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Facts
The assessee filed an appeal against the CIT(A)'s order confirming an addition of Rs. 25.04 lacs under section 69A of the Income Tax Act for the AY 2017-18. The addition was made on account of cash deposited during the demonetization period, which the AO and CIT(A) considered to be unexplained. The assessee argued that the deposits were made from cash withdrawals and rental income.
Held
The Tribunal noted that the assessee had provided cash flow statements and bank statements to explain the source of the deposits. Several High Court and ITAT judgments were relied upon by the assessee, which supported the view that such deposits, when explained with documentary evidence, should not be treated as unexplained. The Tribunal found that the assessee had sufficiently explained the source of the cash deposits.
Key Issues
Whether the addition of Rs. 25.04 lacs made on account of cash deposits during the demonetization period, which the assessee claims to be from cash withdrawals and rental income, is justified.
Sections Cited
69A, 143(3), 142(1), 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
ORDER PER: SANDEEP GOSAIN, JM The Assessee has filed an appeal against the order of the ld. CIT(A) dated 29-08-2023, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2017-18 wherein the assessee has raised following grounds of appeal.
‘’1. Under the facts and circumstances of the case and in law the AO has erred by initiating proceedings and passing order u/s 143(3) of the Income Tax Act, 1961 being without 2 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA jurisdiction and against the statutory provisions. Thus, the resultant order is against the law and deserves to be quashed.
2. Under the facts and circumstances of the case and in law, the ld. CIT(A) has erred in confirming the invocation of Section 69A of the Act for making addition of Rs.25.04 lacs for cash deposited during demonetization out of cash withdrawal. Thus the action is bad in law, thus order deserves to be quashed.
3. Under the facts and circumstances of the case, the ld. CIT(A) has erred in confirming addition of Rs.25.04 lacs alleging unexplained money u/s 69A of the Act based upon surmises, presumptions and without appreciation of facts. Thus the addition is contrary to the provisions of law, unjustified or excessive and findings is contradictory.’’ 2.1 At the outset of the hearing of the appeal of the assessee, the Bench noted that the ld. AR of the assessee has not pressed the Ground No.
1. Hence, the same is dismissed being not pressed.
3.1 Apropos Ground No. 2 & 3, Brief facts of the case are that the assessee is an individual and was deriving salary income from working in Vibrant Academy Pvt. Ltd, Kota as a faculty. Further, the assessee was also earning rental income, in cash, from house property let out to students, and interest on his Saving Account. It is noted from the assessment order that the assessee has e-filed his return of income for assessment year 2017-18 on 26-12-2017 declaring total income of Rs.4,0,03,580/- which was processed u/s 143(1) of the Act on 15-07-2018 at income of Rs.40,13,580/-. Subsequently, the case of the assessee was selected for scrutiny u/s 143(2) of the Income Tax Act and order u/s 143(3) was passed by the 3 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA A.O. on 22.11.2019, wherein, total income was determined by the AO at Rs. 65,17,580/-after making addition of Rs. 25,04,000/-u/s 69A of the Income Tax Act on account of cash deposited during demonetization period whose details as mentioned by the AO at page 2 of the assessment order is mentioned as under:-
SN. Name of Bank Account Amount in Date of cash Rs. deposit.
1. Punjab National Bank 5294009900000282 4,00,000/- 28-11-2016 2. Punjab National Bank 5294009900000103 15,96,000/- 12-11-2016 (Rs.8.00 lacs), 28-11- 2018 (Rs. 46,000) 3. Punjab National Bank 529400NC00003705 3,00,000/- 28-11-2016 4. State Bank of India 51101653945 2,08,000/- 29-11-2016 Total 25,04,000/- 3.2 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who confirmed the action of the AO by observing as under:-
‘’6. I have carefully considered the details involved in the case and case law referred to by the AO and the appellant. It clearly appears to be a fact-based case. Main contention of the appellant is his cash withdrawals in earlier year to justify cash deposits in the current year. It was noticed that there was a gap of approximately one year between such withdrawals and subsequent deposits. Quite logically, the AO concluded that no one is expected to hold back such volumes of cash for a period of about one year. Especially, through salary and rent the 4 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA appellant was having regular sources of income. Therefore, cash withdrawn for any emergency should have been deposited as soon as such a situation was over. There is no reason to expect a person of prudence to lose bank interest by keeping so much money at hand for a year. 6.1 It was also reasonable for the AO to construe that even if we consider for a moment that the assessee’s version was correct, cash should have been deposited at a single go and not sporadically as we done by him. This evidently supports AO’s conclusion that it was undisclosed income of the appellant deposited from time to time. 6.2 Further, the AO has also noted that in the intervening period, the appellant has made substantial cash deposits in his bank accounts on03-08-2016, 05-08-2016 & 11-08-2016. On this count as well, earlier withdrawals of cash cannot explain impugned current cash deposits. Preponderance of possibility overwhelming supports AO’s view.
