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Facts
The assessee, an individual, failed to file an income tax return for AY 2017-18 despite significant cash deposits, including Rs. 23,17,000/- during the demonetization period. The assessee attributed these deposits to gifts from wife and son, sale proceeds of land, and cash sales from business. The AO and CIT(A) made additions totaling Rs. 55,38,150/- as unexplained deposits and long-term capital gains.
Held
The Tribunal upheld the addition related to gifts from the wife, finding insufficient evidence for the cash withdrawals and the rationale for the gift. However, it deleted the addition of Rs. 32,21,150/- pertaining to deposits made outside the demonetization period, as the AO traveled beyond the scope of the notice issued under Section 142(1) and the sources were adequately explained.
Key Issues
Whether cash deposits made during and after demonetization were adequately explained by the assessee as gifts, sale proceeds, or cash sales; and whether the AO exceeded the scope of the notice under Section 142(1) by making additions for the entire financial year.
Sections Cited
144, 142(1), 133(6), 69A, 115BBE
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Income Tax Appellate Tribunal, VISAKHAPATNAM “DIVISION” BENCH, VISAKHAPATNAM
Before: SHRI LALIET KUMAR, HON’BLE & SHRI S BALAKRISHNAN, HON’BLE
करदाता का प्रतततितित्व/ Assessee Represented by : Shri GVN Hari, AR राजस्व का प्रतततितित्व/ Department Represented by : K. Sandhya Rani, Sr.AR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 22.01.2025 घोषणा की तारीख/Date of Pronouncement : 27.02.2025 आदेश /O R D E R
PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER:
This appeal filed by the assessee against the order of the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (“Ld. CIT(A)-NFAC”) vide DIN & Order No. ITBA/NFAC/S/250/2023-24/1061784775(1), dated 29/02/2024 for the AY 2017-18 arising out of the order passed U/s. 144 of the Income Tax Act, 1961 (“the Act”) dated 31/10/2019.
Briefly stated the facts of the case are that the assessee is an individual who has not filed the return of income for the AY 2017-18. Based on the information available with the Department, it was found that the assessee has deposited cash for an amount of Rs. 23,17,000/- during demonetization period. Accordingly, notice U/s. 142(1) dated 30/01/2018 was issued to the assessee calling for the return of income. Since no return was filed, another notice U/s. 142(1) of the Act, dated 5/9/2019 was issued and duly served on the assessee asking him to submit the information by 12/09/2019. Subsequently, information has been obtained from the banks U/s. 133(6) of the Act to ascertain exact amount of deposit made during demonetization period and also during the entire FY 2016-17. In response to the notices, the assessee has submitted that he has received cash gift from his wife Smt. Manda Krishna Veni for Rs. 13,72,430/- and gift from his son Sri Baswa Naga Gowtham Reddy for Rs. 1,95,000/-. The balance amount deposited during the demonetization period was attributed to the cash sales in respect of cloth business. Further, the assessee also submitted that he has received sale proceed from sale of land to Sri Sathi Venkata Reddy for Rs. 2,69,000/-. In support of his contention, the assessee filed the return of income of his wife and son along with sale deed copies before the Ld. AO. The Ld. AO did not accept the contentions of the assessee and has made an addition of Rs. 55,38,150/- including cash deposits made during the entire FY 2016-17 and Rs. 2,69,000/- towards Long Term Capital Gains on the sale of land by the assessee. On being aggrieved, the assessee preferred an appeal before the Ld. CIT(A)-NFAC.
3. Before the Ld. CIT(A)-NFAC, the assessee reiterated the submissions made before the Ld. AO. The Ld. CIT(A)-NFAC did not accept the submissions and dismissed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal before us by raising the following grounds:
“1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case.
2. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 55,38,150/- (Rs. 23,17,000 and Rs. 32,21,150) made by the Assessing Officer U/s. 69A of the Act towards unexplained deposits in the bank account.
The Ld. CIT(A) ought to have held that the provisions of section 115BBE of the Act are not applicable to the case of appellant. Any other ground may be urged at the time of hearing.” 4.
Grounds No. 1 & 4 are general in nature and need no adjudication.
