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Facts
The assessee, a partner in M/s. Gowdara Jayadevappa Silks & Sarees, deposited Rs. 58,40,000 in cash into a joint bank account during the demonetization period. The assessee claimed this was for advancing funds for property purchase and that the amount was from the firm's funds, which were later redeposited. The Assessing Officer (AO) treated this as unexplained money under section 69A and taxed it under section 115BBE.
Held
The Tribunal noted that the lower authorities did not fully consider the CBDT instructions regarding demonetization period cash deposits. The Tribunal directed the AO to re-verify the cash deposits and their genuineness in light of these instructions and decide the issue accordingly.
Key Issues
Whether the cash deposits made during the demonetization period, claimed to be from the firm's funds for property purchase, constitute unexplained income of the assessee.
Sections Cited
69A, 115BBE, 194-IA, 265, 5, 4, 68, 144, 143(3), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
Per Laxmi Prasad Sahu, Accountant Member
This appeal is filed by the assessee against the order dated 6.3.2024 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2017-18.
The sole and substantive issue raised by the assessee is regarding cash deposit of Rs.58,48,000 during the demonetisation period in the joint bank SB account maintained with IDBI Bank, Rajajinagar Branch.
Briefly stated the facts of the case are that the assessee filed return of income for AY 2017-18 and he is a partner in the firm M/s. Gowdara Jayadevappa Silks & Sarees. The case was selected for scrutiny and statutory notices issued to the assessee. It was noticed that during the demonetisation period assessee deposited cash of Rs.58,40,000 in the joint SB account maintained with IDBI Bank, Rajajinagar Br. In this regard show cause notice was issued to the assessee and assessee filed detailed written statement. The assessee also submitted that the amount was utilized towards advance given for purchase of property from Mr. A.S. Premnath for a site bearing 4th No.317, B Block, VI Phase, Banashankari Extension, Vrishabhavathi Nagar, Bengaluru measuring in all to about 216 sq.mtrs. and it was paid through DD and Cheque. The entire explanation submitted by assessee was not accepted by the AO and he treated the entire amount as unexplained money u/s. 69A of the Act and tax rate u/s. 115BBE was applied. Aggrieved by the above order, the assessee filed appeal before the CIT(Appeals).
4. The ld. CIT(Appeals) considering the entire submissions and relying on the judgment of the coordinate Bench of the Tribunal dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the ITAT.
5. The ld. AR The ld. AR reiterated the submissions made before the lower authorities and submitted two paperbooks containing pages 1 to 145 and 1 to 30 containing written submissions, bank statements, financial statements, computation of income, copy of the return, case laws, extract of cash book, etc., which is placed on record. He also submitted as follows:-
“2. The Appellant is the Managing Partner of the Firm M/s GOWDARA JAYADEVAPPA SILKS AND SAREES of Davanagere which is also assessed to income tax by the Respondent Officer with PAN AADFG2804P. The said Firm is one of the leading Retail Cloth Shops in Davanagere, 3. That the Appellant's aforesaid Firm M/s. Gowdara Jayadevappa Silks and Sarees, was looking for purchase some property in and around the City of Bangalore with a view to expand its business out of Davanagere.
That for the said purpose the said Firm had kept a sum of Rs.60,00,000/- in cash in Bangalore at one of the Appellant's family properties in Bangalore. This was for the reason that its lending Bankers HDFC Bank did not allow the said Firm either to make substantial financial investments or to have banking transactions with any other Banks. In fact it had, at a time, demanded the Appellant's firm to close all of its Banking Accounts with the other Banks.
In November, 2016 the Appellant's said Firm viz., M/s. Gowdara Jayadevappa Silks and Sarees was negotiating for purchase of a Site bearing No.317, located at Fourth B Block, VI Phase, Banashankari Extension, Vrishabhavathi Nagar, BENGALURU measuring in all to about 216.00 Square Meters and for the purpose of ar3viding adequate funds for the for making the advance payments a further sum of Rs.28,40,000/- was brought by the Firm to Bengaluru. All of the Appellant's efforts to deposit the said cash with the firm's Banking account with the then State Bank of Hyderabad, Malleshwaram Branch, Bengaluru did not succeed for one or the other reason.
On 19.11.2016 ultimately, with great difficulty, the Appellant cause to deposit a sum of Rs.30,00,000/- (Rupees Thirty Lakhs) only into the said Firm's Banking Current Account No.52015118502, with the then State Bank of Hyderabad, Malleshwaram Branch, Bengaluru. The said Bank refused to accept further cash deposit on that date and required the Appellant and its other partners to try the following days.
