POSINA JAYA LAKSHMI,RAJAHMUNDRY vs. INCOME TAX OFFICER, WARD-2(1), RAJAHMUNDRY

PER DUVVURU RL REDDY, Judicial Member :

2 2. Briefly stated the facts of the case are that the assessee, an individual, is deriving income from ‘business’ and ‘other sources’ filed her return of income for the AY 2017-18 on 31/03/2018 admitting total income of Rs. 3,79,910/-. The case was taken up for ‘limited scrutiny’ under CASS for the reason that ‘cash deposits during demonetization period’. Thereafter, notice U/s. 143(2) of the Act was issued on 09/08/2018 and the same was duly served on the assessee on 17/09/2018. Subsequently, notice U/s. 142(1) of the Act along with a questionnaire, calling for certain information, was issued to the assessee through ITBA on 12/09/2019 in order to verify the genuineness of the cash deposits made by the assessee during the demonetization period in her bank accounts. However, the assessee did not furnish the details as called for by the Ld. AO. Meanwhile, the Ld. AO obtained the information from the Karur Vysya Bank Limited, Bommuru with regard to assessee’s bank account to elicit the exact amount of cash deposits made during the demonetization period. On perusal of the details furnished by the bank, the Ld. AO observed that the assessee made cash deposits to the tune of Rs. 41,46,000/- in the above said bank during demonetization period. Accordingly, the Ld. AO issued a show cause notice dated 12/12/2019 electronically wherein the assessee was asked to 3 furnish the details of cash deposits made during the demonetization period. However, the assessee neither responded to the notices issued nor furnished / explained the sources of such deposits. Therefore, the Ld. AO proceeded to complete the assessment ex-parte U/s. 144(1)(b) of the Act to the best of his judgment based on the merits of the case, material available on record. The Ld. AO while making the assessment observed that the onus is on the assessee to explain the sources of cash deposits so made however, the assessee did not discharge her onus by providing the documentary evidence / explanation to substantiate the sources for the cash deposits of Rs.41,46,000/-. Therefore, the Ld. AO treated the said amount as undisclosed income of the assessee for the FY 2016-17 relevant to the AY 2017-18 and accordingly brought to tax the amount of Rs. 41,46,000/- U/s. 69A of the Act under the head ‘other sources’ and charged the tax U/s. 115BBE of the Act. Thus, the Ld. AO completed the assessment by determining the assessed income at Rs. 46,25,910/- which included the addition of Rs. 41,46,000/- and passed the assessment order U/s. 144 of the Act dated 25/12/2019. Aggrieved by the order of the Ld. AO, the assessee preferred an appeal before the Ld. CIT(A)-NFAC.

4 3. On appeal, the Ld. CIT(A)-NFAC called for the information with regard to the cash deposits made by the assessee during the demonetization. In response, the assessee furnished her reply. However, the Ld. CIT(A)-NFAC vide para 7.2.1 of his order did not consider the submissions and explanation given by the assessee and held that the Ld. AO has rightly made the addition U/s. 69A of the Act and invoked the provisions of section 115BBE of the Act and dismissed the appeal of the assessee. Aggrieved by the order of the Ld. CIT(A)-NFAC, the assessee is in appeal before the Tribunal by raising the following grounds of appeal:

1. The order of the Ld. CIT(A) is contrary to the facts and also the law applicable to the facts of the case. 2. The Ld. CIT(A) is not justified in sustaining the addition of Rs. 41,46,000/- made by the Ld. AO U/s. 69A of the Act towards unexplained cash deposits in the bank account of the appellant. 3. The Ld. CIT(A) ought to have held that the provisions of section 115BBE are not applicable to the case of the appellant. 4. Any other ground that may be urged at the time of appeal hearing.

4. At the outset, it was the submission of the assessee that the assessee along with another person viz., Mrs. Kanchumarti Satya Sri has availed joint loan for the purpose of purchasing raw cashew nuts. The Ld. AR further submitted that the loan is also 5 a short term loan and after selling the raw cashew nuts, they have repaid the loan amount. The Ld. AR has also filed the loan account details in the paper book at page No.5 and submitted that the account details clearly indicate that it is a joint account. Therefore, the Ld. AR submitted that the assessee has established the source of the cash deposits and it is only repayment of loan and the loan amount was utilized for the purpose of purchase of raw cashew nut and after selling the same, the assessee and the other joint holder deposited the sale proceeds into their bank account and repaid the loan amount. Further, the Ld. AR also submitted that the Ld. AO and the Ld. CIT(A)-NFAC have not considered the same and the Ld. AO has made the addition only in the hands of Posina Jaya Lakshmi, the assessee in the present appeal and therefore the Ld. AR pleaded to delete the addition made by the Ld. AO and set-aside the order passed by the Ld. CIT(A)-NFAC.

5. On the other hand, the Ld. DR submitted that the assessee has deposited the cash during the demonetization period and therefore in the absence of any explanation the Ld. AO made the addition and the Ld. CIT(A)-NFAC confirmed the same. Therefore, 6 the Ld. DR pleaded that there is no infirmity in the orders of the Ld. Revenue Authorities and the same may be confirmed.

7 Therefore, the main contention of the assessee before me is that the source of the cash deposited was the loan of a similar account sanctioned by the same bank and branch (Karur Vysya Bank) and the said joint account was merely utilized as a conduit to transmit the loan funds and no other transactions were made in the said account. On perusal of the aforesaid facts and circumstances of the case, it was the contention of the Ld. AR that the Ld. AO should have assessed the joint holders separately instead of attributing all the transactions amounting to Rs. 41,46,000/- solely in the hands of the assessee, and made assessment U/s. 144 of the Act treating the entire cash deposits as unexplained money U/s. 69A of the Act. The Ld. AR also submitted that the Ld. AO has totally misunderstood the facts of the case and made the addition in the hands of the assessee. After considering the above said facts and circumstances of the case, I have no hesitation to come to a conclusion that the assessee and the joint holder Mrs. Satya Sri Kanchumarthi have availed the bank loan jointly which clearly establishes at page 5 of the paper book evidencing the joint account held by the assessee and Mrs. Satya Sri Kanchumarthi. It is also an undisputed fact that the loan availed was a short term loan and the assessee and Mr. Satya Sri Kanchumarthi have repaid the 8 loan amount after liquidating the stocks of raw cashew nuts. Therefore, I am of the considered view that the assessee has properly explained the source for her cash deposits during the demonetization period as it is nothing but repayment of loan of the assessee along with the joint holder. Therefore, I am of the considered view that the Ld. AO and the Ld. CIT(A)-NFAC have not properly appreciated the facts and made the addition U/s. 69A of the Act which is not in accordance with the law. Accordingly, I hereby set-aside the orders of the Ld. Revenue Authorities and allow the grounds raised by the assessee. It is ordered accordingly.