RAJASHIBHAI BHIMABHAI BAPODARA,PORBANDAR vs. WARD - 2(4), PORBANDAR

On the other hand, Learned DR for revenue, submitted that the amount was deposited during the demonetisation period. Therefore, it is unaccounted money of the assessee and hence assessee has to pay the tax, therefore addition made by the assessing officer may be sustained.

I have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. I find that issue under consideration is squarely covered by the judgement of the Co- ordinate Bench of ITAT Surat in the case of Jitesh Vithalbhaia Rashiya, in for Assessment Year: (2017-18), wherein the Tribunal held as follows:

“8. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. The ld Counsel submitted before us that amount deposited in the bank account represents past withdrawal as well as past savings and it is also contended that a part of the deposit has also come from his wife’s savings and estreedhan given to the assessee`s wife. That is, assessee and his wife, both are using the same saving bank account and assessee`s wife also deposited her lifelong savings in the said saving bank account during demonetization. The ld Counsel also pointed out that assessee`s wife does not have other saving bank account in her name, therefore assessee`s wife deposits her pin money, savings, gift received from father-in-law and estreedhan received from father-in-law etc.

Taking into account, the facts narrated above, we note that Instruction issued by the CBDT should be considered, vide Press Release dated 18.11.2016 and Guidelines for Verification of Cash deposit during demonetization to the AO vide Instruction No. 3/2017[ F.NO. 225/100/2017/ITA-II] dated 21.2.2017 and annexure thereof issued under section 119 of Income Tax Act, which are discussing and providing a blanket exemption of Rs. 2,50,000/- per person. In the Press release dated 18.11.2016 also, it was stated that: “It was announced by the Government earlier that small deposits made in the banks by artisans, workers, housewives, etc. would not be questioned by the Income Tax Department in view of the fact that present exemption limit for Income Tax is Rs.2.5 lakh”.

The relevant excerpts of Instruction No. 3/2017[F.NO. 225/100/2017/ITA-II] dated 21.02.2017, in Annexure-“Source Specific General Verification Guidelines ” states as follows: “1 Cash out of earlier income or savings: In case of an individual (other than minors) not having any business income, no further verification is required to be made if total cash deposit is up to Rs.2.5 lakh. In case of taxpayers above 70 years of age, the limit is Rs.5.0lakh per person. The source of such amount can be either household savings/savings from past income or amounts claimed to have been received from any of the sources mentioned in paras 2 to 6 below. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. The basis for verification can be income earned during past years and its source, filing of ROI and income shown therein, cash withdrawals made from accounts etc.”

From the above CBDT instruction, it is vivid that In the case of taxpayers above 70 years of age, the limit is Rs. 5.0 Lakh per person and for other person the limit is Rs.2.50 lakh per person. The source of such amount can be either household savings/ savings from past income or amounts claimed to have been received from any of the sources mentioned in Paras 2 to 6 of the CBDT circular. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. It is a settled law that the Circulars issued by CBDT are binding on the Revenue. This position was confirmed by the Apex Court in the case of Commissioner of Customs vs. Indian Oil Corporation Ltd. reported in 267 ITR 272 wherein their Lordships examined the earlier decisions of the Apex Court with regard to binding nature of the Circular and laid down that when a circular issued by the Board remains in operation then the Revenue is bound by it and cannot be allowed to plead that it is not valid or that it is contrary to the terms of the statute.

Considering the above CBDT Circular, we are of the view that in assessee`s case under consideration, the assessee and his wife is having only one saving bank account wherein both deposits their past savings, therefore assessee should be allowed a blanket exemption of Rs. 5,00,000/- in view of instructions of CBDT, as the wife of the assessee did not have any other operational bank account and hence she has deposited her household savings in the same bank account of Axis bank where she is also a nominee ( Name:Janvi is mentioned in pass book at Pg 37 of the paper Book). The CBDT Instructions also clearly states that only the amount above the cut-off may require verification. Therefore, assessee is entitled to claim a blanket exemption of Rs. 5,00,000/- (Rs.2,50,000/- assessee himself and Rs.2,50,000/- for wife) in view of instructions of CBDT.