Grounds No. 2 & 3 are with respect to addition of Rs. 55,38,150/- U/s. 69A r.w.s. 115BBE of the Act. On this issue, the Ld. AR submitted that the wife of the assessee Smt.Manda Krishna Veni is an employee in GBR Degree College and drawing salary income of Rs. 7 lakhs per annum and also a regular filer of the income tax returns. It was further submitted that the assessee’s son Sri Baswa Naga Gowtham Reddy is also running the business of cloth and readymade garments, who is also a regular filer of the income tax returns, and from his withdrawals from the bank account, gifted the assessee Rs. 1,95,000/-. With respect to the balance amount of Rs. 4,80,570/- deposited during demonetization period, the contention of the Ld. AR was that it is arising out of the cash sales and the cash balance available with the assessee as on 08/11/2016. The Ld. AR further submitted that the cash deposits made during the FY 2016-17 other than demonetization period is attributable to the cash sales made by the assessee and deposited into the bank account for making payments to various vendors towards purchase of goods. The Ld. AR also submitted that the property sold by the assessee belongs to the wife of the assessee who has given the sale proceeds to her husband in the assessee’s bank account. The Ld. AR therefore pleaded that since the sources have been properly explained and recorded in the books of accounts, no addition can be made U/s. 69A of the Act.
Per contra, the Ld. DR relied on the orders of the Ld. Revenue Authorities.
We have heard both the sides and perused the material available on record as well as the orders of the Ld. Revenue Authorities. It is an admitted fact that the assessee has made cash deposits to the extent of Rs. 55,38,150/- into the bank account of the assessee during the FY 2016-17 out of which Rs. 23,17,000/- is during the demonetization period. The sources furnished by the assessee for the cash deposits made during the demonetization period is as follows:
1. Gift from Wife Rs. 13,72,430/- 2. Gift from Son Rs. 1,95,000/- 3. Sale proceeds of Site Rs. 2,69,000/- 4. Sale of goods Rs. 4,80,570/- Total Rs. 23,17,000/- In support of his contention that the assessee received gift from his wife, assessee stated that Smt. Manda Krishna Veni is working in GBR Degree College since 1984 and is an income tax assessee and submitted the copies of the income tax returns filed by Smt. Manda Krishna Veni declaring the salary income of Rs. 7,15,976/- for the AY 2017-18. However, we find that she has withdrawn cash of Rs. 2,51,400/- prior to demonetization. The Ld. CIT(A)-NFAC while considering the submissions made by the assessee with respect to the gift from wife amounting to Rs.16,41,430/- found that Smt. Manda Krishna Veni did not withdraw cash which was claimed to be given as gift to the assessee. The Ld.CIT(A)-NFAC arrived at this conclusion after perusing of the bank statements submitted by the assessee. Further documentary evidences submitted by the assessee showing sale of land has been gifted by the spouse of the assessee by way of settlement deed dated 02/08/2012 to the assessee. We therefore reject the contention of the assessee that he received a gift from his wife thereby sustaining the addition made by the Ld. AO. Even before us, no material was placed on record disclosing the cash withdrawals by the wife of the assessee. Assessee has stated that he has filed the cash transaction statement for the year 2016 disclosing the sources for the cash deposits made during the demonetization period which was reiterated even before us. However, no supporting evidence was provided by the assessee for the cash withdrawals from bank and given as a gift to the assessee. Further, we are also unable to understand that why the wife of the assessee has given the amount of Rs. 16,41,430/- to deposit in the assessee’s account instead of her own account. Given these circumstances, we find no infirmity in the order of the Ld. CIT(A)-NFAC and hence no interference is required. Accordingly, Ground raised by the assessee is dismissed.
With respect to the cash deposits made during the remaining part of the year other than demonetization period amounting to Rs.32,21,150/- the assessee submitted that the sources for such cash deposit is out of the cash sales made during the entire year and deposited in the bank account for making payments to various suppliers of goods. It is found that the assessee has provided a list of cash deposits and the payments made to various suppliers before the Ld. CIT(A)-NFAC. However, the Ld. CIT(A)-NFAC did not accept the contention of the assessee. The prayer of the Ld. AR is that the Ld. AO has required the assessee to submit the details of cash deposits made during the demonetization period however, resorted to make additions to cash deposits made during the entire Financial Year. There is a merit in the argument of the Ld. AR that the Ld. AO has travelled beyond the scope of notice issued U/s. 142(1) to the assessee. Therefore, we are of the considered view that the deposits made during the period other than demonetization period amounting to Rs. 32,21,150/- is properly explained and hence we direct the Ld. AO to delete the addition of Rs.32,21,150/-.
In the result, appeal of the assessee is partly allowed.