THE DCIT CENTRAL-1, INDORE vs. SHRI ASHISH NIGAM, INDORE

Per Vijay Pal Rao, JM :

This appeal by the revenue is directed against the order dated 02.11.2022 of the Commissioner of Income Tax (Appeal)-3, Bhopal for A.Y.2017-18. The revenue has raised following grounds of appeal:

“1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 86,50,000/- made by the AO u/s 69 r.w.s. 115BBE of the Income Tax Act, 1961 on account of unexplained investment

ITANo.31/Ind/2023 Shri Ashish Nigam in the form of cash Rs. 86,50,000/- deposited in his bank account on 11.11.2016. 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in accepting authenticity of the cash book produced ignoring that: a) As per records kept with the AO, assessee did not carry out business/professional transactions and the case of the assessee was not auditable for the A.Y. 2017-18? b) Day to day transaction are not recorded regularly, when the assessee has not declared income from business and profession (other than interest on capitals in partnership firm/AOP) which warranted maintenance of cash book, especially when assessee is not required to maintain books of account u/s 44AA of the Income Tax Act, 1961? c) The claim made by the assessee / AR before the CIT(A) of having huge closing balances of cash (Rs. 1,37,64,580/- as on 31.03.2014; Rs. 1,39,82,380/- as on 31.03.2015; Rs. 1,05,90,080/- as on 31.03.2016; Rs. 1,09,13,280/-) is completely untenable in view of cash balances as per his ITRs (Rs. 90,547/- as on 31.03.2014; Rs NIL as on 31.032015; Rs. NIL as on 31.03.2016; NIL as on 31.03.217)? 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in accepting the assessee's claim made during assessment proceedings that such cash deposit was out of Rs. 2 crores surrendered as per statement recorded during the course of search u/s 132 conducted on 04.10.2013, ignoring that: a) The disclosure of Rs. 2 crore was based on seized documents which pertained to several years and was not on account of hard cash available with the assessee at that time? b) No regular books were maintained by the assessee and cash of Rs. 20,30,000/- was seized out of total cash found of Rs. 20,36,460/- at the time of search on 04/10/2013 ruling out availability of further cash (out of income disclosed) since Page 2 of 18

ITANo.31/Ind/2023 Shri Ashish Nigam receivables were not specified and furthermore, the income was disclosed mainly as commission income on property transaction which, by its very nature, are received early and on completion of such transaction? c) It amounts to accepting an untenable position that a huge cash amount was kept by assessee as idle while various bank transactions were carried out during the period for more than three years and cash was deposited during demonetization period only?” 2. The Ld. DR has submitted that it is a case of huge cash deposit in the bank account during the demonetization period. The AO has noted that the assesse did not carry out any business or professional transactions during the previous year relevant to the assessment year under consideration. The assesse is not keeping record of day to day transactions and no income was declared from business and profession other than interest on capital in partnership firm/AOP. The assessee claimed having huge closing balance of cash as on 31.03.2014, 31.03.2015 and 31.03.2015 but without any supporting evidence and further in the return of income the assessee has shown nil cash balance. The CIT(A) has accepted the explanation of the assessee regarding the cash deposit out of surrendered income of Rs.2 crore made during the course of search and seizure action u/s 132 conducted on 04.10.2014. He has referred to the assessment order and submitted that the disclosure of Rs.2 cr. was based on seized documents which pertains to several years and was not on account of hard cash available with the assessee at that time therefore, accepting the said explanation by the CIT(A) is not justified. He has referred to

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ITANo.31/Ind/2023 Shri Ashish Nigam the assessment order wherein the AO has recorded the relevant facts and submitted that the assessee has deposited cash of Rs.86,50,000/- in the bank account on 11.11.2016 and source of which was explained by the assessee as out of Rs.2 cr. surrendered during the search and seizure operation conducted on 04.10.2013. The said explanation is not acceptable due to the reason that the amount surrendered under during the search on 04.10.2013 was not entirely in cash and consequently it is highly unlikely that the said income was still kept by the assesse in physical form till one time deposit on 11.11.2016. Ld. DR has submitted that the AO has reproduced the statement of the assessee recorded on 13.11.2013 wherein the assessee has surrendered the income of Rs.2 cror. as undisclosed income of the assessee on account of various discrepancies and irregularities as well as investments found during the course of search proceedings. Therefore, the availability of the said income even after the gap of three years defies the human probability as held by the Hon’ble Supreme Court in case of Sumati Dayal 80 taxmann 89. Ld. DR has further submitted that the return of income filed by the assessee in response to notice u/s 153A shows the surrendered income of Rs.2 crore in piecemeal over a period of seven years started from F.Y.2007-08 to 2014-15 which proves that the disclosure of Rs.2 crore in question was not on account of hard cash available with the assesse. Hence, the explanation of source of deposit being the undisclosed income declared by the assessee in the year 2013 cannot be accepted. He has relied upon the judgment of Hon’ble Punjab & Haryana, High

