JAI NARAINDAS KALANI,ULHASNAGAR vs. ITO WD 2(2), KALYAN

This appeal by the assessee raises a solitary issue relating to an addition of Rs.49 lacs made by the Assessing Officer on account of unexplained cash deposits in the bank account of the assessee.

Before proceeding with the merits, it was noted that the appeal has been filed belatedly. The delay in filing of the appeal of 200 days has been explained by the assessee by way of an Affidavit in which the relevant portion reads as under :-

Considering the reasons advanced and the fact that the bona fides of the same have not been contested, we deem it fit and proper to condone the delay. The aforesaid was put across to the parties at the time of hearing and both the sides made arguments with regard to the merits of the addition.

Insofar as the facts relevant to decide the controversy are concerned, the same can be summarised as follows. In the course of assessment proceedings, the Assessing Officer noted from the savings bank account of the assessee that there were several cash deposits. Assessee explained that the cash deposits were sale proceeds of various scrap material relating to one Hotel Eagle which were disposed off during the year under consideration. Assessee had explained that the said hotel was a family concern wherein her husband was a Partner alongwith his younger brother. It was further explained that while dismantling the hotel, various items like air-conditioners, generators, transformers, electrical fittings, wooden furniture, room beds, etc. were sold as scrap to kabadiwallas and the various deposits made in the bank account reflected such sale proceeds. The Assessing Officer was not satisfied with the explanation and, in fact, on being asked to produce the kabadiwallas, assessee produced four of them whose statements were also recorded by the Assessing Officer. The Assessing Officer was not satisfied with the depositions made by such kabadiwallas as, according to him, assessee could not substantiate her claim of having sold the hotel scrap to them. The Assessing Officer notes that assessee also could not furnish any evidence or proof of assets of the hotel and nor could produce the parties from whom the sale proceeds were actually received. Accordingly, he treated Rs. 49 lacs representing the cash deposits in the bank account as ‘unexplained’ and applied the provisions of Sec. 68 of the Act and the aforesaid amount was added to the returned income. This addition has further been sustained by the CIT(A) also primarily for the reasons brought out by the Assessing Officer.

Before us, the learned representative for the assessee reiterated the explanation rendered by the assessee before the lower authorities, which has been reproduced in the orders of the authorities below. So however, there is no material to substantiate the source of the impugned cash deposits in the bank account. The learned representative pointed out that the Assessing Officer recorded the statements of the four kabadiwallas, but assessee was not allowed an opportunity to cross-examine such persons. It is also pointed out that Sec. 68 of the Act could not have been invoked by the Assessing Officer in view of the decision of the Mumbai bench of the Tribunal in the case of Smt. Manasi Mahendra Pitkar, [2016] 160 ITD 605.

On the other hand, the ld. DR appearing for the Revenue pointed out that the witnesses examined by the Assessing Officer were indeed produced by the assessee and they were assessee’s witnesses and there was no justification for the assessee to insist on their cross-examination.

We have carefully considered the rival submissions. In the instant case, the sum and substance of the case made out by the income-tax authorities is that the assessee has failed to substantiate the explanation that the impugned sum deposited in the bank account was on account of sale of scrap of Hotel Eagle. Before the lower authorities, assessee had explained that kabadiwallas used to visit the site and after negotiations, they lifted the material by paying cash to the assessee for various scrap materials in the hotel. In this connection, the Assessing Officer required the assessee to produce the kabadiwallas and, in response, five such persons were produced who were examined by the Assessing Officer. The relevant portion of their statements has been reproduced by the Assessing Officer in the assessment order. The extract reproduced by the Assessing Officer clearly brings out that none of the persons accepted that he had purchased scrap of the hotel from the assessee. In fact, a common refrain of all the persons was that they arranged for another kabadiwalla to effectuate the purchase of the scrap from assessee. All of them also stated that whereabouts of the other kabadiwallas who actually bought scrap from the assessee were not known to them. Another common refrain was that they merely received a commission from the actual kabadiwalla for effecting the transaction. The aforesaid clearly brings out that the witnesses sought to be produced by the assessee did not corroborate and substantiate the receipt of the impugned cash by the assessee. Therefore, on the basis of the material on record, the lower authorities justifiably could not establish the nature or source of the cash deposits by the assessee. In fact, the assessee was also not able to substantiate the existence of the scrap material on the basis of any documentary proof in the shape of Balance-sheet, Profit & Loss Account, etc. of Eagle Hotel. Under these circumstances, in our view, the onus was on the assessee to positively explain the nature and source of the cash deposits in the bank account and having failed to do so, the impugned addition has been rightly made by the lower authorities. The plea of the assessee that the statements of the persons have been used against her without affording their cross-examination is a misnomer. Ostensibly, the persons examined by the Assessing Officer were the witnesses of the assessee who were produced by her. In fact, the assessee could not even give the names and addresses of the actual kabadiwalla from whom assessee is claiming to have received the said sum of money. For all the said reasons, we find no error in the approach of the income-tax authorities in sustaining the impugned addition.

So far as the reliance placed by the assessee on the decision of the Mumbai Bench of the Tribunal in the case of Smt. Manasi Mahendra Pitkar (supra) is concerned, the same does not help the case of the assessee. In the aforesaid case, assessee was a salaried employee and cash was found deposited on various dates in a bank account jointly held by the assessee with his wife and the explanation was that the amounts were received from his near relatives and friends, and such funds were in turn used for treatment of his wife. It was explained that the medicines required for treatment were imported and the payments were made to the supplier through cheques. The dispute was relating to cash deposits, which was explained as small contributions made by relatives, friends and well-wishers on humanitarian grounds. Under these circumstances, the Tribunal considered that Sec. 68 of the Act could not be invoked at all qua the bank passbook. Notably, the aforesaid decision of the Tribunal was rendered in the background of the fact that the explanation of the assessee qua the amounts deposited in the bank account and usage thereof was not disapproved by the Assessing Officer. So however, the facts in the instant case are to the contrary inasmuch there is nothing to substantiate the source or the nature of the cash which has been deposited by the assessee in her bank account. Therefore, the decision of the Tribunal in the case of Smt. Manasi Mahendra Pitkar (supra) does not help the case of the assessee. Therefore, we find no reasons to interfere with the decision of the CIT(A), which we hereby affirm. Thus, on this aspect, assessee fails.

In the result, appeal of the assessee is dismissed.