7. As the agreement for purchase of the aforesaid site was likely to be finalized later on that day, the Appellant had no option but to deposit the balance cash of Rs.58,40,000/- (Rupees Fifty-eight Lakhs Forty Thousands) only in to the Joint Savings Bank Account No.418104000016223 with the IDBI Bank, Rajajinagar Branch, Bengaluru held in the joint names of the Appellant, his brother Mr. G.G.Prakash, his son and partner Mr. Gangadhar M. Gowdar and his niece Ms. Sindhu Prakash.
8. Ultimately the Appellant's said Firm agreed to purchase the aforesaid property viz., Site bearing No.317, located at Fourth B Block, VI Phase, Banashankari Extension, Vrishabhavathi Nagar, BENGALURU for an agreed sale consideration of Rs.1,48,80,000/- in terms of the Agreement to Sell dated 19.11. 2016.
As can be seen from the said Agreement to Sell the Appellant's said Firm made an advance payment of 30,00,000/- by Cheque No.141596 drawn on the then State Bank of Hyderabad and Rs.36,82,500/- by Demand Draft bearing No.015144 issued by the IDBI Bank, Rajajinagar, Bengaluru, in all aggregating to Rs.66,82,500/- after withholding Rs.67,500/- towards the TDS u/s 194-IA of the Act in all aggregating to Rs.67,50,000/- (Rupees Sixty Seven Lakhs Fifty Thousands) only unto the Vendor Mr. A.S.Premanath.
This apart the balance sum of Rs.21,57,500/- (Rupees Twenty-one Lakhs Fifty-seven Thousand Five Hundred) only was paid back to the Firm M/s Gowdara Jayadevappa Silks & Sarees by Cheque No.171553 drawn on the IDBI Bank, Rajajinagar, Bengaluru which was realized by the Firm on 22.11.2016.
The investment of Rs.67,50,000/-so made by way of Advance Sale Consideration to Mr.A.S.Premanath, the Vendor is reflected in the audited Books of Account and the Balance Sheet as at 31st March, 2017 as the asset of the said Firm M/s Gowdara Jayadevappa Silks & Sarees.
Thus it was evident that the entire sum of Rs.58,40,000/- so deposited in to the aforesaid Joint Savings Bank Account No.418104000016223 with the IDBI Bank, Rajajinagar Branch, Bengaluru standing in the name of the Appellant, his brother, his son and his niece who are all the family members of the Appellant, was the funds belonging to and was drawn from aforesaid firm of which the Appellant is the Managing Partner and not his individual funds.
Though the Appellant had furnished all the explanations and evidences with regard to the aforesaid facts relating to the aforesaid cash deposit of Rs.58,40,000/- in to the aforesaid Joint Savings Bank Account No.418104000016223 with the IDBI Bank, Rajajinagar Branch, Bengaluru, the Respondent Assessing Officer disregarding the same held the same as not related to the said Firm and further held the same as the Appellant's unexplained money and brought to tax as unexplained money u/s 69A of the Act and brought to tax u/s 115BBE in his hands, just out of his suspicion, surmise and conjecture by his order dated 11.10.2019 made u/s 143(3) of the Act. - Refer AO order ¬Page No 26 of the Appeal papers (Internal Page 5).
The Hon'ble Appellate Commissioner also dismissed the appeal on the grounds that the Appellant had not been able to identify the source of cash deposits in the bank account during the Assessment and Appellate proceedings vide his order dated 6.3.2024 u/s 250 of the Act. - Refer CIT(A) order — Page No 18- 21 of the Appeal papers. 15. That both the Assessing Officer and the First Appellate Authority failed to take cognizance of the fact that the said sum of Rs.58,40,000/- was the funds belonging to and was drawn from the Firm M/s Gowdara Jayadevappa Silks & Sarees and the same being already taxed in the hands of that Firm, the same could not be treated as the Appellant's individual income and subject the same to tax again in the hands of the Appellant, which, in that case has resulted in double taxation oppose to the scheme of the Act and to Article 265 of the Constitution of India.
