SUNITA SHERWANI, RAIPUR,RAIPUR vs. INCOME TAX OFFICER-4(1), RAIPUR, RAIPUR

“8. I have considered the facts of the case/assessment order. The facts of the case, as perused from the order of the AO are that the assessee had filed her original return of income u/s.139(1) of the Act on 30.01.2018. The case was selected for scrutiny through CASS, the reason being large value cash deposit during demonetization period. So, notice u/s 143(2) of the Income tax Act, 1961 was issued by the AO on 09/08/2018 and served upon the assesse. Notice u/s 142(1) of the Income tax Act, 1961 along with questionnaire was issued and served upon the assesse on 09.08.2019. The assessee responded to the queries raised from time to time, by way of written submissions and other relevant documents electronically, in which the assessee stated that the source of cash deposit is out of accumulated capital & income from hobby classes and also from bank withdrawals.

8.1 The assessee derives income from other source in the form of interest income and Hobby Classes, during the year under consideration and earlier years also. During the year the assessee has deposited a sum of Rs.11,00,000/- in Allahabad Bank, Raipur bearing A/c No. 20036033060. In order to verify genuineness of business of the assessee, Inspector of AO's office was deputed to make field enquiry about business activity of the assessee. On verification, it was found that no such activity was being carried out from the address provided in latest return of income by the assessee. Further, assessee submitted that "cash was deposited out of accumulated capital of earlier years. In this regard, it was submitted that sum of Rs.7,65,932/- was kept in cash out of earlier years income and Rs. 3,27,968/- was deposited out of this years income". The submission of the assessee can not be accepted because no person shall keep such high cash in home with all risk of life & safety when there is ample banking facilities are available in city and also the assessee resides in Raipur city, Further, to verify the genuineness of hobby class income, notice u/s 142(1) dated 15/11/2019 was issued to the assessee to submit the name and address of the persons to whom such service has been provided. However, no compliance was made. Again a show cause notice dated 22/11/2019 was issued to the assessee to furnish the evidence in respect of her claim but again assessee failed to comply. Therefore, in absence of plausible reply related to explain the source of cash deposit with necessary evidences furnished by the assessee, the AO added back the amount of cash deposit of Rs.11,00,000/- in the bank account of the assessee, treating it as unexplained money u/s 69A of the Act to the total income of the assessee.

8.2 In this regard, it is pertinent to mention here that during the course of appellate proceedings, the appellant has not filed any written submission after issuing various notices u/s.250 of the Act as mentioned in the para 4 of this order.

8.3 In the instant case, it is observed that the appellant neither furnished a satisfactory explanation with supporting evidence in support of her claim during the course of assessment proceedings nor during the course of appellate proceedings. It clearly shows that the appellant is not in position to explain the source of the said cash deposit with supporting evidences. It is important to note here that it was the prime responsibility of the appellant to explain the nature and source of cash deposit in her bank account(s) with necessary supporting evidences. However, the appellant has completely failed to discharge her onus as per law.

8.4 Moreover, section 69A of the Act deals with Money etc. owned by the assessee and found in possession including in the bank accounts of the assessee which remained unexplained.

Section 69A-Unexplained Money "Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money. bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the 4 Assessing] Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.]"

8.5 In the present case, the assessee had deposited Cash amounting to Rs.11,00,000/- in her bank account(s), which has been treated as unexplained money. An assessee is found to be the owner of the Money appearing in his/her bank accounts. Though the assessee was found owner of the Money but has not offered any acceptable and cogent explanation regarding the source of such Money found in his/her bank accounts, the same is unexplained income of the Assessee u/s 69A of the Act.

8.5.1 The scheme of Section 69A of the Income-tax Act, 1961, would show that in cases where the nature and source of acquisition of money, bullion, etc., owned by the assessee is not explained at all, all, or not satisfactorily explained, then, the value of such investments and money or value of articles "not recorded in the books of accounts may be deemed to be the income of such assessee. The provisions of section 69A of the Act treat unexplained money, bullion, etc., as deemed income where the nature and source of investment, acquisition as the case may be, have not been explained or satisfactorily explained. Therefore, in these cases, the source not being known, such deemed income covered under the provisions of Section 69A of the Act in view of the scheme of those provisions.