So far the balance amount is concerned, it is Rs.5,20,000/- ( 10,20,000- Rs.5,00,000). Against the additional amount deposited of Rs. 5,20,000/-, if we weigh the same against the criteria mentioned in the said Instruction of CBDT to support the same, that is: (i) income earned during past years and its source, (ii) filing of Return of Income and income shown therein, (iii) cash withdrawals made by the assessee. We note that assesses succeeds on all these above three criteria because he is regularly filing return of income (ROI) and has already made a chart during assessment proceedings of last nine years showing total gross income of Rs.21,67,215/- and further the cash withdrawals of Rs.9,35,000/- in immediate three years is more than sufficient to cover the amount of Rs.5,20,000/-. The ld Counsel has also explained that due to the nature of service/source and social needs being fulfilled by employer and staying in joint family with elder brother, the drawings are negligible and hence the balance addition of Rs.5,20,000/- on account of cash deposit should also be deleted. We note that in the course of assessment proceedings, the assessee filed evidences in the form of Financial Statements and Return of Income of preceding years and the year under consideration to support his claim that cash deposit is reflected in the accounts maintained by him. Further, the assessee also filed the bank statement of the preceding years and the year under consideration; and bank books and cash book of the year under consideration. In addition, the assessee has also filed the Cash Flow Statement to reflect the cash available in the books. Based on these evidences, it is proved that the assessee was having sufficient cash on hand at the time of deposit of the cash in the bank. In response to the various notices filed by the assessee in the explanations, the assessing officer was not able to rebut the explanation offered by the assessee. He just observed that the cash withdrawn by the assessee in the various years were towards the household expenses. In this connection, it is submitted that the assessee has already shown the household expenses in the capital account filed by him in the course of the assessment proceedings. The assessing officer was not able to bring on record any evidence that the cash withdrawn from the banks were utilized by the assessee in excess of the amount shown by the assessee for household expenses. The assessing officer has not found that the household expenses debited in the capital account in various years were low.

We note that the assessee is regular in filing his Return of Income for more than nine years and has already shown his books of accounts and submitted the same to the Assessing Officer to show that he has sufficient cash balance to justify cash deposit during demonetization and hence no adverse view should be drawn in absence of any finding that the cash withdrawn is used for any unaccounted income or any unaccounted asset. Demonetization was a compulsion event and hence it has to be viewed differently from normal cash deposits. Reliance is placed on the decision of Agson Global Pvt. Ltd. vs ACIT [ITA NO. 3741 to 3746/Del/2019] wherein it was held as follows: “Mere addition made on this ground that there is deviation in ratio is not proper. When the assessee had regular cash sale and deposit of cash in bank accounts and if nothing incrementing is found contrary then addition u/s 68 of such cash sale would tantamount to double taxation.” Particularly, in the said judgement, the Tribunal remarked that it was observed that the intention of the Legislature behind introduction of section 115BBE was not to bring to tax genuine cash credits already offered to tax as income by the Assessee at higher tax rates. Such an interpretation would lead to recurring attempts on the part of the Revenue Authorities to reject genuine explanations offered by the Assessee with respect to sums credited/offered as income in its books as unsatisfactory solely to extort higher rates of taxes thereon u/s 115BBE of the Act. The A.O in exercising his powers u/s 68 of the Act is not vested with unfettered powers to reject any explanation as being not to his satisfaction merely on the basis of surmises and conjecture. The AO is bound under law to act reasonable and just while framing any satisfactory opinion surrounding the explanation offered by the taxpayer. From the facts of the case at hand, it is clear that the A.O has acted unreasonably and capriciously in rejecting the genuine explanations offered by the Assessee in respect of the impugned cash deposits as unsatisfactory solely with the aim of fastening exorbitant tax liability on the Assessee- Company under the garb of unexplained cash credit u/s 68 of the Act. Such recourse primarily hedged on surmises, conjecture, assumptions, presumptions and whims of the Revenue Authorities is clearly unwarranted and the additions so made is unsustainable in the eyes of law and thus deserves to be quashed.”

We also note that submission was furnished by the assessee to assessing officer, during assessment proceedings, with supporting evidence and no defect could be pointed out in these evidences maintained by the assessee. We therefore, taking into account all these peculiar facts and circumstances, delete the balance amount of Rs.5,20,000/-.”

From the above judgement, it is vivid that Instruction issued by the CBDT, clearly provides the guidelines for verification of cash deposited during demonetization to the assessing officer, vide Instruction No. 3/2017[ F.NO. 225/100/2017/ITA-II] dated 21.2.2017 and annexure thereof issued under section 119 of Income Tax Act, which provide a blanket exemption of Rs. 2,50,000/- per person. Therefore, respectfully following the judgement of the Co-ordinate Bench of ITAT Surat, in the case of Shri Jitesh Vithalbhaia Rashiya(Supra), I delete the addition of Rs.2,50,000/- and allow the appeal of the assessee.

In the result, appeal filed by the assessee, is allowed.