Considering the facts and circumstances of the case, the grounds of appeal are decided against the appellant.’’ 3.3 During the course of hearing the ld. AR of the assessee prayed that the additions confirmed by the ld. CIT(A) amounting to Rs.25.04 lacs u/s 69A is not justified which needs to be deleted. To this effect, the ld. AR of the assessee has advanced the following written submission alongwith case laws as under:-
Submission for Ground No. 2 and 3
1. In the present case, the appellant had deposited INR 25,04,000/-, in cash, in his bank accounts, during the period of demonetization. The details of cash deposited are tabulated below for reference: Bank Account No. Amount Date of Deposit
5 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA PNB 5294009900000282 4,00,000/- 28.11.2016 PNB 5294009900000103 8,00,000/- 12.11.2016 PNB 5294009900000103 7,50,000/- 18.11.2016 PNB 5294009900000103 46,000/- 28.11.2016 PNB 529400NC00003705 3,00,000/- 28.11.2016 SBI 51101653945 2,08,000/- 29.11.2016
Consequently, the appellant was enquired, vide notice(s) u/s 142(1), to explain the source of income/ nature of receipts and to submit specified details with respect to cash deposited during demonetization. In response to the said notice(s), the appellant submitted all the required details along with the fact that the cash was deposited out of cash withdrawals from bank accounts and rent received. Further, the appellant had also submitted cash flow statement consisting cash inflows and outflows, for the period 01.10.2015 to 31.12.2016.
3. However, inference has been drawn without considering the facts and submission of the record. In this regard our submission is as follows: - a. Appellant was having income from salary, rent from house property (received in cash) and interest from saving bank. Appellant was not required to maintain books of accounts. Under the facts, the appellant had submitted cash flow statement (PBP No.: 1 To 3) along with supporting bank statements(PBP No.: 4 to 48) during the assessment proceeding as well as during the first appellate proceeding However, addition has been made and sustained without finding any fault in submitted cash flow statement. It is pertinent to note that under the circumstances of the case, cash flow statement is the only method from which availability of cash for deposition can be examined. Lower authorities preferred to draw inference based upon presumption or surmises rather than documentary evidenced filed before them.
b. Moreover, appellant was admittedly having rental income, which is evident from the ITR (PBP 50-51) and same was also received in cash which is also not disputed. However lower authorities, without c. It is admitted that appellant himself has deposited INR 15,00,000/- prior to demonetization out of cash withdrawal from bank, however, adverse inference has been drawn from this. Whereas it shows that, even prior to demonetization, the appellant had habit or compelling circumstances to withdraw the money from bank and holding it and subsequently deposit it into the bank. Under the facts and circumstances looking to the peculiar admitted fact as discussed above, the deposition in demonetization out of previous bank withdrawal cannot be doubted rather well within the past practice of the appellant. d. During the proceedings before the Ld. AO and the Ld. CIT(A), the appellant explained that the cash was deposited out of cash in hand accumulated over a period of time for which cash flow statement for the period 01.10.2015 to 31.12.2016 demonstrating the history and status of the cash in hand with the appellant was submitted before the Ld. AO and Ld. CIT(A). To the surprise of the appellant, the Ld. AO rejected the cash flow statement outrightly by classifying it as statement of small withdrawals which might be considered for household expenses and the Ld. CIT(A) did not even care to discuss anything on cash flow statement. Relevant extract of the assessment order is reproduced below for your reference: “…The cash flow statement is also not found acceptable as assessee has withdrawn small amounts from ATM which may be considered for household expenses”. e. Perusal of the cash flow statement shows that the appellant was having cash balance of INR 25,09,620/- as on 08.11.2016 which justify the cash lying with the appellant and more importantly such balance was never disputed either during the assessment proceedings by the Ld. AO or the Ld. CIT(A) during first appellate proceedings. In this regard, following judgement have been relied upon by the appellant:
The Hon’ble High Court of Delhi in the case of CIT Vs Kulwant Rai [291 ITR 36] wherein the Hon’ble Court held as under:
7 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA “This cash flow statement furnished by the assessee was rejected by the AO which is on the basis of suspicion that the assessee must have spent the amount for some other purposes. The orders of AO as well as CIT(A) are completely silent as to for what purpose the earlier withdrawals would have been spent. As per the cash book maintained by the assessee, a sum of Rs. 10,000 was being spent for household expenses every month and the assessee has withdrawn from bank a sum of Rs. 2 lacs on 4th Dec., 2000 and there was no material with the Department that this money was not available with the assessee. It has been held by the Tribunal that in the instant case the withdrawals shown by the assessee are far in excess of the cash found during the course of search proceedings. No material has been relied upon by the AO or CIT(A) to support their view that the entire cash withdrawals must have been spent by the assessee and accordingly, the Tribunal rightly held that the assessment of Rs. 2.5 lacs is legally not sustainable under s. 158BC of the Act and the same was rightly ordered to be deleted.”