For application of Section 69A of the Act, two conditions are required to be satisfied. They are:

(i) Investment/expenditure is not recorded in the books of account of assessee; (ii) The nature and source of acquisition of assets or expenditure are not explained or not explained satisfactorily, The expression "nature and source" used in this section should be understood to mean requirement of identification of source and its genuineness. To explain "Nature" It would require the assessee to explain what is description of investment or expenditure, period and the manner in which it was done. To explain the source it would require the assessee to explain the corpus or fund from where investment or expenditure has been met.

8.5.2 in the present case, the nature and source of such cash deposits made in the assessee's bank account(s) were not at all explained, leave alone satisfactory explanation. Further, for invoking deeming provisions under Section 69A of the act, there should be clearly identifiable asset or unexplained Money. It is amply proved beyond doubt that the assessee's deposits appearing in her bank account(s) remains unexplained, and the sum of Rs.11,00,000/-i.e. cash deposits in the appellant's bank account(s) are identifiable unexplained assets.

The limbs of Section 69A of the Act stands qualified in the case of the assessee, i.e.  the assessee was found to be owner of the Money.  its nature and source is not identifiable.

8.5.3 The Hon'ble Supreme Court in the case of Chuharmal Vs CIT (1988) 172 ITR 250 while affirming the view of the Madhya Pradesh High Court has held that 'the expression 'INCOME as used in Section 69A of the Act, 1961 had a wide meaning which meant anything which came in or resulted in gain and on this basis, concluded that the assessee had Income which he had invested in purchasing article and he could be held to be owner and the value could be deemed to be his income by virtue of Section 69A of the Act.

Following the ratio of the judgement of Hon'ble Supreme Court, in the instant case, the assessee deposited Cash in her bank account and on the basis can be concluded that the assessee had income to the extent of cash deposit made during the year under consideration appearing in bank accounts and she would be held to be the owner and the Money at her credit could be deemed to be her income by virtue of Section 69A of the Act. Hence, in the facts of this case a legitimate inference can be drawn that the assessee had income which she had deposited in Bank accounts and, as such, that Income was subject to tax.

8.5.4 Further, the Hon'ble Supreme Court in the case of Smt Srilekha Banerjee and others Vs CIT, Bihar & Orissa, reported in 1964 AIR 697, dated 27/03/1963, the Hon'ble Court held that the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source. The relevant finding of the Hon'ble Apex Court is as under:-

The fact of the case are that the assessee had encashed 51 high denomination notes of Rs.1,000/- each in January, 1946. The assessee's explanation in his application for encashment of the notes was that he was a colliery proprietor and contractor, that for conducting the business and for payment to labour which came to about Rs.30,000/- to 40,000/- every week he had to keep large sums of money to meet emergency and that the sum of Rs.50,000/- realised by encashment of the notes was neither profit nor part of profit but was floating capital for the purpose of conducting business. The Income-tax Officer did not accept this explanation and treated this amount as profit from some undisclosed source and assessed it as assessable Income. In Manindranath Das v. Commissioner of Income Tax, Bihar & Orissa, the tax- payer had encashed Notes of the value of Rs. 28,600, which he contended were his accumulated savings. His explanation was accepted in respect of Rs.15,000, because 15 notes could be traced to a bank, but was rejected in respect of the balance. The Patna High Court pointed out that if an assessee received an amount in the year of account, it was for him to show that the amount so received did not bear the character of income, and the tax- payer in the case had failed to prove this fact in respect of the remaining notes. The Hon'ble Supreme Court has held that The cases involving the encashment of high denomination notes are quite numerous. In some of them the explanation tendered by the tax-payer has been accepted and in some it has been rejected Where the assessee was unable to prove that in his normal business or otherwise, he was possessed of so much cash, it was hold that the assessee started under a cloud and must dispel that cloud to the reasonable satisfaction of the assessing authorities, and that if he did not then, the Department was free to reject his explanation and to hold that the amount represented income from some undisclosed source.