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ITANo.31/Ind/2023 Shri Ashish Nigam Court in case of Naresh Kumar 88 taxmann.com 547 and submitted that when the assesse has failed to establish the nexus between the income declared by the assesse during the course of search and seizure action on 04.10.2011 and the deposit made by the assesse on 11.11.2016 then the AO has rightly made this addition. Ld. DR has further submitted that the assessee has not carried out any business as no business income was declared by the assessee for last three years therefore, the availability of the cash with the assessee is not supported by any evidence. He has relied upon the order of the AO.

ITANo.31/Ind/2023 Shri Ashish Nigam proceeding and also available at page no.16 to 20 of the paper book. Ld. AR has submitted that it is evident from the cash book that a cash balance of Rs.1,06,89,280/- was available as on 01.04.2016 and out of which the assessee deposited cash of Rs.86,50,000/- in the bank account during the demonetization period on 11.11.2016. The cash balance available with the assesse are duly reflected in the books of account of the assessee which are duly audited and since the total income declared by the assessee was less than the threshold limit of Rs.50,00,000/- at relevant point of time therefore, the details of asset and liabilities were not required to be given in the return of income under schedule AL(Asset Liability). Therefore, the reference made by the department to the return of income for not declaring any assets and liability under schedule AL is irrelevant as the same is not applicable when the total income of the assessee was less than the limit prescribed for giving for these details in the return of income. Thus, Ld. AR has submitted that the AO failed to appreciate the fact that the same income which was already declared by the assessee could not assessed twice once for the assessment year 2014-15 when the assessee surrendered additional income of Rs.2 crore including business income of Rs.1,24,00,000/- and thereafter, the said income was deposited in the bank account for the assessment year under consideration. In support of her contention she has relied upon the following decisions:

(i.) S.R. Venkata Ratnam vs. Commissioner of Income Tax 127 ITR 807 (Kar) Page 6 of 18

ITANo.31/Ind/2023 Shri Ashish Nigam (ii.)DCIT Central Circle 29, vs. M/s. Bhanu Infrabuild Pvt. Ltd. in ITANo.2433/Del?2022 dated 18.8.2023

(iii.) Shri Girigowda Dasegowda vs. ITO in ITANo.360/Bang/2022 order dated 10.08.2022

(iv.) Ajat Bapu Satam Vs. Dy. CIT 147 taxmann.com 222

(v.) Mahaveer Kumar Jain vs. CIT Jaipur 404 ITR 738

(vi.) Krishma Sharma vs. ITO 09 ITR 65

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ITANo.31/Ind/2023 Shri Ashish Nigam deposit of cash and subsequent show cause notice issued to the assesse in para 4 to 4.1 of the assessment order as under:

“4. It is found that during the specified period (09.11.2016 to 30.12.2016) the assessee had deposited cash of Rs.86,50,000/- in his bank account number 212002100248064 held with Punjab National Bank (Silla Mata bazaar, Indore). 4.1 During the course of assessment proceedings vide notice dated 26.09.2019 the assessee was required to explain the sources of cash deposited with requisite supporting evidences. The assessee was also apprised that in case of failure to do so the said cash shall be treated as unexplained investment u/s 69 r.w.s 1156BE of the Act.” 6.1 The assesse filed it reply vide letter dated 20.11.2019 and explained the source of deposit in para 2.1 to 2.12 as under:

“2.1 That as submitted in my previous submission 1 had deposited cash of Rs.86,50,000/- (SBN) on 11-11-2016 at one time only in Punjab National Bank, Sitlamata Bazar, Indore. 2.2] That Search proceedings u/s 132 were carried on 04-10- 2013. That during the course of Search proceedings I had made surrender of Rs.2 Crores. 2.3] That the above cash was deposited by me out of Cash available from Rs.2 crores as surrendered in statement recorded during the course of Search proceedings. Xerox copy of the statement was also filed alongwith my previous submission. 2.4] That I had duly deposited tax on the above amount surrendered during the course of search proceedings. Xerox copy of the Assessment order passed u/s 153A r.w.s 143(3) dated 28-03-2016 was already filed along with my previous submission.