Hon’ble ITAT, Jaipur in case of Shri Sunil Mathur Vs. The ITO, Ward-2(4), Kota [ vide order dated 01.11.2021 held as under: (Case Law#1) “It has been explained by the assessee that the source of cash deposits during the year is out of earlier two years withdrawals and cash in hand at the beginning of the year. In support of his contention, the assessee has submitted cash book and cash flow statement for previous two financial years depicting the individual transactions of receipts and payments/withdrawals. We have gone through these cash flow statements and find that the assessee has sufficiently explained the source of deposits in form of salary and other retirement benefits which have been duly declared and withdrawals towards household expenses which are partly funded by him and partly by his wife and therefore, availability of cash in hand at the beginning of the year has been sufficiently explained. In the result, considering the entirety of facts and circumstances of the present case, we hereby direct the Assessing officer to delete the addition so made in the hands of the assessee towards unexplained cash deposits and ground no. 2 of assessee’s appeal is allowed.” f. Furthermore, time gap between withdrawals and deposits, which is less than 1 year, has also been taken as one of the basis for making addition u/s 69A of the Act. It is relevant to note that, firstly as explained supra, withdrawing the cash, holding it and then depositing
8 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA in the bank account was past practice of the appellant. Secondly a detailed date wise cash flow was also filed, thereby discharge his burden to explain the source and nature of the deposit. However, without disputing the same or bringing evidence on record of utilization of withdrawal other than shown as in cash flow is unjustified and against the law on the part of the Ld. AO and Ld. CIT(A). g. The view point of the Ld. AO as well as the CIT(A) in not accepting the explanation of the appellant about the source of cash deposit on the premise that cash was deposited after a long period of time and the withdrawal were made on various occasions is not tenable under the facts and circumstances of the case. In fact, the Hon’ble Kerala High Court in CIT Vs K. Sreedharan [(1993) 201ITR 1010] held that “the period of four years between 1976-77 and 1980-81 is not so long a period as to rebut the presumption regarding the continued availability of the amount”. The same judgement was also referred by the Hon’ble ITAT Pune while deleting the addition. Relevant extracts of the judgement of Hon’ble ITAT, Pune is reproduced below for your reference:
Hon’ble ITAT, Pune in case of Sunanda Sanjay Chandaliyaon Vs ITO [ITA No. 1967/PUN/2018] vide order 02.05.2019 (Case Law#2) wherein it is held that: “The view point of the AO in not accepting the genuineness of the source of deposits in the bank account on the ground that the cash was allegedly kept in hand for a long period of two years, in my considered view is not tenable. Once a that such amount was spent elsewhere. The Hon’ble Kerala High Court in CIT Vs. K. Sreedharan (1993) 201 ITR 1010 (Kerala) has held that: The period of four years between 1976-77 and 1980 81 is not so long a period as to rebut the presumption regarding the continued availability of the amount.
