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Facts
Two assessees, Shri Deven Chaudhary and Shri Sudhir Chaudhary, appealed against separate orders related to the Assessment Year 2017-18. The appeals involved common facts and issues regarding cash deposits made during demonetization. The assessee had declared income and subsequently made cash deposits, claiming the source as income surrendered in an earlier assessment year (2014-15) during survey proceedings.
Held
The Tribunal observed that the assessee had surrendered a significant amount of income in A.Y. 2014-15, which was accepted by the Department. The revenue failed to establish that this cash was utilized elsewhere or was not available. Citing various judicial precedents, the Tribunal held that the burden was on the revenue to disprove the assessee's explanation and that mere conjectures or suspicions cannot form the basis for additions. The Tribunal also noted that Section 115BBE of the Act applies prospectively.
Key Issues
Whether the cash deposits made during demonetization were sufficiently explained by the income surrendered in a prior assessment year, and if the additions/taxation under Section 115BBE were justified.
Sections Cited
143(2), 142(1), 69A, 115BBE, 234A, 234B, 234C, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, AGRA BENCH, AGRA
Before: SHRI S. RIFAUR RAHMAN & SHRI SUNIL KUMAR SINGH
ORDER PER : S. RIFAUR RAHMAN, ACCOUNTANT MEMBER:
Both these appeals have been filed by two different assessees against separate orders of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 08.11.2024 and 05.03.2025 respectively, for the Assessment Year 2017- 18.
Since common facts and issue are involved in both these appeals, though filed by two different assessees, the same were heard together and are being disposed of by this consolidated order for the sake of convenience and brevity. We take up as a lead case.
Brief facts of the case are, the assessee filed return of income for assessment year 2017-18 on 06.01.2018, declaring income at Rs.30,01,330/-. Case was selected for scrutiny through CASS.
Accordingly, notices u/s. 143(2) and 142(1) of the Income-tax Act, 1961 (“the Act” for short) were issued and served on the assessee through e- portal. Assessee is the director of a company M/s. Aqua Plumbing Pvt. Ltd. Mathura and getting salary from the same company. He has also partner in combined Industries and General Plumbings, Mathura. The selection of the assessee’s case for scrutiny was for the reason that large value of cash deposits were made during the demonetization and undisclosed income reported by PCIT. Assessee was asked to submit the relevant information as per the format provided for disclosing cash deposits in the bank. In response, the assessee has submitted relevant details as per the format. During the assessment proceedings, the assessee has disclosed that the source for cash deposits during demonetization is the amount surrendered by the assessee in 2 | P a g e assessment year 2014-15 in the survey proceedings initiated in that assessment year and the same was disclosed by him in statement recorded u/s. 131 of the Act. After considering the detailed submissions given by the assessee, the Assessing Officer found it not acceptable. He observed that the assessee has deposited cash during demonetization period and the income surrendered was disclosed by the assessee in the proceedings initiated in assessment year 2014-15 and it is not acceptable to keep such huge cash in hand. Accordingly, he proceeded to make addition u/s. 69A of the Act and taxed the same by invoking the provisions of section 115BBE of the Act.
4. Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and filed detailed submissions, which was more or less similar to the submissions made before the Assessing Officer, which is reproduced by the ld. CIT(Appeals) at pages 2 to 10 of the impugned order. After considering the detailed submissions of the assessee, learned CIT(Appeals) sustained the additions made by the Assessing Officer.
5. Aggrieved with the above order, the assessee is in appeal, raising following grounds of appeal :
“1. BECAUSE, upon due consideration of facts and in law the 'NFAC' was highly unjustified in dismissing the appeal without consideration of the evidences brought on records.
2 BECAUSE, while dismissing the appeal the 'NFAC' had completely overlooked the written submission furnished by the 'appellant' on 28.07.2024 against the addition made. IN ALTERNATIVE AND PREJUDICE TO THE ABOVE
3. BECAUSE, the authorities below have erred both on facts and in law in making total addition of Rs. 75,00,000/- deposited in Bank Account during the demonetization period without consideration of the submissions made, solely on the basis of conjecture and surmises.
