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Facts
The assessee deposited Rs. 15,14,000/- in cash during the demonetization period. The assessee claimed these deposits were from cash withdrawn from a housing loan availed for constructing a commercial building. The Assessing Officer (AO) treated the entire amount as unexplained and brought it to tax. The Commissioner (Appeals) partly allowed the appeal, upholding the addition of Rs. 12,64,000/-.
Held
The Tribunal held that the cash deposits were out of cash withdrawals from a housing loan. The Tribunal noted that the AO did not provide any evidence to show that the withdrawn cash was utilized for purposes other than construction. The Tribunal found the assessee's explanation to be consistent with the loan disbursement and withdrawal details.
Key Issues
Whether the cash deposits made during the demonetization period, claimed to be out of housing loan withdrawals for construction, were correctly treated as unexplained income by the AO and CIT(A).
Sections Cited
69A, 115BBE
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Income Tax Appellate Tribunal, “A” BENCH : BANGALORE
Before: SHRI GEORGE GEORGE K & SHRI LAXMI PRASAD SAHUR
Per George George K, Vice President:
This appeal at the instance of the assessee is directed against the Order of CIT(A) dated 03.07.2024, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
Grounds raised are as follows:
1. The CIT (A) was not correct in restricting the addition to Rs,12,64,000/-out of Rs.15,14,000/-, which was made by AO in respect of cash deposits made during demonetization period, though the Appellant has fully explained the sources of the entire cash deposits of Rs.15,14,000/-
2. The CIT (A) and AO have not appreciated the fact that the cash deposits are out of cash withdrawal in the same bank account during year.
3. The CIT (A) and AO have erred in considering the explanation given by the Appellant that the cash was withdrawn out Housing loan amount during year and the same was re-deposited during demonization period 4. The CIT (A) and AO have erred in not appreciating the fact that the Appellant was constructing Building during the year and availed housing loan and was withdrawn cash for day to day expenditure. However, due to demonetization, the appellant has re-deposited the said cash. 5. The AO has erred in coming to conclusion that loan will be disbursed based on the completion of work and same was utilized for construction of house. However the Appellant has explained that all the construction activities was looking after by her son, who is working in Bangalore. Hence as and when he comes to Mysore he withdraw cash and given to Appellant. 6. The AO has erred in invoking the provisions of section 115BBE of the act for the additions made, though the Appellant has explained the sources of cash deposits with documentary evidences and therefore no tax could be levied U/s.115BBE of the act and further without prejudice to this fact, the taxes could not have been levied at 60% which came into the enactment in an amendment dated 05.12.2016. 7. The Appellant objects the levy Interest u/s.234A, B and C consequent to above additions. 8. The Appellant craves leave to add, to alter, to amend or to delete any of the grounds that may be urged at the time of hearing of the Appeal Wherefore on the above grounds and on such other grounds the Appellant prays the Appellate Authority to set aside the Assessment order and may pass such other as the Appellate Authority deems fit.
Brief facts of the case are as follows:
For the Assessment Year 2017-18, the return of income was filed by the assessee on 07.11.2017 declaring total income of Rs.4,58,700/- under the head “Income from House Property’ and ‘Income from Other Sources”. The assessment was selected for scrutiny to examine the source of cash deposits made during the demonetization period. Notice under section 143(2) of the Act was issued on 03.09.2018. Pursuant to the information obtained under section 133(6) of the Act, the assessee was directed to explain the source of cash deposit to the tune of Rs.15,14,000/-. The assessee submitted before the AO that she was constructing a commercial building and she had availed loan from Vijaya Bank. It was submitted that cash withdrawn for the purpose of construction and unspent portion of cash was redeposited during the demonetization period. In response to the final show cause notice issued by the AO, the assessee submitted a reply by stating that loan disbursed from Vijaya Bank (now Bank of Baroda) was to the tune of Rs.49,83,555/- and the amount of cash withdrawn from the loan disbursed was Rs.37,25,000/- between 03.08.2016 and 05.10.2016. Assessee had also furnished before AO copy of the loan statement and also SB account details. Since there were contradictory submissions made by the assessee as regards withdrawal of cash, the AO treated the entire cash deposits amounting to Rs.15,14,000/- as unexplained and brought the same to tax under section 69A of the Act. The AO also applied special rate of taxation under section 115BBE of the Act. The relevant finding of the AO in making the addition under section 69A of the Act reads as follows:
“9. The submissions made by the assesee on 26.09.2018 and the latest submissions in response to showcause notice is worth perusal.
