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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI G.S.PANNU, AM & SHRI RAVISH SOOD, JM Shri Anwarali B. Karachiwala,
आदेश / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER:
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-32, Mumbai, dated 15.01.2016, which in itself arises from the order passed by the A.O under Sec.143(3) r.w.s. 147 of the Income Tax Act, 1961 (for short „Act‟), dated 26.12.2013 for A.Y 2006- 07. The assessee assailing the order of the CIT(A) has raised before us the following grounds of appeal: “Being aggrieved by the order passed by the Learned Assessing Officer (A.O) u/s 143(3) r.w.s. 147 of the Income-tax Act („the Act'), as confirmed by Learned Commissioner of Income Tax (Appeals) [the CIT (A)], your appellant prefers an appeal on the following grounds, which it is prayed, may be considered without prejudice to one another:
P a g e | Shri Anwarali B. Karachiwala Vs. ITO-24(1)(2) 1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in confirming addition of Rs. 11,49,000/- as Income from unexplained sources u/s.69A of the Act. 2 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding AO‟s action of reopening of assessment U/s.147 of the Act which is bad in law. Your appellant craves leave to add, alter, amend, delete or modify any of the above referred grounds of appeal.”
Briefly stated, the assessee who is engaged in the business of trading of imitation jewellery, cutlery and footwear had filed his return of income for A.Y 2006-07 on 26.07.2006, declaring total income of Rs.11,45,124/-. Subsequently, the case of the assessee was reopened under Sec.147 of the Act.
During the course of the assessment proceedings, the A.O called upon the assessee to explain alongwith supporting documentary evidence the source of cash deposits of Rs.13,36,250/- in his bank account with DCB Bank, Branch: Dongri, Mumbai. The assessee in his reply submitted before the A.O that he had on various occasions deposited cash in his saving bank account in order to facilitate purchase of certain immovable property. On the basis of a summary of the bank statement placed on record during the course of the assessment proceedings, it was the claim of the assessee that the cash deposits in the bank account were sourced out the cash withdrawals preceding the same. The A.O taking cognizance of the narrations mentioned against certain cash deposits viz. „transfer from son- in-law‟ and „transfer from son‟, called upon the assessee to establish the identity and creditworthiness of the persons who had deposited money in his bank account, as well as substantiate the genuineness of the transactions. However, the assessee failed to comply with the aforesaid directions of the A.O. Subsequently, the assessee on being called upon by the A.O to explain as to why the cash deposits in his bank account may not be treated as his income from unexplained sources, related the credits in his bank account to four sources of receipts viz. (i) amount received from relatives: Rs.14,18,755/-; (ii) amount received as business income:
P a g e | Shri Anwarali B. Karachiwala Vs. ITO-24(1)(2) Rs.1,13,911/; (iii) rental income: Rs.81,500/-; and (iv) opening cash balance of Rs. 57,513/-. It was further submitted by the assessee that the amount received by him from his relatives of Rs.10,92,010/- was withdrawn in cash on various dates and re-deposited in the bank account. However, the A.O not being persuaded to subscribe to the explanation of the assessee, declined to accept the same. The A.O after perusing the bank statement was not impressed with the explanation of the assessee that the cash deposited in his aforesaid bank account was sourced from the cash withdrawals preceding the same. The CIT(A) held a conviction that no inextricable nexus between the cash withdrawals starting from 11.04.2005 and the cash deposited in the bank from 04.08.2005 onwards was established. However, in the same breath it was observed by the A.O that at the time of making of cash deposits of Rs.74,000/- on 04.08.2005 and Rs.2,00,000/- on 10.09.2005, the assessee had on the said respective dates sufficient cash balance of Rs.3,57,000/- and Rs.2,93,000/- available with him. On the basis of the aforesaid observations, the A.O held a conviction that it was beyond comprehension that the assessee would had made cash withdrawals on different dates and without utilising the same either towards household expenses or for any other purposes, thereafter redeposited the said amount in his bank account. Thus, on the basis of the aforesaid deliberations, the A.O not being persuaded to subscribe to the claim of the assessee that the source of the cash deposits of Rs. 13,36,250/- in his bank account was sourced out of the cash withdrawals preceding the same, added the same as the income of the assessee from unexplained sources.
Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after perusing the explanation of the assessee as regards the source of the cash deposits of Rs.13,36,250/-, observed that the assessee had tried to relate the cash deposits made in his bank account in the months of August and September, 2005 with the cash withdrawals made from the said bank account a year ago. The CIT(A) on a perusal of the bank statement of the assessee for the year under consideration observed, that a peak credit of Rs.11,49,000/- stood reflected as on 02.08.2005. In the P a g e | Shri Anwarali B. Karachiwala Vs. ITO-24(1)(2) backdrop of his aforesaid observations the CIT(A) restricted the addition in the hands of the assessee to the extent of peak cash credit of Rs.11,49,000/-.
The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short „A.R‟) took us through the facts of the case. The ld. A.R drawing our attention to the “Statement showing nexus between cash withdrawals and cash deposits” [forming part of the order of the CIT(A)], submitted that the assessee during the period 01.07.2005 to 02.08.2005 had made cash withdrawals aggregating to Rs.6,70,000/-. On the basis of the aforesaid facts, it was submitted by the ld. A.R that the assessee had within a period of two months i.e during 15.09.2005 to 23.09.2005 made cash deposits aggregating to Rs.5,08,250/- in his said bank account. It was thus the contention of the ld. A.R that in the backdrop of the fact that the assessee had within a period of two months redeposited the cash withdrawn from his bank account, no adverse inference as regards the availability of cash in hand with the assessee on the date of the respective cash deposits was liable to be drawn. The ld. A.R in order to drive home his contention that the source of cash deposits could safely be related with the preceding cash withdrawals made by an assessee, relied on the following orders of the coordinate bench of the Tribunal:
(i) ACIT Vs. Baldevraj Charla (2009) 121 TTJ 366 (Del) (ii) Jagdish N. Thakkar Vs. ITO-23(2)(3) (ITA No.1475/Mum/2009, dated 31.05.2010) (Mum) (iii) Smt. Veerappa T. Shetty Vs. The Dy. CIT (ITA No. 5276/Mum/2011, dated 24.05.2012) (Mum) (iv) Shri Vikram Deo Kisan Sharda Vs. The ACIT,12(3)(2), Mum (ITA No. 277/Mum/2012, dated 05.12.2012) (Mum) The ld. A.R further submitted that as the assessee during the year under consideration was admittedly not maintaining any books of accounts, therefore, no addition under Sec.68 could have been made in respect of the P a g e | Shri Anwarali B. Karachiwala Vs. ITO-24(1)(2) cash deposits appearing in his bank account. The ld. A.R in support of his aforesaid contention relied on the following orders of the Tribunal:
(i) Smt. Madhu Raitani Vs. ACIT, Circle 3 (2011) 45 SOT 231 (Gau) (TM) (ii) Smt. Dipikadevi Todi Vs. ITO, Ward-1(3), Thane (ITA No. 189/Mum/2008, dated 29.07.2011) (Mum)
The ld. A.R further submitted that he was not pressing the ground of appeal
No.
2. On the basis of the aforesaid concession of the ld. A.R the Ground of appeal no. 2 is dismissed as not pressed. Per contra, the ld. departmental representative (for short „D.R‟) submitted that the case laws relied upon by the assessee were distinguishable on facts. It was averred by the ld. D.R that in the case of Shri Vikram Deo Kisan Sharda (supra) & Baldevraj Charla (supra), the respective assesses were duly maintaining their books of account. It was further submitted that unlike the case of the present assessee, in the case of Jagdish N. Thakkar (supra) the assessee had furnished daily cash flow statement with the A.O. The ld. D.R further distinguishing the facts involved in the case of Shri Veerappa T. Shetty (supra) averred that in the said case proper explanation as regards the source of the cash deposits was furnished by the assessee. The ld. D.R in order to drive home his contention that where an assessee fails to explain the „Nature‟ and „Source‟ of the cash deposits, the same was liable to be added to his income, relied on the following judicial pronouncements:
(i) Sudhir Kumar Sharma Vs. CIT-III, Ludhiana (2014) 224 Taxaman 178 (P & H) (ii) Pareshbhai Karshanbhai Sorathiya Vs. ITO, Ward 8(3), Surat (ITA No. 1290/Ahd/2013, dated 27.03.2017) (ITAT, Surat).