Adverting to the facts of the instant case, it is seen that the assessee was regularly filing returns and balance sheets on year to year basis. The availability of cash in hand from maturity of FDRs in past and re- depositing of proceeds in the bank account in the instant year, cannot be doubted as the factum of maturity of FDRs has not been disputed by the AO. When the Hon’ble Kerala High Court in the aforementioned case has accepted the availability of unutilized cash for four years as reasonable, there is no reason to doubt such availability for two years in the instant case. In view of the foregoing discussion, I am satisfied h. The appellant proved the sources of cash deposit along with documentary evidences, clearly demonstrated the cash inflow and outflow over a period of time till 8th November, 2016 and neither of these evidences/ documents and facts were never objected by the Ld. AO or the Ld. CIT(A) nor any document/ evidence were brought on record contrary to the explanation/ documents submitted by the appellant then what else the appellant was supposed to prove in order to satisfy the Ld. AO. The satisfaction of the Ld. AO, as required u/s 69A of the Act, must be based on some material which is not present in the current case. Hence, the reasons provided by the Ld. AO and confirmed by the Ld. CIT (A) cannot be, in any way, be the basis for making addition u/s 69A of the Income Tax Act. In this regard, the appellant wants to draw attention to the following judgements of various Hon’ble ITATs to support his argument:
Hon’ble ITAT, Delhi in case of Muon Computing Pvt. Ltd. vs. ITO [ held as under: “9. There is no dispute with regard to the fact that Revenue has not brought any material suggesting that the withdrawal made by the assessee were utilized for making payments. It is also not brought on record that the amounts so withdrawn from the bank account was utilized for any other undisclosed purposes. Further, it is noticed that Ld. CIT(A) observed that despite having sufficient cash in hand, the assessee withdraw the amount. It is correct that the assessee has withdrawn higher amounts than the immediate preceding years but that cannot be sole reason for making addition purely on the basis of suspicion. Further, I failed to understand the reasoning of the Assessing Officer that the amount was withdrawn to justify the cash deposits during demonetization period i.e. between 09.11.2016 to 30.12.2016. It is also seen that the cash was withdrawn much prior to such event. So far observation regarding sharp increase in payable expenses is concerned, there is no finding by the Assessing Officer that such expenses are bogus. Therefore, in my considered view, the addition has been made purely on the basis of suspicion. Such action of authorities below cannot be affirmed. I, therefore, direct the Assessing Officer to delete the impugned addition. Thus, ground raised by the assessee in this appeal is allowed.”
10 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA The Hon’ble ITAT, Surat (SMC) Bench in the case of Hasmukh Kanjibhai Tadhani Vs ITO, Surat [ITA No. 19/SRT/2023] has deleted the addition made u/s 69A of the Act and held as under: “12. I have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. Before me, Ld. DR for the Revenue reiterated the stand taken by the Assessing Officer. However, on the other hand, Ld. Counsel for the assessee submitted, the return of income and computation of income for assessment year (AY.) 2017- 18 (vide paper book page nos.3 to 5), wherein I have noticed that assessee has income from house property and also has income from business and profession to the tune of Rs.10,70,000/-, as a remuneration received from Shivam Polishing LLP. The assessee also received profit from Shivam Polishing LLP to the tune of Rs.12,73,620/-. The assessee also submitted the detail of cash deposited during the year under consideration of Rs.5,07,000/-, vide paper book page no.6, wherein it is stated that cash was deposited out of cash withdrawal from bank and out of capital withdrawal from Shivam Polishing LLP in cash. The Ld. Counsel also submitted the bank statement of the assessee, which is placed at paper book, page no.7, wherein the deposit in the bank and withdrawal from the bank, are clearly stated. The assessee also submitted the copy of the cash book from period of 01.04.2016 to 31.03.2017, wherein all the transactions relating to the cash withdrawal from the bank and deposited in the bank, have been duly recorded. The Ld. Counsel also submitted before me the cash flow statement, which is placed at paper book page no.16, and I have observed that, as per cash flow statement, the closing cash balance is Rs.10,40,779/- as on 31.03.2016. The assessee also submitted the details of cash deposited for the period under consideration which is placed at paper book page nos.18 and 19. The assessee also submitted the return of income and ledger account of Shivam Polishing LLP wherein the assessee is a partner.
