TABREZ IQBAL SAYED ,MUMBAI vs. INCOME TAX OFFICER 12(3)(1), MUMBAI

Brief facts of the case are that the assessee filed his return of income on 07.07.2017 declaring total income of Rs. 6,72,730/-. The assessee has mainly shown salary income during the year. The case was selected for limited scrutiny for verification of cash of Rs. 33,50,000/- deposited in his bank account during the demonetization period. Before the AO, the assessee contended that he was receiving his salary in cash as a director of M/s. Jharokha Hotels & Properties Pvt. Ltd. Further, the said cash was the closing cash balance of the previous year. In support of his contention, the assessee submitted statement of cash account, copy of capital account as well as copy of his return for AY 2016-17 filed on 25.07.2016 declaring total income of Rs. 8,09,450/-. However, the AO added the entire amount u/s 69A of the Act on the ground that the salary being more than 20,000/- could not have been received in cash and the amount deposited in cash in the bank account was also not be commensurate with his salary of merely Rs. 7,80,000/- during the year. The Ld. CIT(A) vide his order dated 30.10.2023 upheld the order of the AO. Aggrieved the assessee is in appeal before us.

Before us, the Ld. AR has reiterated that the cash deposits amounting to Rs. 33,50,000/- in the bank account during the demonetization period have been made out of past years’ savings as well as current year’s salary income, as the assessee was receiving his salary in cash. The Ld. AR also placed reliance on the order of the co-ordinate bench in the case of the assessee’s father Mohamed Iqbal Bawamiya Sayed in for AY 2017-18 in which a similar plea has been accepted by the co-ordinate bench.

We have heard the rival submissions and perused the material available before us. It is seen that the assessee has shown receipt of salary income in cash during this year as well as in the preceding years. In support of his claim, the assessee has filed copy of his I.T. return submitted for AY 2016-17 which was filed on 25.07.2016 that is much before the demonetization. He has also furnished his capital account, balance sheet as well as form No. 16 evidencing payment of salary, out of which TDS has also been deducted by the employer viz. M/s. Jharokha Hotels & Properties Pvt. Ltd. The capital account reflects cash in hand as on 31.03.2016 to the tune of Rs. 33,99,844/-. The deposit of cash in the bank account was triggered by the announcement of demonetization. The lower authorities have rejected the assessee’s explanation mainly for the reason that the salary could not have been paid in cash. The responsibility of payment of salary either in cash or by cheque is on the employer company. This alone cannot be the ground for rejecting the assessee’s claim. Moreover, Ld. AO has also accepted that the assessee has received salary from M/s. Jharokha Hotels & Properties Pvt. Ltd. which is reflected in the Traces statement. 5.1 We find that the facts of this case are almost similar to the case of Shri Mohammed Iqbal Bawamiya Sayed (supra) father of the assessee, who was also in receipt of salary in cash and had deposited lump sum amount of Rs. 35,95,800/- in his bank account during November, 2016, after the announcement of demonetization. The addition made in his hands has been deleted by the co-ordinate bench . The relevant portion of the order in the case of Mohammed Iqbal Bawamiya Sayed (supra) is reproduced below: “5.3. We have also perused the material placed in the paper book as referred by the ld. Counsel and find that withdrawal of cash from the bank account and salary earned and received during the year up to October 2016 was available with the assessee for making deposit in the bank account. The act of deposit was triggered by the announcement of demonetisation in the month of November, 2016. 5.4. Important fact is that assessee is an individual earning Director's remuneration, i.e., income chargeable to tax under the head "Income from salaries". For earning the Director's remuneration, assessee had placed on record all the documentary evidences in the course of assessment proceedings not only for the year under consideration but also for the preceding three years. Furthermore, return for the immediately preceding year, i.e. Assessment Year 2016-17 was filed on 21.07.2016 which is prior to the date of the announcement of demonetisation. 5.5. In the preceding years also, assessee has duly reported his earning of remuneration (salary) from these companies it the returns filed by him, all placed on record. Mode of receipt of salary income has no bearing on its taxability in the hands of the assessee in the year under consideration through it could have an adverse effect in the hands of the payer which is not the issue before us. The submissions and documentary evidences placed on record by the assessee in the course of proceedings have not been refuted or controverted by the ld. Assessing Officer to be sham or bogus. Also, there is nothing brought on record to establish that the cash available with the assessee was "utilised elsewhere. We find that assessee had filed details of cash withdrawal along with bank statement. We do not find any justification in not accepting the withdrawal of cash in the immediately preceding year as well as earning and receipt of remuneration in the current year which is duly supported by entries in the bank statement about the withdrawal. The onus to prove that assessee had spent his cash otherwise and not having cash in hand on the date of deposit is on the Revenue and assessee cannot be asked to prove the negative as to show how he had spent the money.

Considering the material fact that the assessee being an individual and receiving remuneration from the two companies in cash, we do not find any merit in the action of the lower authorities in making an addition on account of deposit of cash in the bank account during the demonetisation period, when the same was available out of the withdrawals of cash from the bank and remuneration earned and received during the year up to the period of demonetisation, without bringing any supporting material on record to suggest that the said cash so available has been used by the assessee elsewhere. We thus, delete the addition so made. Grounds taken by the assessee in this respect are allowed.”

The facts of the present case are nearly identical with the above cited case. Respectfully following the decision of the co-ordinate bench, we hold that there is no justification for making the addition of Rs. 33,50,000/- in the hands of the assessee u/s 69A of the Act and the same is hereby deleted.

In the result, the appeal of the assessee is allowed.