In view of the aforesaid facts, the Appellant urges that the said sum of Rs.58,40,000/- belonging to the firm M/s. Gowdara Jayadevappa Silks & Sarees, was drawn by the Appellant to utilize for the purpose of purchase of property and the balance was deposited back into the firm's account, the source of which is demonstrated by the bank transfers and audited books of accounts of the firm and other evidences and documents and thereby is not unexplained money as contemplated u/s 69A of the Act and thus is not liable tax in the hands of the Appellant. GROUND-WISE SUMMARY: GROUND No. 1: GENERAL GROUND REGARDING ADDITION MADE BY THE AO OPPOSED TO LAW 17. General Ground. No further submissions to be made. GROUND No. 2: APPELLANT HAS CLEARLY IDENTIFIED THE SOURCE OF CASH DEPOSITS AND HENCE ADDITION U/S 69A IS NOT VALID 18. Cash of Rs.58,40,000/- withdrawn from the firm M/s GOWDARA JAYADEVAPPA SILKS AND SAREES, in which he is partner. Refer Cash book extract from the audited books of account of M/s GOWDARA JAYADEVAPPA SILKS AND SAREES - Marked Page 74¬81 of the Paper Book. Refer Cash book extract from the books of account of the Appellant - Marked Page 72-73 of the Paper Book. 19. The cash deposited was utilized for payment of advance towards purchase or property by the firm from Mr. A.S Premanath to the extent to Rs.36,82,500/- on 19.11.2016 by issue of DD No.015144 and the balance Rs.21,57,500/- was transferred to the Firm's account No. 50200019606000 with HDFC Bank at Davanagere on 21.11.2016 -Refer Agreement dated 19.11.2016 - Marked Page 63-71 of the Paper Book. Refer Bank a/c statement of IDBI Bank on 21.11.2016 - Marked page 53 of the Paper Book.
Payments to Mr.A.S.Premanath (Rs. 36,82,500/- on 19.11.2016 and Rs.30,00,000/- on 29.11.2016) made through bank transfers in the aforesaid manners- Refer Bank Statements of State Bank of Hyderabad (Now State Bank of India), Malleshwaram Branch -Marked Page 51-52 of the Paper Book and Bank Statement of IDBI Bank, Rajajinagar Branch - Marked Page 53 of the Paper Book.
The investment of Rs.67,50,000/-so made by way of Advance Sale Consideration to Mr.A.S.Premanath, the Vendor is reflected in the audited Books of Account and the Balance Sheet as at 31st March, 2017 as the asset of the said Firm M/s Gowdara Jayadevappa Silks & Sarees. - Refer Pages 47 and 50A of the Paper Book.
Also refer the Copy of the Imprest: Bangalore Account as appearing in the books of the Firm M/s Gowdara Jayadevappa Silks & Sarees, -Refer Pages 81A of the Paper Book. GROUND No. 3 and 4: ADDITION RESULTS IN DOUBLE TAXATION AS AMOUNT ALREADY TAXED IN THE HANDS OF THE FIRM 23. The sum of Rs.58,40,000/- is the amount drawn from the Firm M/s Gowadara Jayadevappa Silks & Sarees which is also assessed to tax by the Respondent Officer under PAN AADFG2804P, cannot be brought to tax as it does not fall within the ambit of Sections 5 and 4 of the Act.” 6. The ld. DR relied on the order of lower authorities and vehemently argued the case.
7. Considering the rival submissions, we note that assessee has deposited cash in joint bank account. We note that both the lower authorities have considered the issue in detail and have not accepted the submissions of the assessee. Since the issue is with regard to cash deposits during the demonetisation period, CBDT has issued instructions/notification for examining the specific cases regarding cash deposits during the demonetisation period. However, both the lower authorities have not done so. A case regarding cash deposits during the demonetization has been decided by the co-ordinate bench in the case of M/s. Bhoopalam Marketing Services Pvt. Ltd. vs ACIT in dated 15.09.2022 for the AY 2017-18 in which the CBDT Instructions/ other notifications have been considered for examining the cash deposits during the demonetization period which is as under:-
We have carefully considered the rival contention and perused the orders of the lower authorities. Admittedly the assessee has deposited Rs.298,08,080/- during the post-demonetization between 09/11/2016 and 30/12/2016. Therefore Ld.AO made addition of INR 5,82,76,300/- as income of the assessee u/s. 68 of the income tax act, by passing assessment order u/s. 144 of the Act. The Ld.AO made such addition as the assessee could not file requisite details as the notice was issued to the email address that was not functional. In the interest of justice, we deem it proper to remand the issues back to the Ld.AO for a de novo verification. 7.1 We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017-ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-ITA.II. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases.
8. In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money.
8.1 The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. 8.2 The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law.
8. Respectfully following the above judgment we direct the AO to verify the cash deposits bank accounts during the demonetization period in above terms to the extent of applicability in this case and decide the issue as per law.
In the result, the appeal is allowed for statistical purpose.
Pronounced in the open court on this 21st day of August, 2024.