On the basis of the aforesaid contentions, it was submitted by the ld. D.R that the appeal filed by the assessee being devoid of any merit was thus liable to be dismissed.
P a g e | Shri Anwarali B. Karachiwala Vs. ITO-24(1)(2) 6. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the contention of the ld. A.R that as the assessee was not maintaining any books of account, therefore, the A.O had erred in making the addition in respect of the cash deposits appearing in the bank account under Sec. 68 of the Act. We have given a thoughtful consideration to the aforesaid contention of the assessee and are principally in agreement with him that as the bank account cannot be held to be the books of account of an assessee, therefore, an addition made in respect of cash deposits appearing in the bank account cannot be assessed as an unexplained cash credit under Sec.68 of the Act. However, we find from a perusal of the assessment order that the A.O had not made the addition in the hands of the assessee under Sec.
Still further, the assessee had assailed the addition of Rs.11,49,000/- sustained by the CIT(A), on the ground that the latter had erred in confirming the addition made by the A.O under Sec.69A of the Act. We thus, are of the considered view that the aforesaid contention of the assessee that the A.O had erred in making addition under Sec. 68 does not arise from the orders of the lower authorities. We thus, in the backdrop of our aforesaid observations decline to admit the aforesaid contention so raised by the assessee before us.
We shall now advert to the sustainability of the addition of Rs.11,49,000/- as had been upheld by the CIT(A). We find from a perusal of the order of the A.O, that he had specifically observed that the assessee while making the cash deposits of Rs.74,000/- on 04.08.2005 and Rs.2,00,000/- on 10.09.2005 in his bank account, had cash balance of Rs. 3,57,000/- and Rs.2,93,000/- available with him on the said respective dates. However, the A.O despite observing as hereinabove, had thereafter made an addition of the said respective cash deposits of Rs.74,000/- and Rs.2,00,000/-, on the ground that an inextricable nexus between the preceding cash withdrawals and the subsequent cash deposits could not be established. We have given a thoughtful consideration to the observations of the A.O and are unable to persuade ourselves to subscribe to the same. We
P a g e | Shri Anwarali B. Karachiwala Vs. ITO-24(1)(2) are of the considered view, that now when the A.O had admitted the availability of sufficient cash in hand with the assessee at the time of making of the aforesaid cash deposits of Rs.74,000/- and Rs.2,00,000/- on 04.08.2005 and 10.09.2005, respectively, therefore, there was no reason for characterising such cash deposits as having been made by the assessee from unexplained sources. We thus, in terms of our aforesaid observations delete the addition of Rs.2,74,000/- [Rs.74,000/- (+) Rs.2,00,000/-].