From the above facts, it is vivid that assessee has sufficient cash in hand, at the beginning of 01.04.2016, and the documents and evidences submitted by assessee, prove the cash in hand, as on 01.04.2016, which has not been rebutted and discredited by the Assessing Officer. The assessee has submitted plethora of documents to prove its claim of cash deposit, such as, the return of income and computation of income for assessment year (AY.) 2017-18, the detail of cash deposited during the year under consideration of Rs.5,07,000/-, the details of cash withdrawal from bank and cash withdrawal from Shivam Polishing LLP, bank statement, the copy of the cash book from 11 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA period of 01.04.2016 to 31.03.2017, and the cash flow statement. I observe that assessing officer has not stated in anyplace in the assessment order that the above documents and evidences are bogus and fabricated by the assessee. Therefore, I note that assessing officer has not refuted or discredited these evidences and documents. The assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidences in support of its claim, they cannot be brushed aside based on surmises and guesswork.
I note that assessee has submitted cash book, cash flow statement and cash book, which shows that assessee has sufficient opening cash balance at the beginning of 01.04.2016. Apart from this, the assessee is a partner in M/s Shivam Polishing LLP and from the partnership firm, the assessee has received remuneration to the tune of Rs.10,70,000/- and profit to the tune of Rs.12,73,620/-. The assessee has submitted the cash deposited during the demonetization and the summary thereof which is placed at paper book page nos.18 to 19 and hence it is quite clear from the cash book, cash flow statement and cash withdrawal from the bank, that assessee has explained the source of cash deposit in bank account in a satisfactorily manner. Hence, I am not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made is deleted. Hence this ground of the assessee is allowed”.
The Hon’ble ITAT, Mumbai Bench in the case of Shri vinay Deshrath Guptaibhai Tadhanihas deleted the addition made and held as under: “8. I have considered rival submission and perused material on record. Undisputedly, in the relevant previous year the assessee has made cash deposits into his savings bank account. While explaining the source of such cash deposits, the assessee had submitted that such deposits were made out of cash withdrawals from the current account. Though, no substantive evidence has been submitted by the assessee to conclusively co-relate withdrawals with the deposits, however it is observed, the fact that the assessee has made sufficient cash withdrawals from the current account has not been disputed by the Assessing Officer and learned Commissioner (Appeals). This fact is very much evident from the observations of the learned Commissioner (Appeals) in Para 5.3 of his order. Therefore, the availability of sufficient cash at the hands of the assessee to make the deposits in the saving bank account cannot be doubted. More so, when the Departmental Authorities have not been able to identify the utilization of cash
12 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA withdrawals from the current account in any other assets/ mode or manner. That being the case, the explanation of the assessee that being a contractor he required sufficient cash and the unutilized cash is again re-deposited to savings bank account cannot be disbelieved on mere presumption and surmises. That being the case, since assessee’s contention has not been proved to be false through proper reasoning and supporting material, the addition made under section 68 of the Act cannot be sustained. Accordingly, I delete the addition made by the Assessing Officer. This ground is allowed.” Therefore, in view of the facts and circumstances of the case and judicial precedents, in is mostly humbly requested to kindly delete the addition made u/s 69A of the Act since the appellant has explained properly with supporting evidence the source of cash deposit during demonetization and no material has been placed on record on the contrary to the claim of the appellant by the Ld. AO or Ld. CIT(A).
III. Grounds of Appeal
No.
3. Under the facts and circumstances, the learned CIT(A) has erred in confirming addition of INR 25,04,000/- alleging unexplained money u/s 69A of the Income Tax Act, 1961 based upon surmises, presumptions and without appreciation of facts. Thus, the addition is contrary to the provisions of law, unjustified or excessive and finding is contradictory.
Findings of the Ld. AO The Ld. AO noted his findings at page 6 and 7 of the Assessment order as under: (b) In the ordinary course, it is human tendency that a person who possesses a large amount of cash in hand, will deposit the same into the bank account immediately, once he comes to know that the currencies which he holds/possesses are banned by the prescribed authorities from circulation and that too, he will deposit all the currencies in on a single day as one time deposit and not inpiece-meal at different dates. If it is not done within a reasonable time, it is for the assessee to prove the reasons for not doing so. … (d) Applying the ratio in the “Theory of Human Probability”, no prudent person will hold such Specified Bank Notes (SBNs) in hand in large number in his possession and deposit the same into the bank account on various dates spread over for 15 to 20 days. It has been held by the Hon’ble Supreme Court in the Case of Sumati Dayal Vs CIT (Citedsupra)that the time period between cash in hand and deposit of such cash in bank account should not be too long
13 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA and therefore, must not be against human probabilities. In the case of the assessee, it is seen that the deposits of SBN notes are made from 12.11.2016 to 29.11.2016, spread over for 18 days, which the assessee could not substantiate with reasonable explanation. Thus, by the human test of probabilities as laid down and tested by the Highest Court of the land as well as the circumstances of the case, the plea of the assessee is not acceptable. Findings of the Ld. CIT(A) Ld. CIT(A) given his finding in Para 6.1 and 6.2 of his order at page 8. Perusal of the findings shows that the Ld. CIT(A) reiterated, more or less, the same basis as of the Ld. A.O.
