LALJIBHAI DUDABHAI BHUVA,RAJKOT vs. INCOME TAX OFFICER, WARD-2(2)(1), RAJKOT., RAJKOT

Succinctly, the factual panorama of the case is that assessee before us is an Individual. As per the SFT report, the assessee had made cash deposit of Rs.3,56,500/- in his RDCC Bank account no.614049000881 held in Ramod Branch, during Demonetization period between 09/11/2016 to 30/12/2016 in old Rs.500 & Rs.1000 currency notes. Further as per ITS data, the assessee had not filed his return of income for assessment year (A.Y.) 2017-18.On the basis of this 2 Laljibhai Dudabhai Buva vs. ITO information the assessee was issued a notice u/s.142(1) of the Act on 14/06/2019 which was duly served on him. The assessee was asked to furnish details of all his bank accounts with bank statements and to explain the source of cash deposits made by him in old Rs.500 & Rs.1000 currency notes during Demonetisation period between 09/11/2016 to 30/12/2016. This information was asked to be submitted on or before 19/06/2019 but the assessee failed to submit any reply to the abovementioned notice on the appointed date. Therefore, a show cause notice was issued on 26/06/2019 as to why cash deposit of Rs.3,56,500/- made by him in his Bank account no.614049000881 held in Ramod Branch during Demonetisation period between 09/11/2016 to 30/12/2016 be treated as unexplained money u/s.69A of the Act and added to his total income for A.Y.2017-18. The assessee was asked to submit his reply by 27/06/2019 but once again the assessee failed to reply. Therefore, the assessing officer made addition in the hands of the assessee, to the tune of Rs.3,56,500/- under section 69A of the Act.

On appeal, ld.CIT(A) confirmed the action of the assessing officer. That is, the appeal preferred by the assessee did not find favour with the Commissioner of Income Tax (Appeals), who confirmed the order of the Assessing Officer in this regard. Calling into question the said order, the assessee preferred appeal before this Tribunal.

At the outset, the Ld. Counsel for the assessee submitted that the assessee has deposited the cash during the demonetization period to the tune of Rs.3,56,500/-. The assessee has not filed the return of income, as the assessee does not have any Laljibhai Dudabhai Buva vs. ITO source of income. However, the assessee has deposited the cash of Rs.3,56,500/- out of his past savings. The Ld. Counsel for the assessee submitted that before the Ld. CIT(A), the assessee has submitted additional evidences to prove his claim that the amount of Rs.3,56,500/- was deposited out of the definite past sources of the assessee and for that additional evidences were produced before the Ld. CIT(A). However, the Ld. CIT(A) has rejected these additional evidences. By way of additional evidence, the assessee submitted that the assessee has earned out of agricultural activity and for that assessee submitted the sales bills and the land holding etc. and also submitted the proof that the part amount was from the past savings of the assessee. However, the Ld. CIT(A) did not accept these evidences and confirmed the addition made by the AO which is not justifiable.

I have heard both the parties and perused the materials available on record. I note that total addition made by the AO is to the tune of Rs.3,56,500/-. Since, the assessee has not filed the return of income, therefore, the maximum amount which is not chargeable to tax to the tune of Rs.2,50,000/- should not be added in the hands of the assessee, that is, to the extent of Rs.2,50,000/-, no addition should be made in the hands of the assessee. However, I note that the amount of addition made by the AO is in excess of Rs.2,50,000/-, that is, it is Rs.3,56,500/-, therefore, I am of the view that the profit element on such cash deposit in the bank account should be treated as income of the assessee. Therefore, considering the facts and circumstances and by following the decision of the Hon’ble Jurisdictional High Court of Gujarat in the case of CIT v. President Industries, [2002] 258 ITR 654 (Guj), wherein it was held that the entire amount of undisclosed money cannot be treated as income and only estimated profit embedded in these transactions may be taxed. The Hon’ble High Court also held that 30% estimated addition in the case of ‘on money’ is sufficient to protect the interest of the revenue. Therefore, respectfully following the judgment of the Hon’ble Jurisdictional High Court of Gujarat in the case of President Industries (supra), I direct the assessing officer (AO) to disallow 30% of Rs.3,56,500/- in the hands of the assessee which comes to Rs.1,06,950/-.

In the result, appeal filed by the assessee is allowed partly in above terms.