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Facts
The assessee is aggrieved by the CIT(A)'s order confirming an addition of Rs. 38.07 lakhs relating to cash deposits made into the assessee's bank account for AY 2017-18. The AO rejected the assessee's claim that past cash withdrawals were the source for these deposits, citing inconsistencies in withdrawal patterns and the assessee's investment habits.
Held
The Tribunal held that while it cannot be said that the entire withdrawn cash was kept intact, the AO was not justified in completely rejecting the availability of cash balance. The Tribunal estimated 80% of larger withdrawals from FY 2014-15 and 2015-16, plus a withdrawal from FY 2016-17, to be available cash, estimating a total available sum of Rs. 30.00 lakhs.
Key Issues
Whether past cash withdrawals can be considered as the source for cash deposits made into the bank account.
Sections Cited
Section 68 of the Income Tax Act, 1961 (implied, as it deals with unexplained cash credits)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: SHRI B.R. BASKARAN & SHRI SANDEEP SINGH KARHAIL
PER B.R. BASKARAN, ACCOUNTANT MEMBER :
The assessee has filed this appeal challenging the order dated 13-03- 2023 passed by Ld CIT(A), NFAC, Delhi and it relates to the assessment year 2017-18. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the addition of Rs.38.07 lakhs relating to cash deposited into the bank account of the assessee.
None appeared on behalf of the assessee. The notices sent by the registry has also returned back by the postal department unserved with noting “left”. Hence we proceed to dispose of the appeal ex-parte, without the presence of the assessee.
2 Seema Jethani 3. The appeal is barred by limitation by 20 days. The assessee has filed a petition requesting the bench to condone the delay. We heard Ld D.R on this preliminary issue. Having regard to the submissions made by the assessee, we are of the view that there was reasonable cause for the assessee in filing the appeal belatedly. Accordingly, we condone the delay and admit the appeal for hearing.
We heard Ld D.R and perused the record. The submission of the ld D.R is that the order passed by Ld CIT(A) does not call for any interference. The facts are stated in brief. The assessee filed her return of income for the year under consideration declaring a total income of Rs.21,60,630/-. It was taken up for limited scrutiny. It was noticed that the assessee has sold two properties and accordingly declared long term capital gains thereon. During the course of scrutiny proceedings, the AO examined the bank accounts maintained by the assessee with ICICI Bank and HDFC Bank. It was noticed that the assessee has made cash deposits aggregating to Rs.38.07 lakhs in both the bank accounts during the year relevant to the assessment year 2017- 18. The assessee explained that she had withdrawn cash in the earlier two years in connection with the expected heart treatment of her husband. It was submitted that the above said cash withdrawals along with other withdrawals were used to make the above said deposits.
The AO examined the details of withdrawals made during the financial years 2014-15 to 2016-17. He noticed that the assessee has made withdrawals of big amounts raging from Rs.50,000/- to Rs.9,50,000/- in FY 2014-15. However, the assessee has also withdrawn smaller amounts of Rs.20,000/- to Rs.30,000/- after withdrawal of big amounts. In FY 2015-16, the withdrawals were mainly of smaller amounts. In FY 2016-17 also, the withdrawals were smaller amounts only. Accordingly, the AO took the view that there was no necessity for the assessee to withdraw smaller amounts, when it is claimed that she was already having huge cash balance in hands. Accordingly, he rejected the claim of availability of cash balance. Further, the AO noticed that the assessee is having investments in the form of mutual fund
3 Seema Jethani investments, fixed deposits etc. Hence the AO took the view that the assessee could not have kept huge cash balance in hand without earning any income. Accordingly, the AO rejected the claim of availability of cash balance out of past cash withdrawals. Accordingly, he assessed the aggregate cash deposits of Rs.38,07,000/- as income of the assessee.
The ld CIT(A) also confirmed the same.
The question that arises for our consideration is whether the past cash withdrawals can be considered to be the source for making deposits aggregating to Rs.38,07,000/- in FY 2016-17 relevant to AY 2017-18. We examined the details of cash withdrawn by the assessee, which has been given by the AO in the assessment order. The aggregate amount of cash withdrawn by the assessee in larger amounts (Amount exceeding Rs.50,000/-) is given below:-
F.Y 2014-15 - Rs.36,90,000 F.Y 2015-16 - Rs.12,75,000 ------------------- Rs.39,65,000 Less:- Deposits of larger Sums 4,48,000 ----------------- Rs.35,17,000 =========== The case of the assessee is that cash balance to the tune of Rs.34,25,000/- was available with the assessee as on the beginning of the current year, i.e. as on 1.4.2016. The AO has not accepted the said claim for the reasons discussed earlier. The assessee had stated that she withdrew cash for anticipated heart surgery of her husband, but the said claim was rejected by the AO by observing that the prescription pertained to June, 2013 and August, 2015. We notice that major portion of cash was withdrawn by the assessee in Financial year 2014-15 and the assessee has also furnished medical bills relating to that period. Thus the reasoning given by the assessee for huge withdrawal is in a way corroborated by the medical bills. The AO has expressed the view that the assessee was withdrawing cash of smaller
4 Seema Jethani amounts subsequently even when the cash balance was already available with her. Further, the AO has also observed that the assessee is in the habit of making investments and hence she could not have kept cash balance in hand. In our view, these are also surmises entertained by the AO. It is well settled proposition that the AO cannot direct the assessee the manner in which the funds are to be used by the assessee. Further, we notice that the AO did not bring any material on record to show that the earlier cash withdrawal was spent away and was not available with the assessee. Accordingly, we are of the view that the AO was not justified in rejecting the claim of availability of cash balance.
At the same time, it cannot also be said that the entire cash withdrawn by the assessee was kept intact by her, since the assessee did not bring any evidence to show that the entire withdrawals were available with her in cash. It is quite possible that the assessee would have spent some portion of cash balance. Under these set of facts, we are of the view that the cash balance that could be available with the assessee needs to be estimated. Accordingly, we estimate that 80% of the withdrawals made in bigger amounts mentioned above (FY 2014-15 and 2015-16) should be available with the assessee, i.e., 80% of Rs.35,17,000/- amounting to Rs.28,13,600/-. In FY 2016-17, the assessee has withdrawn Rs.1,75,000/- on 07-09-2016 (during the current year) and the same should be available with the assessee. Thus, the aggregate amount available with the assessee should be Rs.29,88,000/- (Rs.28,13,000/- + Rs.1,75,000/-). Considering the savings that could have been made from other withdrawals, we are of the view that a sum of Rs.30.00 lakhs can be considered to be available with the assessee for making the deposits of Rs.38,07,000/-. Barring the above, the remaining withdrawals, being smaller amounts, should be considered to have been spent away.
In view of the foregoing discussions, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to accept source to the tune of Rs.30.00 lakhs. Accordingly, the addition towards cash deposits made into
5 Seema Jethani the bank account is sustained to the tune of Rs.8,07,000/-. We order accordingly.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the open court on 26th February, 2024.