BECAUSE, while making and sustaining the addition the authorities below have omitted to consider that cash as was deposited in the bank account got sourced from repayment of Rs.45,00,000/- which came back to the appellant in cash in A.Y. 2016-17, cash in hand available and the cash withdrawal made in earlier months from Bank Accounts.
BECAUSE, the source of cash in hand as on 01.04.2015 and amount of Rs.45,00,000/- which was returned to the appellant in cash in A.Y. 2016-17 was from the income surrendered of Rs.1,30,00,000/- during A.Y. 2014-15, which fact was stated on oath in the statement recorded on 13.12.2019.
6. BECAUSE, the authorities below have erred in making addition by referring to provisions of Section 69A of the Act without appreciating that provisions of said Section are not at all applicable in the case of the Appellant.
BECAUSE, the order has been passed without providing due opportunity to the appellant and therefore same is bad in law being passed without following principles of natural justice.
8. BECAUSE, the Ld. CIT(A) erred in observing that the appellant could not justify the link between surrendered amount of survey proceedings & cash deposited during demonetisation as the same was explained in detail in the Written Submission filed which was supported with cash flow statement.
9. BECAUSE, while passing the assessment order the 'AO' erred in observing that the appellant has changed his stand and further erred in not accepting the explanation given by the appellant to explain the source of cash deposited. Thus, assessment order passed and addition made therein is in violation of principles of natural justice.
BECAUSE, the assessment order to the extent making addition is bad in law and against the facts of the case.
11. BECAUSE, assessee denies its liability against Interest charged under section 234A based on incorrect assumption of facts and Interest under section 234B and 234C is incorrectly charged.
At the time of hearing, learned AR brought to our notice detailed submissions made before learned CIT(Appeals) and the submissions made before lower authority, which is filed by the assessee in the form of paper book along with written submissions filed before the ld. CIT(Appeals) and further submitted as under : “8. During the course of assessment proceedings, a statement of assessee was also recorded on 13.12.2019 (PBP- 36-40)wherein it was stated on oath in detailed manner that infact a survey was conducted by Income Tax Department on the assessee during A.Y. 2014-15 and assessee surrendered an income of Rs.1,30,00,000/- disclosed at the time of survey and the same was received in cash which was earlier given for purchase of property. This amount was returned to assessee in cash in A.Y. 2016-17.
9. At the very outset, the appellant respectfully submits that both the authorities below have proceeded in a wholly unjustified manner in brushing aside the consistent explanation furnished by the appellant. The observations of the learned AO and the learned CIT(A) that the stand of the appellant is inconsistent or dwindling are factually incorrect and contrary to record. The addition has been made not on the basis of any cogent material, but merely on presumptions, assumptions, surmises, and conjectures, which cannot take the place of evidence.
10. There was no inconsistency in Explanation furnished by the Assessee before the authorities below.Therefore, it is incorrect to allege that the appellant has changed his stand. The source of this cash has been clearly explained to be out of the income surrendered by the assessee during the course of survey proceedings conducted in A.Y. 2014-15. (PBP 36-40)This categorical explanation has remained the same and has never been altered or retracted.
11. The AO while making the addition has ignored the Statement on Oath recorded by the AO on 05.11.2019 during the course of Assessment proceedings, wherein a detailed factual position was explained. It was specifically submitted that during the survey in A.Y. 2014-15, the appellant surrendered an income of ₹1,30,00,000/-. The surrendered amount was 5 | P a g e received back in cash, since the same was earlier given in cash for the purchase of a property, which did not materialize, and accordingly was returned to the assessee in A.Y. 2016-17. This cash was thereafter deposited in the bank account of the appellant. The statement was unambiguous and leaves no scope for alleging any inconsistency and banking thereon for making the addition.