Initially, the assessee states that the deposit of Rs.15,00,000/- is out of the amount withdrawn on 3.8.2016 by herself and her son and later states in her final submissions that the residual cash remaining out of the total amount withdrawn of Rs.37,25,000/- has been deposited to Bank. Both these statements are contradictory and hence it is nothing but just an afterthought reply submitted by the assessee towards the deposits of Rs.15,14,000/- which is not acceptable.
The law is well settled that the onus of proving the source of a sum of money found to have been received by the assessee is on him and if he disputes the liability for tax. it is for him to show that the receipt is not income or it is exempted from tax. In the absence of such proof. the revenue is entitled to treat it as taxable income. Hence, based on the foregoing, entire submissions of the assessee are nothing but just an afterthought which is not acceptable and the entire cash deposit of Rs.15,00,000/-during demonetisation period stands un-explained and is hit by the provisions of section 115 BBE and accordingly, the sum of Rs.15,14,000/- is brought to tax as un-explained money u/s. 69 A of the Income-tax Act, 1961.”
Aggrieved by the Assessment Order, assessee preferred appeal before the First Appellate Authority. The CIT(A) partly allowed the appeal of the assessee by giving credit of Rs.2,50,000/- based on the CBDT’s Circular No.3/2017 dated 21.02.2017 regarding SOP to be followed for verification of cash transaction during the demonetization period. Therefore, the CIT(A) upheld the addition of Rs.12,64,000/- (Rs.15,00,000 – Rs.2,50,000) under section 69A of the Act on account of cash deposit. The reasoning of the CIT(A) to confirm the disallowance of Rs.12,64,000/- was on the premise that loan is disbursed in instalment based on the progressive completion of the work and most of the cash withdrawals would have been expended for the construction of the commercial building.
Aggrieved by the CIT(A)’s Order confirming the addition to the extent of Rs.12,64,000/-, assessee has filed the present appeal before the Tribunal. Assessee has filed a Paper Book enclosing the return of income, the housing loan statement, the bank account statement (SB A/c), etc. The learned AR has also filed brief written submission and relied on the same.
Learned Standing Counsel strongly supported the Orders of the AO and the CIT(A).
We have heard the rival submissions and perused the material on record. Assessee is a senior citizen and a lady. It is the claim of the assessee that being a senior citizen, all the construction activities were looked after by her son who is a salaried employee in a private company at Bangalore. It is stated that assessee’s son visits Mysore once or twice in a month and as and when he comes to Mysore, he would withdraw cash out of the loan account and keep the same with the assessee for incurring the expenditure on construction of the commercial property. It was stated that when demonetization was announced on 06.11.2016, the balance / unspent amount that is withdrawn has been deposited in the bank account of Vijaya Bank (now Bank of Baroda). On perusal of the loan account, it is seen that loan disbursed before 06.11.2016 was Rs.49,83,555/-. The details of same are as under:
Date Amount disbursed 02.08.2016 25,00,000 16.08.2016 2,65,000 23.08.2016 10,00,000 26.09.2016 3,21,000 01.10.2016 8,97,555 Total 49,83,555
The cash withdrawn by the assessee are detailed below:
Date Withdrawals 03.08.2016 10,00,000 03.08.2016 8,00,000 23.08.2016 10,00,000 01.10.2016 9,05,000 05.10.2016 20,000 Total 37,25,000
The assessee had made cash deposit of a sum of Rs.15,00,000/- on 11.11.2016 and a further amount of Rs.14,000/- on 01.12.2016 in the SB account from where she was incurring the expenditure for construction of the commercial building.
10. The AO has ignored the source of cash deposits since there was contradictory statement made before him at the first instance and pursuant to the final show cause notice. On perusal of material on record, it is clear that the aforesaid disbursement of loan and cash withdrawal is correct. Assessee does not have any other income apart from rental receipts as well as income from other sources. Some of the rental receipts are also deposited in cash. Out of the cash withdrawals and cash deposits, there is proximity and cash redeposits are less than 3 months. Therefore, on the facts of the instant case, we are of the view that these cash deposits are only out of cash withdrawals to the tune of Rs.37,25,000/- and the AO has not brought anything on record to show that the entire cash withdrawals of Rs.37,25,000/- has been utilized by the assessee for construction of commercial building or any other purposes. For the aforesaid reasoning, we delete the addition confirmed by the CIT(A) amounting to Rs.12,64,000/- under section 69 of the Act. It is ordered accordingly.
In the result, appeal filed by the assessee is allowed.