Submissions 1. Inference has been drawn based upon suspicion, presumption and without appreciating the surrounding circumstances. In this regard, we submit our response as follows: - a. Ld. A.O. as well as CIT(A) by applying Human Probability Test hold that in demonetization period person should deposit entire cash in one go. The entire finding is based upon mere presumption, without any basis rather ignoring the prevailing circumstances. As we are aware that during the demonetization period a chaos was created in the society and the prevailing circumstances forced the government to issue number of notifications for clarification on daily basis, arrangements in banks were short of requirement and various persons were reported died standing in line. Carrying huge amount in waiting lines always carries risk. Various banks were reported to have maximum limit of single deposits. Under such circumstances even Theory of Human Probability support the conduct of appellant. The inference is arbitrary, unjustified based upon surmises. The Income Tax Department have complete data of the pattern of deposit into the bank, therefore without referring any such analysis, it is merely an arbitrary attempt to make addition. b. The appellant wants to submit further that the whole foundation of making addition u/s 69A of the Act and the confirmation thereof by the Ld. CIT(A) is the ‘Theory of Human Probability” and no ground work with respect to substantiating the allegation with actual material or records has been done either by the ld. AO or the Ld.CIT(A). c. Theory of Human Probability is a concept which comes into picture in a situation where there is absence of conclusive evidence to prove a case and in the present case, the reference of Theory of Human Probability in the orders itself proves that there were lack/ absence of d. It would not be appropriate to routinely apply the principle of Human Probability in every case and disregard the explanation and documentary evidences available on record by merely citing the Judgements of Hon’ble Supreme Court in the case of Durga Prasad More and Sumati Dayal. e. It is humbly submitted that while these decisions provide guidance on when to use the Theory of Human Probability in tax assessments but do not provide a blanket authorization for the Ld. AO or the Ld. CIT(A) to ignore documentary evidence and rely solely on Human Probability. Each case must be evaluated on its own merits and the AO/ CIT(A) must provide clear and cogent reasons for rejecting the evidence presented by the appellant. f. Furthermore, it is also an established principle that the judgement of any court/ tribunal etc. must be read in its context and should be applied after considering the facts and circumstances of the case and not in pick and choose manner. In the assessment order, the Ld. AO cared to pick ‘Theory of Human Probability’ but shuts his eyes to the ‘Principle of ApparentReality’ discussed in the judgements of the Hon’ble Supreme Court which states that “apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real”.In the context of this principal the Ld. AO and the Ld. CIT(A) should have relied on the apparent state of affairs of the appellant unless the appellant fails to provide a satisfactory explanation since as per this principal the apparent documents etc. must be presumed to be real until the contrary is proved. The cash withdrawal from bank was apparent, rent received in cash was apparent, non-utilization of cash withdrawal for any purpose other than household expenses and cash deposit was apparent and the state of affairs depicted by cash flow statement was apparent. However, both the Ld. AO and Ld. CIT(A) disregarded of all the apparent facts and material and relied solely on the human probability to decide the case under consideration. g. Review and detailed analysis of all the findings of the Ld. AO and Ld. CIT(A) brings on the surface of the discussion the fact that the 15 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA addition of INR 25,04,000/- made u/s 69A of the Act is purely on surmises, conjectures and with a predetermined mindset without providing any corroborative evidence to support it which is grossly illegal on the part of Ld. AO and CIT(A)and cannot be justified. h. As evident from forgoing discussion, the entire addition is based upon surmises or suspicion. Whereas it is settled legal position that no addition can be made based upon the surmises or suspicion, how so ever it may strong. In this regard, we place our reliance on following case law:-
The Hon’ble Supreme Court in the case of Lalchand Bhagat Ambical Vs CIT [1959 AIR 1295] dismissed the appeal of the revenue and held as under: “In arriving at the above decision the High Court referred to the cases of Mehta Parikh & Co. v. Commissioner of Income- tax, Bombay (1) and Chunilal Ticamchand Coal Co., Ltd. v. Commissioner of Incometax, Bihar and Orissa (2). It is, therefore, clear that the Tribunal in arriving at the conclusion it did in the present case indulged in suspicions, conjectures and surmises and 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, or the finding was, in other words, perverse and this Court is entitled to interfere. We are therefore of opinion that the High Court was clearly in error in answering the referred question in the affirmative. The proper answer should have been in the negative having regard to all the circumstances of the case which we have adverted to above”.