While framing the assessment order, the Ld. AO has failed to bring any evidence whatsoever to show that the out of the surrendered amount Rs. 75,00,000/- had already been utilized, deposited in some other account, or invested elsewhere. In the absence of any such finding supported by evidence, the conclusion drawn by the Ld. AO that the cash deposit was unexplained is wholly untenable. It is settled law that the burden lies on the revenue to disprove the explanation of the assessee when the assessee has discharged his initial onus. Mere conjectures cannot be a basis for addition.
The learned CIT(A) has also failed to consider the specific submissions of the appellant and has mechanically confirmed the addition by simply relying on the assessment order. This approach is contrary to the settled principle that the first appellate authority is required to independently evaluate the facts, submissions, and evidence brought on record by the assessee.
The ratio of the above decision squarely applies to the assessee’s case. Here too, the assessee had surrendered an income of ₹1,30,00,000/- during survey in A.Y. 2014-15, on which due Income Tax was paid which was accepted by the Department in Assessment completed under section 143(3) of the Act passed by the DCIT, Circle-3, Mathura.
In the Statement recorded on Oath dated 29.01.2024 in response to question No.10 it was replied that amount of Rs.1,30,00,000/- has been given as Advance for purchase of Land to a person whose name Assessee wish not to disclose. That amount was duly available in cash and has been explained as the source of the deposits in A.Y. 2016-17. The revenue has miserably failed to demonstrate that such cash was not available with the assessee or was utilized elsewhere. Therefore, the impugned addition is wholly unjustified. Principle of Consistency and Natural Justice requires thatonce the Department 16. had itself accepted the surrender in earlier year, it cannot, in subsequent year, take a contrary stand and deny the availability of such surrendered cash without producing any evidence. To do so is to act in violation of the principle of natural justice, rendering the order arbitrary, perverse, and liable to be quashed.
Reliance is placed tothe case of Motherson Jones Limited Vs Income Tax Officer (ITAT Delhi)
Order dated 24.06,2011wherein the Hon’ble Tribunal had categorically held that once the assessee has disclosed an income during survey and the same has been accepted by the Department, there is no basis for the revenue to presume that the same was not available in cash unless contrary evidence is brought on record. The Tribunal held that where sufficient cash was available out of the surrendered
6 | P a g e income, the cash deposit in the bank stood duly explained and no addition could be sustained.
17.1 The Hon’ble ITAT has held that: “We have heard both the sides and perused the record carefully. Since the assessee has already surrendered Rs. 30 lacs in the four assessment years, three of which are preceding assessment years and during relevant assessment year, the assessee has disclosed Rs. 6,30,000/-. The disclosure made by assessee in the earlier year has been accepted in toto. Thus, there was sufficient cash available to be deposited in the bank. The revenue has failed to establish that the amount disclosed in the survey was invested/spent somewhere and the same was not available with the assessee to be deposited in the bank. Since the assessee has already disclosed more than Rs. 30 lacs which is sufficient to explain the cash deposited in bank, therefore, we find no merit in making the addition. Rs. 6,30,000/- which has been surrendered by the assessee during survey operation itself and assessment should restrict to that extent only.”
The Ld. CIT(A) while confirming the addition has observed that Assessee cannot be expected to hold huge cash in hand for a long period and therefore, the explanation of the appellant that Cash deposited in Bank during Demonetization was sourced from Surrendered Cash during A.Y 2014-15. Hon’ble Karnataka High Court in the case of S.R. Ventakaratnam Vs CIT (1981)127 ITR 807 (Karnataka) has observed as under: “There is some force in the argument of the learned counsel for the petitioner and the argument advanced by the revenue is, therefore, without any force. Once the petitioner-assessee disclosed the source as having come from the withdrawal made on a given date from a given bank, it was not for respondents Nos. 1 and 2 to concern themselves with what the assessee did with that money, i.e., whether he had kept the same in his house or utilised the services of a bank by depositing the same. The ITO had only two choices before him. One was to reject the explanation as not believable for the reason that on his investigation no such pigmy deposit was ever made in the bank. In the alternative he ought to have called upon the assessee- petitioner to substantiate his claim by documentary evidence. Having exercised neither of the choices, it was not open to the ITO to merely surmise that it would not be probable for the assessee to keep Rs. 15,000 unutilised for a period of two years. The ITO should have given an opportunity to the assessee to substantiate his assertion as to the source of his capital outlay.”