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ITANo.31/Ind/2023 Shri Ashish Nigam 2.5] Copy of Cash flow statement from November 2013 to March 2017 was also filed alongwith my previous submission. 2.6] Copy of Cash book for the period 01.04.2016 to 31.03.2017 was also filed alongwith my previous submission. 2.7] That my father Shri Premnarayan Nigam residing with me and not keeping good health. That he is high diabetic and left side of the body is paralytic. That due to that he feel sudden weakness on various occasions and having slurred speech. He is also suffering from Cardie problem. 2.8] That I am having 02 sons and the Cash fund is kept for their higher education and marriage. 2.9] Looking to health problem of my father and for my children I keep Rs.85,00,000/- as cash balance with me at home. 2.10] The medical reports of my father is annexed herewith and medical recordi is readily available for kind verification. 2.11] That with the blessings of GOD she not require the safe fund kept for him. 2.12] That I had deposited Rs.86,50,000/- [SBN ] on 11-11- 2016 in my saving bank account with Canara Bank a/c no 0325101023131 out of Cash balance available with me of Rs.85,00,000/- kept in safe at home and balance amount of Rs. 1,50,000/- out of my regular income.”. 6.2 Along with above reply the assesse also filed cash flow statement from November 2013 to March 2017 as well as cash book for the period 01.04.2016 to 31.03.2017. Thus, the assessee explained the source of cash deposit in the bank account as surrender of additional income of Rs.2 cr. at the time of search and seizure operation on 04.10.2013. The details of surrendered income for various years are as under:

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ITANo.31/Ind/2023 Shri Ashish Nigam

Assessment year Amount surrendered (in Rs.)

2008—09 4,00,000/-

4,00,000/- 2009-10

4,00,000/- 2010-11

4,00,000/- 2011-12

2012-13 45,00,000/-

2013-14 15,00,000/-

2014-15 1,24,00,000/-

6.3 It is pertinent to note that for A.Y.2014-15 the assessee has surrendered undisclosed income of Rs.1,24,00,000/- on account of business income and particularly the commission liasoning and mediation income. Further out of the total surrendered income of Rs.2 crore the income surrendered on account of purchase of Mercedez Car was Rs.9,01,000/- and entry in the books of Shri Ashok Bhatia was of Rs.39,00,000/- total amounting to Rs.48,01,000/-. In any case the income declared for A.Y.2014-15 to the tune of Rs.1,24,00,000/- as surrender income was business income of the assesse and there is no fact or material either detected or brought on record by the AO to show that the said Page 10 of 18

ITANo.31/Ind/2023 Shri Ashish Nigam income was invested by the assesse elsewhere. In absence of any other investment or asset brought into existence by utilizing the said income, the availability of the cash with the assessee out of the surrendered income and particularly of Rs.1,24,00,000/- cannot be denied. The assesse filed the cash book before the AO reflecting availability of the cash from 1st April 2013 to 21.03.2017. The cash balance as on 31.03.2014, 31.03.2014 & 31.03.2016 was more than Rs.1 crore and the same was not disturbed by the AO for any of the preceding year. Therefore, the cash balance with the assessee as reflected in the books of account and specifically in the cash book cannot be disregarded in absence of any discrepancy or defect found in the books of account of the assessee. It is pertinent to note that the assessment order passed u/s 153A itself supports the claim of the assesse regarding availability of the cash wherein the AO has accepted the additional income declared by the assessee of Rs.2 crore out of which a sum of Rs.9,01,000/- was on account of investment in purchase of Mercedez Car and a sum of Rs.39,00,000/- was on account of transactions in the books of account of Shri Ashok Bhatia as per diary BS-1. Therefore, the balance amount was available with the assessee out which cash of Rs.20,30,000/- was seized by the department. By considering all these facts the availability of the cash with the assesse was more than sufficient to make this deposit of Rs. 86,50,000/- in the bank account. The CIT(A) has considered this issue in para 4.2.3 to 4.2.5 as under:

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ITANo.31/Ind/2023 Shri Ashish Nigam “4.2.3. I have considered the facts mentioned in the assessment order and submission of the appellant. During the year under consideration, the appellant has derived income from House Property, Salary and Interest. I find that 'Search & Seizure operation u/s 132 of the Act was carried out on the business as well as residential premises of the appellant on 04.10.2013. During the Search & Seizure proceedings, the appellant had declared unaccounted income of Rs. 2,00,00,000/- which include following income/investment:- (i) Unaccounted investment in Mercediz Car :- Rs. 9,01,000/- (ii) Unaccounted transaction with Ashok Bhatia :- Rs. 45,00,000/- (iii) Unaccounted brokerage income:- Rs. 16,00,000/- (iv) Unaccounted commission on purchase and sale of property and interest income:- Rs. 1,24,00,000/- (v) Unaccounted income :- Rs. 5,99,000/- Accordingly, the appellant declared additional income and paid taxes thereon in different assessment years which is as follows:-

Assessment year Amount surrendered (in Rs.)

