SRI. JAYAN PALERI,BANGALORE vs. ITO, BANGALORE

Facts apropos are that assessee having salary income and interest income had filed his return of income for the impugned assessment year declaring income of Rs.11.85,400/-. During the course of assessment proceedings it was noted by the AO that assessee had made cash deposits totalling to Rs.56,65,000/-, in three different accounts. Deposits in his a/c no.38634 with Canara Bank came to Rs.37,90,000/-, in account no.35662 came to Rs.16,00,000/- and deposit in HDFC bank came to Rs.1,75,000/-. Assessee was required to explain the source of above deposits. Explanation of the assessee was that all these three accounts were NRO accounts. As per the assessee, he was employed for a long time in Saudi Arabia and during the period when he was in Saudi Arabia, he used to send money to his mother. Contention of assessee was that other family members had also givenmoney to his mother who was living in his village in Kerala. As per the assessee, such amounts were accumulated by his mother who was very old and was not having individual bank account. This money as per the assessee, was deposited by his mother into the above accounts. Assessee also submitted that his mother was owning 0.62 acres of agricultural land from which she was earning agricultural income.

AO after considering the submissions of the assessee, was of the opinion that except for a sum of Rs.20 lakhs for which these were earlier withdrawals, balance of the sum deposited in the bank accounts were not properly explained. According to AO, assessee did not produce any evidence to show that he or other family members had gifted any money to his mother, nor any details regarding the income his mother was earning from agricultural operations. He thus made an addition of Rs.35,60,000/- and completed the assessment.

Aggrieved assessee moved in appeal before the CIT (A). Argument of assessee was that his mother owned 0.62 acres of agricultural land, which gave substantial income. Further as per the assessee, he as well as the family members were regularly gifting money to his mother and such accumulated money was deposited by her in his bank account with the help of third parties. However, CIT (A) was not impressed. According to him it could not be believed that assessee’s mother was accumulating cash over a number of years and had deposited in assessee’s bank account. As per the CIT (A), the cash-flow statement produced by assessee reflected accumulation from the year 1995-96 to 2010-11, as also accumulation of agricultural income over such years. He held that assessee could not ITA.150/Bang/2015 Page - 4 explain his case and confirmed the addition made by the AO except for giving a relief of Rs.1,44,000/-, for the agricultural earnings of his mother.

Now before us, Ld. AR strongly assailing the orders of lower authorities submitted that assessee was a Non-Resident Indian since many years and had become resident only in the relevant previous year. As per the Ld. AR, it was not possible for the assessee to earn so much money in India within one year. Further as per the Ld. AR, preponderance of probability was that assessee had earlier sent substantial amounts to his mother from Saudi Arabia which she could have used used for depositing in assessee’s bank account. As per the Ld. AR, assessee had discharged his burden and the explanation offered by him was reasonable. The cash-flow statement and the agricultural earnings of his mother were unjustly rejected by the lower authorities. Reliance was placed on the judgment of Gauhati High Court in the case of Nemi Chand Kothari v. CIT [264 ITR 254], that of the Apex Court in CIT v. Smt. P. K. Noorjahan [237 ITR 570] and that of coordinate bench in Ms. Panduranga Bhargavi Vaidya v. DCIT [ITA No.1215/Bang/2015, dt.13.04.2016].

Per contra, Ld. DR submitted that AO had given credit for Rs.20 lakhs for earlier withdrawals from bank accounts. As per Ld. DR, except ITA.150/Bang/2015 Page - 5 for submissions, assessee could not produce any evidence in support of his case.

I have perused the orders and heard the rival contentions. It is not disputed by the Revenue that assessee was employed in Saudi Arabia since a number of years. As per the Ld. AR, assessee was in such employment since 15 years. Since assessee’s case was with AO (International Taxation), I am inclined to accept the contentions of the assessee. AO himself has mentioned in para 2 that status of the assessee was claimed as NRI, since assessee stayed in India only for 68 days. In such a situation to come to a conclusion that assessee had earned huge sum of Rs.35,65,000/- during a single year, for making the deposits in the bank account cannot be believed. Just like any other NRI, it was very much probable that assessee would have sent substantial amount to his mother living in a village. There is every chance that his mother being an aged lady would have kept the money with herself without spending much and gave it back to her son through deposits in his bank accounts. In any case assessee had filed a cash-flow statement of his mother which was not disputed by the authorities below. Assessee had also shown agricultural income and the ownership of agricultural property by his mother and this has also not been ITA.150/Bang/2015 Page - 6 disputed by the lower authorities. In the case of Ms. Panduranga Bhargavi Vaidya (supra), coordinate bench had held as under at para 6.1 of the order:

Case of assessee, in my opinion, is also supported by the case of Smt. P. K. Noorjahan (supra), wherein their Lordship held that in every ITA.150/Bang/2015 Page - 7 case it is not necessary that source of investment should be treated as income. A discretion has to be exercised by the ITO before treating the source of investment as income. In my opinion, explanation given by the assessee in the case was satisfactory. Addition stands deleted.

Vis-a-vis the addition of Rs.70,380/- for interest, we find that CIT (A) had remitted the issue back to the file for rectificatory action. We do not find any reason to interfere with the directions given by CIT (A) in this regard.

In the result, appeal of the assessee is partly allowed.