The Hon’ble ITAT, Bench “B”, Hyderabad in the case of ITO(IT-1) vs Shri M. Prabhakar, Hyderabad [ITA No. 1727/Hyd/2014] dismissed the appeal of the revenue and held as under: “Considered the rival submissions and perused the material facts on record. The assessee has deposited Rs. 34.70 lakhs during this AY and there is sufficient cash available in his possession as per the cash book and Wealth Tax return submitted by the assessee. The mute question before us is whether the cash deposited was coming out of the cash available with the assessee, which was kept by him for last two years. It was not brought on record why he has withdrawn so much of money and what made the assessee to keep such huge money in hand. But, on record, submitted by the assessee, we find that he had 16 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA sufficient money. Even the AO could not bring any proof that the assessee has in fact utilized or applied the cash withdrawn two years back, except making a remark that there is no possibility of keeping such amount by the assessee being a NRI. He has not brought on record, why he cannot keep so much of cash in hand and no contrary findings were given by him against the submissions of assessee. AO has made the addition merely on conjectures/surmises/suspicion and no proper reasons were given why he cannot keep the cash in hand except the remark of being an NRI. In our view, the Hon’ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. (supra) has held that the AO cannot complete the assessment purely on guess and without any reference to evidence or any material at all. Also in the case of Umacharan Shaw & Brothers (supra), the Apex Court has held that AO cannot complete the assessment merely on suspicion which cannot take the place of proof in these matters. Respectfully following the ratio laid down by the Hon’ble Supreme Court in the said cases, we hold that the AO made the assessment merely on suspicion and without bringing any cogent material on record to establish that assessee cannot keep the cash in his hand being a NRI. Accordingly, we uphold the order of the CIT(A) in deleting the addition of Rs. 34,70,000/- made by the AO and dismiss the grounds raised by the revenue in this regard”.
The Hon’ble ITAT, Jaipur Bench “B”, Jaipur in the case of Abhilasha Jain Vs DCIT, Circle (Intl Tax), Jaipur [ITA No. 05/JP/2022] by relying on the judgement of the ITAT, Hyderabad(supra) allowed the appeal of the appellant and held as under: “In the above judgment the Coordinate Bench decided that the addition made by the AO merely on suspicion and without bringing any cogent material on record to establish that assessee cannot be keep the cash on hand being a non-resident of India. It has been observed from the record that the assessee as meticulously given case flow statement giving different date wise cash available is supported by the bank statement placed on record. The assessee has also placed on record the affidavit of his mother supported by the withdrawal made by her mother from her bank accounts all these evidences, the Revenue failed to establish any fault or contrary finding to this bulk of papers and merely the addition sustained on account of suspicious reasons..”