The Hon'ble Supreme Court further held in the case of Smt. Srilekha Banerjee and others (cited supra) that 'the Department was justified in holding that Rs.51,000/- was assessable income of the assessee from some undisclosed source. It was not correct that the assessee was not required to prove anything and that the burden was entirely upon the department to prove that the amount received from the encashment of high denomination notes was income. The correct position is as follows. If there is an entry which shows the receipt of a sum or conversion of the notes by the assessee by himself, it is necessary for the assessee to establish, if asked, what the source of that money was and to prove that it did not bear the nature of income. The department is not at this stage required to prove anything. The fact that there was receipt of money or conversion of notes is itself prima facie evidence against the assessee on which the Department can proceed in absence of good explanation."

8.5.5 Therefore, in case where assessee's huge cash deposits in her bank account(s) during the year under consideration, but the sources were neither explained nor such money offered for taxation, the onus is on the assessee to prove that the cash deposits did not bear the character of income. In this case, the assessee had failed to prove this fact. Further, by relying upon the decision of Hon'ble Supreme Court in the cases cited above that there was ample evidence that Cash was deposited in bank accounts, which is prima facie evidence against the assessee that the deposits are undisclosed income on which the Department can proceed in absence of good explanation.

8.6 In this regard, reliance is placed on the decision of the Hon'ble Delhi High Court in the case of Sunil Jain vs. Income Tax Department [2022] 142 taxmann.com 507 (Delhi) dated 22.07.2022, wherein the Hon'ble Tribunal has upheld the similar addition made by the AO and decided the appeal in favour of the revenue. The head note of the decision is reproduced as under.- “Section 69A, read with section 148 of the Income-tax Act, 1961 – Unexplained money (Reassessment) – Assessment year 2017-18 – Assessee filed his return of income showing an income of certain amount-Case of assessee was selected for limited scrutiny raising queries regarding cashdeposit of Rs. 28.75 lakhs made by assessee during demonetisation period in 'C' bank-Further, an assessment order was passed making an addition of Rs. 28.75 lakhs to returned income of assessee - Assessee preferred an appeal against same During pendency of appeal, revenue issued a reassessment notice on ground that assessee had failed to satisfactorily explain source of fund for cashdeposit of Rs. 12.50 lakhs made by assessee in 'PN' bank - It was noted that cashdeposit of Rs. 12.50 lakhs was not adjudicated upon during original scrutiny proceedings - In income-tax return, assessee had only mentioned detail of cashdeposited in 'C' bank account and had not mentioned cashdeposits in any other bank accounts Whether, on facts, impugned reopening notice issued against assessee was justified-Held, yes [Paras 13, 15, 16 and 19] [In favour of revenue] 8.6.1 Reliance is also placed on the decision of the Hon'ble ITAT, Chennai Bench in the case of Raju Ravichandran vs. Income-tax Officer [2024] 159 taxmann.com 1518 (Chennai Trib.) dated 16.06.2023, wherein the Hon'ble Tribunal has upheld the similar addition made by the AO and decided the appeal in favour of the revenue. The head note of the decision is reproduced as under.- “Section 69A, read with section 115BBE, of the Income- tax Act, 1961 Unexplained moneys (cash deposit) - Assessment year 2017-18 - Assessee was engaged in business of retail/wholesale of egg – during demonetization period, assessee made cash deposit in his bank accounts and claimed that same was out of sale proceeds from wholesale/trading of egg business – Assessing Officer noted that assessee had deposited specified bank notes in his bank account – He, thus, treated same as unexplained money under section 69A and taxed same under section 115BBE on ground that assessee’s business did not come under exempted category and assessee was not allowed to received old SBN notes as same ceased to be legal tender – Whether since Central Government had notified that denomination of Rs.1000 and Rs.500 notes was not a legal tender with effect from 9-11-2016, nobody could engage in trading through this currency- Held, yes – Whether thus, Assessing Officer had rightly added cash deposits made by assessee under section 69A – Held, yes [Para 4] [in favour of revenue] 8.6.2 Reliance is further placed on the decision of the Hon'ble ITAT, Raipur Bench in the case of Adim Jati Seva Sahkari Samiti Maryadit vs. Income-tax Officer [2024] 159 taxmann.com 8 (Raipur - Trib.) dated 18.09.2023, wherein the Hon'ble Tribunal has upheld the similar addition made by the AO and decided the appeal in favour of the revenue. The head note of the decision is reproduced as under:-