The legal principle emerging from the above judicial precedent is that:
• Once income is declared/surrendered and accepted by the Department, the availability of cash out of such income is presumed.The Department cannot deny its availability merely on assumptions.The burden is on the Department to prove contrary utilization of such funds.Additions made without such proof are liable to be deleted.
Applying the above principles, to the case on hand,it is clear that: The assessee surrendered ₹1,30,00,000/- in A.Y. 2014-15, accepted by • the Department.The assessee consistently explained that this cash was available and deposited in A.Y. 2016-17.The Revenue has not established any contrary utilization of this cash.The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof. Sreelekha Banerjee and others v. Commissioner of Income-tax, Bihar and Orissa, 49 ITR 112 (S.C) Therefore, the addition sustained is contrary to law and liable to be deleted.
Similar view was adopted in the case of Lalchand Bhagat Ambica Ram reported as (1959) 37 ITR 288 (S.C) “Where, however, the fact finding authority has acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, the Court is entitled to interfere. A finding on a question of fact is open to attack under s. 66(1) as erroneous in law when there is no evidence to support it or if it is perverse”
Hon’ble Supreme Court Judgment in the case of CIT vs. DaulatramRawatmal (1973) 87 ITR 349 (SC) holding that onus of proving what was apparent is not real is on the party who claims it to be so. There should be some direct nexus between the conclusions of fact arrived at by the authorities concerned and the primary facts upon which the conclusion is based. Use of extraneous or irrelevant material in arriving at the conclusion would vitiate the conclusion of fact, because it is difficult to predicate to what extent, the extraneous and irrelevant material has influenced the authority in arriving at the conclusion of fact.
21.1 Similar observation has been made by the Hon’ble Supreme Court in the case of Kishan Chand Chelaram vs. CIT (1980) 125 ITR 713 (S.C.). Wherein the Hon’ble Supreme Court has held that the burden is on the department to show that the money belonged to the assessee by bringing proper evidence on records and the assessee could not be expected to put in the evidence to help the department to discharge the burden that lay upon it. Therefore, in absence of any contrary evidence on record the observation of the Assessing Officer are mere surmise. 21.2 The entire case of the ‘AO’ is based on suspicion, surmises and conjectures. The ‘AO’ has discredited the evidences brought on records on consideration of suspicion, surmises and circumstantial evidence. Though while using circumstantial evidence the ‘AO’ has to be cautious in drawing inferences or 8 | P a g e presumptions having due regard to the common course of natural events, to human conduct and their relation to the facts of the particular case. 21.3 ‘Appellant’ respectfully submits that on the face of evidences brought on records and in view of the cogent submission filed by the ‘appellant’ at the stage of assessment the approach of the ‘AO’ is liable to be held as perverse. It is settled position in law that suspicion however so strong cannot be allowed to take the place of proof. The Court has to be watchful and ensure that conjectures and suspicions do not take the place of legal proof. Hon’ble Supreme Court in the case of Jaharlal Das v. State of Orissa, reported in (1991) 3 SCC 27, has observed in para 9 that caution must be borne in mind that in cases depending largely upon circumstantial evidence there is always a danger that the conjecture or suspicion may take the place of legal proof and such suspicion however strong cannot be allowed to take the place of proof.