2008—09 4,00,000/- 4,00,000/- 2009-10 4,00,000/- 2010-11 4,00,000/- 2011-12

2012-13 45,00,000/-

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ITANo.31/Ind/2023 Shri Ashish Nigam

2013-14 15,00,000/-

2014-15 1,24,00,000/-

The above disclosure of additional income has been accepted by the AO while passing assessment order u/s 143(3) r.w.s. 153A of the Act for AY 2008-09 to 2013-14 and u/s 143(3) for AY 2014-15. The appellant during the assessment proceedings as well as appellate proceedings has furnished cash book and cash flow statement. On perusal of which, it has been found that the appellant has shown amount of Rs. 1,24,00,000/- in its cash book as a income on account of property settlement commission, Liaoning and mediation on 31.10.2013. The cash book starting from 01.04.2013 to 31.03.2017 contain the details of cash receipt and expenditure and also cash deposited in the bank account. The AO has not pointed out any discrepancy in the cash book. Further, the appellant has also furnished balance sheet and P&L A/c for the AY 2014-15 to 2017-18 before the AO and me. The AO has also not pointed out any discrepancy and irregularity in the said financial statement. The AO basically rejected the availability of cash on the basis of human probability that nobody can hold such huge amount of cash for three or more years. The AO has ignored the cash book of the appellant. Additional income of Rs. 1,24,00,000/- has been accepted in the assessment order dated 28.03.2016 which was offered for taxation on account of commission income from purchase and sale of property and interest income. Though, only Rs. 23,36,460/- was physically found from the possession of the appellant during the search and seizure proceedings, no contrary material available on record denying the fact that remaining part of cash income was available to the appellant which he recorded in his cash book as cash receipt on 31.10.2013. The cash book of the appellant clearly shows that the amount of Rs. 1,24,00,000/- increased his cash in hand which was available to him throughout the year and subsequent years also. The said cash has been got increased or decreased in subsequent years depending upon

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ITANo.31/Ind/2023 Shri Ashish Nigam the expenses or cash receipt of the appellant. Cash Book and Balance sheet of the appellant show the following closing cash balance in different years:

F.Y. As on the date Amount (Rs.)

2013-14 31.03.2014 1,37,64,580/-

2014-15 31.03.2015 1,39,82,380/-

2015-16 31.03.2016 1,05,90,080/-

2016-17 11.11.2016 1,09,13,280/-

On perusal of cash book for the year under consideration, the availability of cash on 11.11.2016 was at Rs.1,09,13,280/- out of which Rs. 86,50,000/- was deposited on 11.11.2016. The cash book of the appellant itself shows the expandability of the cash deposit on 11.11.2016. No discrepancies have been pointed out by the AO in the cash book of the appellant. Only on the basis of human probability, the AO ignored the cash books and balance sheets of the appellant. The position of cash balance as on 31.03.2014 has already been accepted in the assessment proceedings for the A.Y.2014-15 and no discrepancy in cash book for the subsequent period has been pointed out by the AO. Therefore, I find no infirmity in the cash book of the appellant for the period 01.04.2013 to 31.03.2017. The cash of Rs.86,50,000/- has been deposited in the bank account on 11.11.2016 was out of cash balance available. Hence, it can not be said that the source of cash deposit is not explained. 4.2.4. The AO has placed reliance upon various decisions which have been mentioned in the earlier paras. In view of the above factual discussion, they cannot be applied here.

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ITANo.31/Ind/2023 Shri Ashish Nigam 4.2.5. In view of the above discussion, the AO was not justified in making addition of Rs.86,50,000/- treating the same as unexplained cash deposit in the bank account u/s.69 of the Act. Therefore, addition of Rs.86,50,000/- is, hereby, deleted. The appeal on the above grounds is allowed.” 6.4 The CIT(A) has considered the cash available with the assessee as on 31.03.2014 to 31.03.2017 based on the books of account and cash book filed by the assesse. This availability of the cash with the assessee is also supported by the fact that additional income of Rs.1,24,00,000/- was offered to tax for A.Y.2014-15 which was accepted by the AO in the assessment framed u/s 153A on 28.03.2016. The contention of the Ld. DR regarding no cash declared by the assessee in the schedule AL of the return of income for assessment year 2016-17 is without any substance as the said schedule is not applicable for the relevant assessment year due to the reason that the income declared by the assesse was below the limit of Rs.50 lac requiring the assessee to disclose the details of asset and liabilities in the return of income itself. However, when the assessee has duly recorded all these facts including the availability of the cash in the books of account which were not disturbed by the AO then in absence of any contrary fact or material brought on record, the claim of the assessee supported by the books of account cannot be denied.

