SH. SANJAY GODHA,JAIPUR vs. ACIT, CIRCLE-1, JAIPUR, JAIPUR

ITA 539/JPR/2024Status: DisposedITAT Jaipur29 August 2024AY 2017-18Bench: DR. S. SEETHALAKSHMI (Judicial Member)1 pages

AI SummaryAllowed

Facts

The assessee deposited Rs. 55,30,000/- of Specified Bank Notes (SBNs) during the demonetization period. The assessee claimed this cash was from earlier withdrawals made in 2013. The Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)] treated this deposit as unexplained income under section 69A of the Income Tax Act.

Held

The Tribunal held that the assessee had sufficiently explained the source of the cash deposit with evidence. The lower authorities' observations were based on surmises and conjectures without rebutting the assessee's evidence. Therefore, the addition made by the AO and confirmed by the CIT(A) was deleted.

Key Issues

Whether the cash deposit made during the demonetization period was unexplained income, and whether the tax rate under section 115BBE was applicable at 60% or 30% for AY 2017-18.

Sections Cited

69A, 115BBE, 143(3)

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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR

Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 539/JP/2024

For Appellant: CA jktLo dh vksj ls@

Hearing: 05/08/2024Pronounced: 29/08/2024

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Mk0 ,l- lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, vk;dj vihy la-@ITA No. 539/JP/2024 fu/kZkj.k o"kZ@Assessment Years : 2017-18 cuke Sh. Sanjay Godha, ACIT, Vs. 750, Achariyon Ka Rasta, Kishan Circle-01, Pole Bazar, Jaipur Jaipur LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABAPG 1328 A vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. P. C. Parwal, FCA jktLo dh vksj ls@ Revenue by : Sh. Anoop Singh, Addl. CIT lquokbZ dh rkjh[k@ Date of Hearing : 05/08/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 29/08/2024 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

Because the assessee was dissatisfied with the finding so recorded in the order of the Commissioner of Income Tax (Appeals)-4, Jaipur dated 26/02/2024 [here in after ld. CIT(A) ] for assessment year 2017-18, the present filed before this tribunal. The said order of the ld. CIT(A) arises because the assessee preferred an appeal before him against the order dated 20/11/2019 passed under section 143(3) of the Income Tax Act, by ACIT, Circle-01, Jaipur.

“1. The Ld. CIT(A) has erred on facts and in law in confirming the addition of Rs.55,30,000/- u/s 69A of the Act by treating the cash deposit during demonetization period as unexplained by not accepting the explanation of assessee regarding source of such cash deposit and by making various incorrect and irrelevant observations.

2. The Ld. CIT(A) has erred on facts and in law in taxing the above additions u/s 115BBE @ 60% instead of taxing the same @ 30% by ignoring that section 115BBE substituted by Taxation Laws (Second Amendment Act), 2016 which received the assent of President on 15.12.2016 and made applicable from 01.04.2017 is not applicable to AY 2017-18.

“6. Apart from that, the details of; opening cash, cash withdrawal, cash deposited, cash expenditure; closing cash in hand and increase cash in hand, in case of both the assessees were given before the authorities below, which has been incorporated above in para 3 and 3.1 No discrepancy or any inquiry has been done by Assessing Officer to disapprove the cash disclosed in the books of account and balance sheet. The sole reason for disbelieving the assessee’s explanation is that, firstly, no prudent person after withdrawing the cash will keep at home; and secondly, if there was an OD account having negative balance on which interest is being charged, then there was no need to keep such huge cash in hand at home. Such reasoning dehors any contrary material on record that the cash disclosed in the books of accounts has been invested somewhere else, then on mere surmise assessee’s explanation cannot be discarded. If assessees have genuine sources of income which are received through banking channels, out of which cash has been withdrawn and have been disclosed in the income tax return and in the balance sheet as cash-in-hand, then I am unable to apprehend how the provision of section 69A is applicable. Because the section can only be invoked where in any financial year the assessee is found to be the owner of any money, etc., which has not been recorded in the books of accounts and assessee offers no explanation. Here in these cases, Assessee’s cash in hand duly stands recorded and source has been explained from the income deposited in the bank account and withdrawal, then in my opinion deeming provision of section 69A cannot be invoked. The reasoning given by the AO and Ld. CIT (A) is vague and based on surmise as to what a prudent person should have done. Once assessee has explained that being of senior citizen they have maintained such liquidity of cash out of their own disclosed income with them for certain contingencies, then without any material to controvert such an explanation, addition cannot be sustained. Assessees before the lower authorities have filed following documents to substantiate the cash in hand with them:- a. Income Tax Return with computation of total income. b. Balance Sheets for FY 2013-14, 2014-15 and FY 2015-16. c. Comparative Chart of cash movement FY 2013-14, 2014-15 and FY 2015-16. d. Cash book maintained by the assessee. e. Kotak Mahindra Bank Statement bearing A/c No. 6311509485 f. Standard Chartered Bank: Statement of account. g. Bank: Book of Kotak Mahindra Bank. h. Bank Book of Standard Chartered Bank. i. Copy of all medical treatment documents.