3.4 On the other hand, the ld. DR supported the order of the ld.CIT(A).
17 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA 3.5 We have heard both the parties and perused the materials available on record. The facts in brief are that the AO made an addition of Rs.25.04 lacs holding that the assessee could not explain the sources for making deposit of cash in SBN notes to the extent of Rs.25.04 lacs which was deposited during demonetization period. The AO also noted that the assessee failed to give satisfactory explanation about the nature and source of cash deposits for which the AO treated the amount of Rs. 25.04 lacs as unexplained money u/s 69A of the Act and added the same to the total income of the assessee. Hence, the total income of the assessee is taxed u/s 115BBE of the Act @ 60% by the AO. In first appeal, the ld. CIT(A) has confirmed the action of the AO. It is noted from the submissions of the assessee that the assessee was having income from salary, rent from house property which was received in cash and the assessee also earned interest from saving bank. Thus assessee was not required to maintain book of accounts. The ld. AR of the assessee submitted cash flow statement (APB 1 to 3) alongwith supporting bank statement (APB 4 to 58) during the assessment proceedings as well as first appellate proceedings. It is noteworthy to mention that cash flow statement is the only method from which availability of cash for deposition can be examined. It is also noted that the assessee had received rental income in cash which has also been shown in the ITR (APB 50-51) and the same was also not disputed. It is also noted that the assessee had admitted that he had deposited
18 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA Rs.1.500 lacs prior to demonetization out of cash withdrawal from bank. It is also noted that during the proceedings before the AO and ld. CIT(A), the assessee had explained that the cash was deposited out of cash in hand accumulated over a period of time for which cash flow statement for the period 01-10-2015 to 31-12- 2016 demonstrating the history and status of the cash in hands was submitted which was rejected by the lower authorities. From the perusal of the cash flow statement, it is noted that the assessee was having balance of Rs.25,09,620/- as on 8-11-2-016 which shows that the cash was lying with the assessee and it is also noted that cash balance was never disputed by the lower authorities during the proceedings. We also note the finding of AO as mentioned at page 6 & 7 of the assessment order as to Human Probability Test which is mentioned at para (a) to (d) as under:-
‘’(b) In the ordinary course, it is human tendency that a person who possesses a large amount of cash in hand, will deposit the same into the bank account immediately, once he comes to know that the currencies which he holds/possesses are banned by the prescribed authorities from circulation and that too, he will deposit all the currencies in on a single day as one time deposit and not inpiece-meal at different dates. If it is not done within a reasonable time, it is for the assessee to prove the reasons for not doing so. … (d) Applying the ratio in the “Theory of Human Probability”, no prudent person will hold such Specified Bank Notes (SBNs) in hand in large number in his possession and deposit the same into the bank account on various dates spread over for 15 to 20 days. It has been held by the Hon’ble Supreme Court in the Case of Sumati Dayal Vs CIT (Citedsupra)that the time period between cash in hand and deposit of such cash in bank account should not be too long and therefore, must not be 19 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA against human probabilities. In the case of the assessee, it is seen that the deposits of SBN notes are made from 12.11.2016 to 29.11.2016, spread over for 18 days, which the assessee could not substantiate with reasonable explanation. Thus, by the human test of probabilities as laid down and tested by the Highest Court of the land as well as the circumstances of the case, the plea of the assessee is not acceptable.
In first appeal the Ld. CIT(A) has given his finding in Para 6.1 and 6.2 of his order at page 8. Perusal of the findings shows that the Ld. CIT(A) reiterated, more or less, the same basis as of the A.O. The Bench has taken into consideration the submissions of both the parties and found that the assessee had deposited Rs.25.04 lacs in cash in bank accounts during the demonetization whose details were put forth before the lower authorities by the assessee as mentioned in the cash flow statement and supporting bank statement. We found that the assessee has submitted full details of amount of Rs.25.04 lacs through his written submission and there remains no ambiguity in the submission giving the details of amount of Rs.25.04 lacs deposited during the demonetization period. We also take into consideration the following case laws which finds favour in the case of the assessee.
CIT vs Kulwant Rai, 291 ITR 36 (Delhi) 2. Sunil Mathur vs ITO, Ward 2(4), Kota (ITA NO. 66/JP/2019 order dated 01-11-2021).
CIT vs K Sreedharan [1993] 201 ITR 1010 (Kerala).
Lalchand Bhagat Ambical vs CIT [1995 AIR 1295)
20 SHRI AJAY BAIRAGI, KOTA VS DCIT, CIRCLE-2, KOTA 5. ITO vs Shri M Prabhakar (ITA No.1727/Hyd/2014 – ITAT Hyderabad B Bench) 6. Abhilasha Jain vs DCIT, Circle (Intl. Tax) ITA No.5/JP/2022)
By taking into consideration the facts, circumstances of the case and the case laws relied upon by the assessee, the Bench does not concur with the findings of the ld.CIT(A) and accordingly, the ground No. 2 & 3 of the assesee is allowed.
4.0 In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 14 / 02/2024.
Sd/- Sd/- ¼jkBksMdeys'kt;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 14 /02/2024 *Mishra आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Ajay Bairgai, Kota 2. izR;FkhZ@ The Respondent- DCIT, Circle-2, Kota 3. vk;djvk;qDr@ The ld CIT 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZQkbZy@ Guard File (ITA No.641/JP/2023) vkns'kkuqlkj@ By order,
सहायकपंजीकार@Aेेजज. त्महपेजतंत