6.5 The Bangalore Benches of the Tribunal in case of Karishma Sharma vs. ITO (supra) has considered an identical issue in para 11 & 12 as under:

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ITANo.31/Ind/2023 Shri Ashish Nigam “11. I have heard rival submissions and perused the material on record. The undisputed fact is that flat belonging to the assessee has been sold as per the registered deed dated 14.08.2013. According to the assessee, this flat was sold for Rs.44,70,000, whereas, the sale deed reflected only an amount of Rs.27,00,000. The assessee claims that she has received balance consideration of Rs.17,70,000 in cash. It is an undisputed fact that the assessee has entered into a sale agreement of the said flat for an amount of Rs.39,00,000 plus additional consideration of Rs.6,00,000, which is reflected in the agreement of sale dated 24.04.2013. Copy of the sale agreement is on record at pages 95 to 107 of the paper book filed by the assessee. It is an undisputed fact that the property sold by the assessee and her mother in the very same apartment complex in the earlier AY 2013-14 are in the range of 44 lacs (for each of the flats). The entire sale consideration which is in the range of Rs.44 lakh for each of the flats, has been offered to tax by the assessee and her mother in their respective income tax returns, which find place in the paper book compilation filed by the assessee. It is also an undisputed fact that the assessee has in her return of income has declared the total sale consideration at Rs.44,70,000/- as being the full sale consideration for sale of property. The return of income filed by the assessee is prior to demonetization period. This demonstrates the bonafides of the assessee in declaring the entire receipts, i.e. both in cheque and cash. In view of the above, it is clear that FMV of flat sold is Rs.44.70 lakh as disclosed in the return of income filed by the assessee. Therefore, cash receipt of Rs.17,70,000 on sale of flat on 14.08.2013 cannot be brushed aside as untrue. 12. Further question is, why the delay in depositing the above cash receipt on account of sale of flat. In respect of the inordinate delay in depositing the cash into the bank account, the argument of the assessee is that the revenue has not brought anything on record to suggest that the cash was utilised or put to use in any other manner. It is further stated that the assessee was not present in India to spend the money and same was lying with her father. It was stated that only on Page 16 of 18

ITANo.31/Ind/2023 Shri Ashish Nigam annual visits to India, the assessee used to spend money for her personal purposes. The balance cash remaining with her father was deposited into bank account after demonetization (After assessee specifically came down to India for depositing balance cash which was available with her father). The above submission of the assessee on surrounding circumstances, cannot be stated to be untrue. The sale of flat itself was through assessee's father, the Power of Attorney Holder. The cash was received by the assessee's father and has been in his possession. The assessee being an NRI visits India very rarely and spends money for her personal purposes on such visits. On perusal of the assessee's bank statement, I find that there is hardly any cash withdrawal for the period September 2013 (i.e., the period of sale of second flat) upto the date of cash deposits. Therefore, an inference can be drawn that a small portion of cash was utilized out of cash which was in the possession of the assessee's father, whenever she visits India. Moreover, the Revenue has not brought anything on record to suggest that the cash which was received for the sale of flat was utilized or put to use in any other manner. Further, the Revenue has not been able to bring on record that the assessee being an NRI, has any other source of Income, not disclosed to the Department. Considering the overall facts, the surrounding circumstances and the explanation given by the assessee, I am of the view that the cash deposits are out of sale proceeds received by the assessee from the sale of the property and the same was available for making deposit to the extent of Rs.14,41,000 during the period of demonetization. Therefore, the addition made u/s 69A of the I.T. Act is hereby deleted. It is ordered accordingly.” 6.6 Accordingly in the facts and circumstances of the case as discussed above we do not find any error or illegality in the impugned order of the CIT(A) same is upheld.

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ITANo.31/Ind/2023 Shri Ashish Nigam

Order pronounced in the open court on 18 .07.2024.

Sd/- Sd/- (B.M. BIYANI) (VIJAY PAL RAO) Accountant Member Judicial Member

Indore,_ 18 .07.2024 Patel/Sr. PS

Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPY Sr. Private Secretary Income Tax Appellate Tribunal Indore Bench, Indore

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