Ground of Appeal
No. 4 is directed against the action of the AO in taxing the appellant under section 115BBE of the Act. It is submitted that the provisions of section 115BBE of the Act cannot be invoked in view of the judgement of Hon’ble Madras High Court in the case of S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras), as followed by the Hon’ble ITAT, Agra Bench in the case of Sh. Pankaj Kumar Vs. ITO in dated 04.02.2025. Thus, even if the amount is held to be unexplained the same cannot be taxed under section 115BBE of the Act.”
7. On the other hand, learned DR relied on the findings of lower authorities. Further, he submitted that the cases relied on by the assessee are distinguishable to the present facts on record. He submitted that the submissions of the assessee cannot be accepted for the simple reason that the assessee has deposited the cash declared by him in survey proceedings after three years. Therefore, the assessee has not justified and brought on record the source of making deposits during demonetization period.
Considered the rival submissions and the material placed on record. From the submissions and facts brought on record, we observe
9 | P a g e that the assessee has deposited cash during demonetization period to the extent of Rs.75,00,000/-. It is also brought to our notice that the assessee has surrendered an income of Rs.1.30 crores during the survey proceedings initiated in assessment year 2014-15. Assessee has disclosed the source of cash deposited during the year under consideration that the assessee held the cash, which was disclosed during the survey proceedings to the extent of Rs.1.30 crore and he has deposited portion of the same during the demonetization period. After considering the facts available on record, we observe that similar issue was considered by the Hon’ble Karnataka High Court in the case of S.R.
Ventakaratnam vs. DCIT (supra) and the Hon’ble High Court decided the issue of delay in depositing the cash, in this regard, it has observed as under :-
“There is some force in the argument of the learned counsel for the petitioner and the argument advanced by the revenue is, therefore, without any force. Once the petitioner-assessee disclosed the source as having come from the withdrawal made on a given date from a given bank, it was not for respondents Nos. 1 and 2 to concern themselves with what the assessee did with that money, i.e., whether he had kept the same in his house or utilised the services of a bank by depositing the same. The ITO had only two choices before him. One was to reject the explanation as not believable for the reason that on his investigation no such pigmy deposit was ever made in the bank. In the alternative he ought to have called upon the assessee- petitioner to substantiate his claim by documentary evidence. Having exercised neither of the choices, it was not open to the ITO to merely surmise that it would not be probable for the assessee to keep Rs. 15,000 unutilised for a period of two years. The ITO should have given an opportunity to the assessee to substantiate his assertion as to the source of his capital outlay.” 10 | P a g e Further we observed that co-ordinate Bench in the case of Motherson Jones Ltd. vs. ITO (supra) has held as under :
We have heard both the sides and perused the record carefully. Since the assessee has already surrendered Rs. 30 lacs in the four assessment years, three of which are preceding assessment years and during relevant assessment year, the assessee has disclosed Rs. 6,30,000/-. The disclosure made by assessee in the earlier year has been accepted in toto. Thus, there was sufficient cash available to be deposited in the bank. The revenue has failed to establish that the amount disclosed in the survey was invested/spent somewhere and the same was not available with the assessee to be deposited in the bank. Since the assessee has already disclosed more than Rs. 30 lacs which is sufficient to explain the cash deposited in bank, therefore, we find no merit in making the addition. Rs. 6,30,000/- which has been surrendered by the assessee during survey operation itself and assessment should restrict to that extent only.
Further with regard to invoking of section 115BBE of the Act, we observe that Hon’ble Madras High Court in S.M.I.L.E. Microfinance Ltd. vs. ACIT, W.P. (MD) No. 2078 of 2020 & 1742 of 2020 dated 19.11.2024 has held that the provisions of section 115BBE are applicable prospectively. Therefore, respectfully following the above judicial precedents, we are inclined to allow the grounds raised by the assessee.
In the result, appeal filed by the assessee is allowed.
In the result, both the appeals filed by assessees are allowed.
Order pronounced in the open court on 29.12.2025.