Section 69A of the Income-tax Act, 1961 Unexplained moneys (Bank deposit) Assessment year 2017-18 During demonetization period, assessee-society deposited certain sum in its bank account - Since assessee didn't respond adequately to several notices issued by AO, said cashdeposit was treated as unexplained income under section 69A On appeal, Commissioner (Appeals) had afforded sufficient opportunities to assessee to put up its case on merits before him, but no material/evidence was placed on record by assessee to substantiate sources of credit in its bank account Commissioner (Appeals) thus sustained addition made by A.O. under section 69A-Held, yes Whether considering facts of instant case, there was no infirmity in view taken by lower authorities who had rightly sustained addition and accordingly, same was to be upheld - Held, yes [Paras 15, 18 and 20] [In favour of revenue)

8.6.3 It is relevant to refer to the Decision of Hon'ble ITAT Hyderabad in the case of Mir Basheeruddin Ali Khan v. ITO 42 taxmann.com 69 wherein it is held as under.

"14. We have heard the submissions of both the parties and perused the material on record as well as the orders passed by the revenue authorities. Undisputedly as revealed from the bank account, the assessee has made cash deposit of Rs. 6,50,000/- on 8-9-2004. It is the contention of the assessee that the aforesaid deposits were out of the cash available with him from withdrawals made by him earlier from the SBI from February, 2002 to September, 2003. However, such explanation of the assessee is against human probability and totally unbelievable. When the assessee is having a bank account, it is beyond human probability and totally incomprehensible that the assessee would keep quite a substantial amount of Rs.6,50,000/- in cash with him for a period of over one year without depositing into the bank account. The assessee has also not shown any valid reason as to why he kept so much cash with him for over a period of one year when he was holding a bank account. In the absence of any cogent reason backed by sufficient evidence, the explanation of the assessee is only a make- believe story and hence cannot be accepted. The decisions relied upon by the learned AR will also be of no help to the assessee as in the present case the assessee has failed to prove the source of deposit with valid reasons and proper evidence. In this view of the matter, we do not find any infirmity in the order of the CIT (A) in sustaining the addition of Rs. 6,50,000/-. Accordingly, we uphold the order of the CIT (A) by dismissing the ground raised by the assessee.

8.6.4 It is also relevant to refer to the Decision of Hon'ble ITAT Bangalore in the case of Karan Sharma v. ITO in wherein it is held as under:

“6. The assessee has explained that Rs.92.64,462 is out of previous withdrawals and sale of garments and pleaded that it is to be excluded from the taxation. The assessee has not furnished any evidence to establish the nexus between the earlier withdrawals and deposits into various bank accounts. In such circumstances, we are not in agreement with the assessee's counsel that it is from the earlier withdrawals In our opinion, these receipts are to be considered as from unknown sources to bring into taxation Therefore, those deposits of Rs. 92,54.462 to be considered as unexplained deposits from Income from other sources. It is ordered accordingly.

8.7 In view of the above factual discussions and legal matrix of the case, addition made by the AO is upheld, hence confirmed. Thus, the ground of appeal no. 1 is dismissed.