We shall now advert to the remaining cash deposits of Rs. 10,62,250/- [i.e Rs. 13,36,250/- (-) Rs. 2,74,000/-] made in the bank account of the assessee from 12.09.2005 onwards, as extracted from the „Chart‟ filed by the assessee with the A.O, as under:
Date Withdrawals Deposits 12.09.2005 100000 13.09.2005 100000 15.09.2005 108250 19.09.2005 300000 22.09.2005 30000 23.09.2005 100000 26.09.2005 50000 28.09.2005 50000 03.10.2005 50000 05.10.2005 50000 07.10.2005 25000 13.10.2005 16000 15.10.2005 100000 18.10.2005 100000 22.10.2005 7000 130000 23.12.2005 4000 23.01.2006 4000 06.03.2006 50000 23.03.2006 10000 We may herein observe, that as the assessee had submitted before the lower authorities that the source of the cash deposits in his bank account were P a g e | Shri Anwarali B. Karachiwala Vs. ITO-24(1)(2) out of the cash withdrawals preceding the same, therefore, our adjudication as regards the sustainability of the addition in respect of the balance cash deposits of Rs. 10,62,250/- shall proceed in the backdrop of the said claim of the assessee. We have perused the order of the CIT(A) and find that the assessee on the basis of a statement showing nexus between the cash withdrawals and cash deposits in his aforesaid bank account, had tried to explain the source of the entire cash deposits of Rs.13,36,250/- starting from 04.08.2005, as having been made out of the accumulated funds available with him out of cash withdrawals starting way back from 21.07.2004. Before proceeding further, we may herein observe that we have already accepted the source of the cash deposit aggregating to Rs. 2,74,000/- [i.e Rs. 74,000/- (+) Rs. 2,00,000/-]. We are of the considered view that though the cash withdrawals aggregating to Rs. 4,79,000/- made by the assessee during the period 21.07.2004 to 03.03.2005 cannot be held to be available with him, in toto, as such, to explain the cash deposits in his bank account during the year under consideration, but in the absence of any material which could persuade us to conclude that the said funds were totally exhausted by the assessee, therefore, part of the said amount can safely be held to be available with the assessee. We find that our aforesaid view stands fortified by the judgment of the Hon‟ble Supreme Court in the case of Anantharam Veerasinghaiah & Co. Vs. CIT (1980) 123 ITR 457 (SC). We thus, in all fairness conclude that out of the aggregate cash withdrawal of Rs. 4,79,000/- made by the assessee during the period 21.07.2004 to 03.03.2005, an amount of Rs. 2,39,500/- (i.e 50% of Rs. 4,79,000/-) could safely be held to be available with him. We have further deliberated on the bank statement filed by the assessee with the A.O and find that the assessee after making a cash deposit of Rs. 2,00,000/- on 10.09.2005, in the backdrop of the cash withdrawals/deposits pertaining to the year under consideration itself, was left with cash in hand of Rs. 93,000/-. We thus, in terms of our aforesaid observations are of the considered view that in the backdrop of availability of cash in hand of Rs. 3,32,500/- [i.e Rs. 2,39,500/- (+) Rs. 93,000/-] with the assessee on 11.09.2005, the cash deposits to the P a g e | Shri Anwarali B. Karachiwala Vs. ITO-24(1)(2) said extent, as against the total cash deposits of Rs. 6,08,250/- made by the assessee during the period 12.09.2005 to 23.09.2005 stands explained. We thus, in terms of our aforesaid observations sustain the addition of Rs. 2,75,750/- [i.e Rs. 6,08,250/- (-) Rs.3,32,500/-] in respect of the cash deposits made by the assessee out of unexplained sources during the aforesaid period. Still further, as regards the cash deposit of Rs. 1,00,000/- made by the assessee on 23.09.2005, after considering the cash withdrawal of Rs. 30,000/- carried out by him a day before i.e on 22.09.2005, the balance investment of Rs. 70,000/- [i.e Rs. 1,00,000/- (-) Rs. 30,000/-] is held to be the income of the assessee as having been made from unexplained sources.
We further find that the assessee had deposited an amount of Rs. 3,54,000/- in his bank account during the period 13.10.2005 to 23.01.2006. We find, that the aforesaid cash deposits are preceded by cash withdrawals aggregating to Rs. 2,32,000/- during the period 26.09.2005 to 22.10.2005. We thus, are of the considered view that the cash deposits of Rs. 2,32,000/- (out of the cash deposits of Rs. 3,54,000/-) stands explained to be have been sourced out of the aforesaid cash withdrawals. We thus, uphold the balance addition of Rs. 1,22,000/- [i.e Rs. 3,54,000/- (-) Rs. 2,32,000/-] in the hands of the assessee.
We thus, in terms of our aforesaid observations substitute the addition of Rs. 11,49,000/- sustained by the CIT(A), by an addition of Rs. 4,67,750/- [i.e Rs. 2,75,750/- (+) Rs. 70,000/- (+) Rs. 1,22,000/-] in the hands of the assessee.
The appeal of the assessee is partly allowed.
Order pronounced in the open court on 11.07.2018