate previous year for inclusion is the relevant financial year and its genuineness has already been adjudicated upon by the assessing authority for the appropriate financial year, i.e., 1992-93 (sic) then how the order of the assessing authority can be said to be erroneous or prejudicial to the interest of the revenue. Since the Income Tax Appellate Tribunal has decided the appeal on the basis of the decision dated 6-12-2001, therefore, there appears to be no illegality in the order passed by the Income Tax Appellate Tribunal.”