“It seems to us that the correct approach to questions of this kinds in this. If there is an entry in the account books of the assessee which shows the receipt of a sum on conversion of high denomination notes tendered for conversion by the assessee himself, it is necessary for the assessee to establish, if asked, what the source of that money is and to prove that it does not bear the nature of income. The Department is not at this stage required to prove anything. It can ask the assessee to bring any books of account or other documents or evidence pertinent to the explanation if one is furnished, and examine the evidence and the explanation. If the explanation shows that the receipt was not of an income nature, the Department cannot act unreasonably and reject that explanation to hold that it was income. If, however, the explanation is unconvincing and one which deserves to be rejected the Department can reject it and draw the inference that the amount represents income either from the sources already disclosed by the assessee or from some undisclosed source. The Department does not then proceed on no evidence, because the fact that there was receipt of money is itself evidence against the assessee. There is thus, prima facie, evidence against the assessee which he fails to rebut, and being unrebutted, that evidence can be used against him by holding that it was a receipt of an income nature. The very words "an undisclosed source" show that the disclosure must come from the assessee and not from the Department. In cases of high denomination notes, where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or a part of a particular sum in high denomination notes the assessee prima facie discharges his initial burden when he proves the balance and that it might reasonably have been kept in high denomination notes. Before the Department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof into no proof. It is within the range of these principles that such cases have to be Sh. Sanjay Godha vs. ACIT decided. We do not think that the Allahabad view puts no burden upon the assessee and throws the entire burden on the Department. The case itself does not bear this out. If it does, then, it is not the right view.”

4.2 As regards the assessee’s second, without prejudice, argument, i.e., qua nonretrospectivity, we find considerable force therein. Section 1(2) of the Amending Act provides that save as otherwise provided therein, it shall come into force „at once�. The same only conveys the intent for, except where a later date is specified, the legislation to take immediate effect, i.e., as soon the assent of the Hon'ble President of India is received, by signing the same. The words „at once� convey an urgency, so that the same represents the earliest point of time at which the same is to take effect, i.e., 15/12/2016 itself, and which also explains the same being enacted during the course of the fiscal year, tax rates for which stand already clarified at the beginning of the year per the relevant Finance Act (FA, 2016). The said words „at once� would loose significance if the provisions of the Act are to, as stated by the ld. CIT(A), be read as effective 01/04/2017, implying AY 2018-19. The same, for substantive amendments, as in the instant case, represents the first day of the assessment year, i.e., AY 2017-18, which Sh. Sanjay Godha vs. ACIT explains the assessee’s grievance of it being thus effective for fy 2016-17 or, w.e.f. 01/4/2016. Enacting it mid-year and, further, making it applicable „at once�, becomes meaningless if the same is to take effect retrospectively, or is made effective from a later date (01/4/2017), which could in that case be by Finance Act, 2017. True, the amendment, where so read, does gives rise to a peculiar situation inasmuch as two tax rates would obtain for the current year, i.e., one from 01/04/2016 to 14/12/2016, and another from 15/12/2016 to 31/03/2017, but, then, that is no reason to read retrospectivity where the applicable date is clear and, further, there is nothing to suggest retrospectivity. Further, extraordinary and supervening circumstance of the Demonetization Scheme, 2016, brought out by the Government of India in November, 2016, explains the urgency in bringing an amendment mid-year. Further, the tax rate being in respect of incomes which are imputed with reference to a transaction/s, it is possible to administer the same, another aspect of the matter that stands considered by us. That is, a tax rate for transactions made up to 14/12/2016, and another for those thereafter. Subsequent mention of the applicability of the amended provisions of ss. 271AAB and 271AAC with reference to the date on which the Presidential assent to the Act is received, further corroborates this view, which is based on the clear language of the Amending Act, as well as the principle that a substantive amendment is to be generally prospective. We draw support from the decision in Vatika Township Pvt. Ltd. (supra), reiterating the settled law of the rule against retrospectivity. The tax rate applicable to the impugned income would, therefore, be at 30%, i.e., the rate specified in sec. 115BBE as on 30/11/2016, the date of the surrender of income per statement u/s133A (PB-1, pgs.35-44). This, it may be noted, is also consistent with our view that the income is liable to be assessed u/s. 69B (see para 4.1).