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Facts
The assessee, a non-filer, deposited cash in bank accounts, leading to his case being reopened and a reassessment order. He filed a return under presumptive taxation (u/s 44AD), but the AO added ₹11,46,410 as unexplained money (u/s 69A) due to his failure to explain the source, which the CIT(A) upheld. The assessee contended that he is governed by the Portuguese Civil Code and thus Section 5A of the Income Tax Act requires apportionment of income between spouses.
Held
The Tribunal confirmed the addition of unexplained cash deposits under Section 69A due to the assessee's inability to prove the source. However, it held that as the assessee is governed by the 'Communiao Dos Bens' system (Portuguese Civil Code), the unexplained income, being income from other sources (u/s 56) and not salary, must be equally apportioned between the assessee and his spouse as per Section 5A. The AO was directed to assess 50% of the unexplained addition in the appellant's hands.
Key Issues
1. Whether the cash deposits were correctly treated as unexplained money under Section 69A of the Income Tax Act. 2. Whether the unexplained income should be apportioned between the assessee and spouse under Section 5A of the Income Tax Act, given the applicability of the Portuguese Civil Code.
Sections Cited
5A, 14, 14A, 15, 56, 69A, 143(3), 147, 148, 246A, 250, 253(1), 44AD
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PANAJI BENCH, GOA
Before: HON’BLE SHRI PAVAN KUMAR GADALE & SHRI G. D. PADMAHSHALI
ORDER PER G. D. PADMAHSHALI; The captioned appeal of the assessee impugns DIN & Order No. ITBA/APL/S/250/2024-25/1073026397(1) dt. 07/02/2025 passed by Addl./Jt. Commissioner of Income Tax, Appeals(2), Ahmedabad [‘Ld. CIT(A)’] u/s 250 of the Income-tax Act, 1961 [‘the Act’] which in turn sprung out of order of assessment dt. 27/12/2018 passed u/s 143(3) r.w.s. 147 of the Act by the Income ITAT-Panaji Page 1 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 Tax Officer, Ward-1(5), Panaji, Goa [‘Ld. AO’] anent to assessment year 2011-12 [‘AY’].
The sole dispute in the present appeal orbits around solitary question ‘as to whether application of provisions of section 5A of the Act is automatic or voluntary? And whether such application confined merely to returned income?
Succinctly stated facts of the case are that; 3.1 the assessee an individual was identified as non-filer. Upon receipt of information that for the year under consideration the assessee deposited cash of ₹12,32,000/- & ₹68,000/- into his SBI’s SB A/c No 10037069046 and SB A/c No 72092210002060 maintained with ‘Syndicate Bank’ respectively, the Ld. AO after recording reasons & obtaining prior approval from competent authority vide notice dt. 31/03/2018 issued u/s 148 of the Act reopened the assessee’s case for reassessment u/s 147 of the Act.
ITAT-Panaji Page 2 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 3.2 In response to said reassessment notice, the assessee filed his return of income on 24/05/2018 declaring total income of ₹1,53,590/- and offered same to tax on basis of presumptive taxation u/s 44AD of the Act. The said return was subjected to scrutiny and consequential assessment u/s 143(3) r.w.s. 147 of the Act was completed wherein owning to assessee’s failure to explain nature & source of balance cash deposits (₹13,00,000/- minus returned income ₹1,53,590/-) a solitary addition of ₹11,46,410/- was made to the total income as unexplained money u/s 69A of the Act. Aggrieved by the former addition the assessee filed an appeal u/s 246A of the Act before the Ld. CIT(A) who in the absence of documentary evidence confirmed the addition and dismissed the appeal.
3.3 Aggrieved by order of first appellate authority, the appellant assessee filed present appeal u/s 253(1) of the Act with following two substantive grounds; ITAT-Panaji Page 3 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 1. The Learned Commissioner of Income-tax (Appeals) ADD/JCIT (A)-2 AHMEDABAD has erred in taxing total deposits in the banks without considering withdrawals made for purchases and other expenses and refusing to accept profit calculated u/s 44AD of the Income Tax Act 1961.
2. The learned Commissioner of Income Tax (Appeals) ADD/JIT (A)-2 AHMEDABAD has erred in refusing the claim that the Appellant is governed by the Portugal Code, as applicable to the State of Goa, were Income is required to be apportioned u/s 5A of the Income Tax Act 1961, except the income from Salary irrespective of the fact that to whom the income is accrued /received is to be taxed in the hands of the spouses in the ratio of 50:50.
We have heard the rival parties and subject to rule 18 of ITAT-Rules 1963 perused material placed on record, considered the facts in the light of settled legal position. We note that, indisputably the appellant was identified as ‘Nonfiler’ and in the absence of return cash deposits exceeding ceiling fixed for saving bank account ITAT-Panaji Page 4 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 founded a basis for reopening of assessee’s case u/s 147 of the Act. Pursuant to reassessment notice the appellant filed his return declaring income of ₹1,53,590/- and claimed that the said income was offered on presumptive taxation basis. The said return was subjected to scrutiny and the appellant was called upon to adduce documentary evidence in support of his claim of carrying business in terms of section 44AD of the Act. In the event of failure on the part of appellant to prove with necessary & convincing documentary evidence that said cash deposits represent ‘sales proceeds’ from a source of ‘business’ carried out by him during the year under consideration the Ld. AO disbelieved the assessee’s explanation & declaration with respective presumptive taxation. In the event the Ld. AO treated the entire cash deposit as unexplained money u/s 69A of the Act and brought same to tax after allowing credit for income already declared in the return of income filed in response to notice issued u/s 148 of the Act. ITAT-Panaji Page 5 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 5. We also note that, in the first appellate proceedings, the appellant assessee was indifferent as a result the Ld. CIT(A) reaffirmed the addition by placing reliance on decision of Hon’ble Supreme Court in the case of ‘Sumati Dayal Vs CIT’ [1995, 214 ITR 801 (SC)].