9. The brief fact of the case are already discussed in para 8 (cited supra), therefore, for the sake of repetition, the same is not discussed herein again. In this regard, it is observed that on perusal of appellant's bank statements, the AO had observed that there were cash deposits of Rs.11,00,000/- during the year under consideration. Thus, the amount of cash deposit of Rs.11,00,000/- in the bank account of the appellant was treated as unexplained money u/s. 69A of the Act and added back to the appellant's total income by the AO while passing the order u/s143(3) of the Act.

9.1 It is also observed from records that the appellant had not filed any detail/explanation with supporting evidences to explain the nature and source of the said cash credit entries in her bank accounts during the course of appellate proceedings. Therefore, it can be concluded that the appellant has completely failed to discharge her onus and addition made by the AO is found to be justified. It is also relevant to note that in absence of any response/explanation in respect of cash credit entries in the bank accounts, the AO was justified in making the addition as unexplained money u/s 69A of the Act.

9.2 In view of the above factual matrix of the case, the addition made by the AO on account of cash credit entries in the appellant's bank account is upheld and hence confirmed. Thus, all grounds of appeal are dismissed.

7. Shri R.B Doshi, Ld. Authorized Representative (for short ‘AR’) for the assessee, at the threshold, submitted that both the lower authorities had grossly erred in law and facts of the case in making/sustaining the addition u/s. 69A of the Act. It was submitted by the Ld. AR that though the assessee had before the A.O duly explained the source of the subject cash deposits, viz. (i) out of her accumulated capital; (ii) current years income from the vocation of running hobby classes; and (iii) bank withdrawals, but the latter had most arbitrarily not considered the same. The Ld. AR submitted that now when the cash deposits of Rs.11 lacs (supra) were made by the assessee from her duly explained sources, therefore, there was no justification for the A.O to have treated any part of the same as her unexplained money u/s.69A of the Act.

10. As the assessee had assailed the validity of the jurisdiction assumed by the A.O for framing the assessment u/s.143(3) of the Act, dated 28.11.2019, for the reason that though the notice u/s.143(2) of the Act was issued by the ITO-3(1), Raipur but the assessment thereafter been framed by the ITO-4(1), Raipur without any order of transfer having been passed u/s. 127 of the Act, therefore, the Ld. Sr. DR was directed to obtain a report from the A.O on the aforesaid issue. In compliance, the A.O vide his letter 17.12.2024 had placed on record a copy of the order u/s. 127(2) of the Act, dated 31.03.2019. It transpires, on a perusal of the aforesaid order of transfer u/s. 127 of the Act that it is stated at Sr. No.20 that the case of the present assessee had been transferred from ITO-3(1), Raipur to ITO-4(1), Raipur. For the sake of clarity, the relevant extract of the order u/s. 127(2) of the Act is culled out as under:

Considering the aforesaid fact, the additional grounds of appeal raised by the assessee are dismissed in terms of the aforesaid observations.

11. I shall now deal with the explanation of the assessee as regards the "source" of the cash deposit of Rs.11 lacs (supra) made in her bank account during the demonetization period. As observed by me hereinabove, it is the claim of the assessee that the cash deposit in question was sourced from, viz. (i) income from the vocation of running hobby classes; (ii) accumulated cash savings of the past years; and (iii) bank withdrawals that were available with her. The assessee had failed to come forth with an irrefutable explanation as regards the source of the cash deposits of Rs.11 lacs (supra) made in her bank account during the year under consideration. In the backdrop of the aforesaid unsubstantiated explanation of the assessee which I am afraid cannot be summarily accepted, I am left with no other alternative but to draw support from the CBDT Instruction No.3/2017, dated 21.02.2017 for estimating the amount of cash in hand that would have been available with her to source the subject cash deposits in her bank account. For the sake of clarity, the CBDT Instruction No.03/2017 dated 21.02.2017 is culled out as under (relevant extract):

1.1 In case of an individual (either than minors) not having any business income, no further verification required to be made if total cash deposit is up to Rs.2.5 lakh. In case of taxpayers above 70 years age, the limit is Rs.5 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 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.

(emphasis supplied by me)