The appellant continued to reiterate his oral & bald submissions in the present proceedings as well but without necessary & convincing material so as to showcase to our slightest satisfaction that, cash deposits represents sales proceeds arisen from business (if any). In our view the burden of proof casted upon the appellant to prove nature & source of cash deposits palpably remained undischarged as a result the appellant failed to make out his case. Therefore placing reliance on ‘Kale Khan Mohammad Hanif Vs CIT’ [1963, 50 ITR 1(SC)] we upheld the actions of tax authorities in holding the entire cash deposit as unexplained money u/s 69A of the Act. The first ground thus stands dismissed.
ITAT-Panaji Page 6 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 7. Next comes to applicability of provisions of section 5A of the Act. In the instant case, total amount of cash deposited by the appellant was held as unexplained money u/s 69A of the Act while completing the assessment in the hands of the appellant and such action was countenanced in first appeal by the Ld. CIT(A). The aforestated action of treating entire cash deposits as unexplained money u/s 69A of the Act since confirmed in the present appeal, therefore the question for our consideration arose as to whether Revenue erred in taxing the entire unexplained money as the income of the appellant alone & failed to give effect to provisions of section 5A of the Act as the appellant for the year under consideration was governed by the system of ‘Communiao Dos Bens’ [‘CDB’] that is system of community of property.
Without re-producing loose stock & barrel of section 5A of the Act, it shall suffice and germane to note that, ITAT-Panaji Page 7 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 where an assessee is governed by Portuguese Civil Code 1860 which is in force in the state of Goa and Union Territory of Dadara, Nagar, Haveli, Daman Diu then except Salary income all sources of income as contemplated u/s 14 of the Act is to be equally apportioned between husband & wife irrespective of whom has earned it and income so apportioned shall be included separately in the total income of respective spouse and shall be assessed as accordingly. This view finds fortifies in catena of judicial precedents of Hon’ble Jurisdictional High Court in ‘CIT Vs Purushottam Gangadhar Bhende’ [1977, 106 ITR 932] ‘CGT Vs Aleixo P. Velho’ [1983, 143 ITR 372] ‘ACIT Vs Valentino F Pinto’ [1983, 15 Taxman 433], ‘CIT Vs Jose Filipe Alvares’ [1995, 81 Taxman 380], ‘CIT Vs Datta Gaitonde’ [2000, 241 ITR 241 (Bom)], Following the ratio laid in former judicial precedents the Ld. Co-ordinate bench found adjudicated the similar issue in ‘Priya Gangadhar Bhende Vs NFeAC’ [ITA No. 10/PAN/2024]. ITAT-Panaji Page 8 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 9. The apportionment of all sources of income as contemplated u/s 14A of the Act except salary income chargeable u/s 15 of the Act, is neither optional to the Revenue nor to the person who is governed by the system of ‘Communiao Dos Bens’. Conversely, on the other hand while assessing income under the provisions of the Act, it is incumbent upon the Revenue Authorities to give effect to the provisions of section 5A of the Act where an individual assessee is governed by the CDB system notwithstanding such assessee (either spouse) while filing his/her individual return of income failed to make a claim for apportionment of income. Further the apportionment of income as envisaged in section 5A of the Act not only applicable to returned income of any individual assessee but equally & inexorably applies to any additional income (either by way of additions or disallowances as the case may be) that is brought to tax while assessing total income of any individual assessee who is governed by section 5A of the Act. ITAT-Panaji Page 9 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 10. In the instant case, the addition of income made u/s 69A of the Act since not exigible to tax as ‘Salary’ u/s 15 of the Act but as the income from other source u/s 56 of the Act, therefore, by virtue of provisions of section 5A of the Act such addition inevitably to be apportioned between the appellant assessee (husband) and his spouse equally and such apportioned income then to be assessed in the hands of respective spouse.
The Revenue per contra taxed the entire addition exclusively in the hands of appellant assessee turning blind eye to the binding provisions of section 5A of the Act. The entire addition brought to tax solely in the hands of appellant without apportionment in terms of provisions of section 5A of the Act do not represent correct position of law thus rendered contra-legem. The impugned order therefore in view of the binding judicial precedents cited hereinbefore deserves to be set-aside on that score, ordered accordingly.
ITAT-Panaji Page 10 of 11
Agnelo Socorro Joaquim Viegas Vs ITO AY: 2011-12 12. As result we direct the Ld. AO to assess the appellant’s income with 50% of such addition made u/s 69A of the Act after reducing therefrom (from such 50%) the income already returned/declared by him in the return of income filed in response to re-assessment notice issued to him u/s 148 of the Act. The second ground thus stands allowed.
SA 06/PAN/2025 13. In view of former adjudication of main appeals the stay petition filed by the assessee applicant hereby dismissed.
The appeal of the assessee in result stands PARTLY ALLOWED and stay application stands DISMISSED. In terms of rule 34 of ITAT Rules, 1963 the order pronounced in the open court on date mentioned herein before.