VEERABHADRA RAO MOLLETI,VISAKHAPATNAM vs. INCOME TAX OFFICER, WARD 2(5), VISAKHAPATNAM

Finally, appeal papers were prepared for filing online on 8/4/2024.

Before me, the Ld. AR therefore pleaded that the delay in filing the appeal is beyond the control of the assessee and therefore taking a lenient view the delay of 90 days in filing the appeal before the Tribunal may be condoned and the appeal may be admitted for adjudication on merits.

Briefly stated the facts of the case are that the assessee, an individual, having income from ‘salary’ filed his original return of income for the AY 2017-18 on 8/8/2017 declaring an income of Rs. 3,72,970/-. The case was selected for limited scrutiny under CASS for the reason ‘large value cash deposits during the demonetization period as compared to return income”. Subsequently, notice U/s. 143(2) of the Act was issued to the through email on 24/09/2018. Further, notices U/s. 142(1) were also issued to the assessee and called for certain information and to submit the same on or before 22/01/2019. A reminder dated 28/01/2019 was also issued to the assessee. In response to the show cause notice, the assessee furnished the information and a letter through e-proceedings. On verification of the details furnished by the assessee, the Ld. AO noted that the assessee made cash deposits in State Bank of India, Gopalapatnam Branch of Rs. 10,00,000/- and Rs. 4,00,000/- on 10/11/2016 and 4 12/11/2016 respectively. However, the assessee did not explain the sources for the said cash deposits and therefore, the Ld. AO issued a show cause notice stating that as to why the cash deposits of Rs.14 lakhs should not be treated as unexplained income and added to the total income of the assessee in the absence of any explanation and supportive documents with respect to sources for the cash deposits. Further, the Ld. AO also noticed some discrepancy between the return of income and Form-16 filed by the assessee. However, the assessee did not furnish any explanation or documentary evidence in response to the queries raised by the Ld. AO during the assessment proceedings. Therefore, the Ld. AO, in the absence of any cogent reason backed by sufficient documentary evidence, treated the cash deposits made during the demonetization period aggregating to Rs. 14,00,000/- as unexplained money in the hands of the assessee and brought to tax U/s. 69A of the Act. The Ld. AO also initiated penalty proceedings U/s. 271AAC of the Act. Thus, the Ld. AO completed the assessment U/s. 143(3) of the Act and passed the assessment order dated 13/12/2019 and determined the assessed income at Rs. 17,72,970/- which includes the addition of Rs. 14,00,000/- towards unexplained income U/s. 69A r.w.s 115BBE of the Act.

On appeal, the Ld. CIT(A)-NFAC, after considering the submissions of the assessee and also the cash flow statement of the assessee’s bank account and the withdrawal pattern, as narrated in pages 6 and 7 of the Ld. CIT(A)-NFAC order, came to a conclusion that, to some extent during the FY 2016-17 there are considerably higher withdrawals which may have withdrawn for the purpose of the assessee’s daughter’s marriage and due to demonetization the assessee might have redeposited the cash in his bank account and therefore, the Ld. CIT(A)-NFAC considered Rs. 5,10,000/- as a valid source and granted relief to that extent. Accordingly, the Ld. CIT(A)-NFAC deleted the addition to the extent of Rs. 5,10,000/- out of total addition of Rs.14,00,000/- and sustained the addition to the extent of Rs. 8,90,000/- [Rs. 14,00,000 – Rs. 5,10,000]. Thus, the Ld. CIT(A)-NFAC partly allowed 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:

At the outset, the Ld. Authorized Representative [AR] submitted that the assessee is a retired employee of Visakhapatnam Port Trust. The Ld. AR further submitted that the sources of the assessee’s income are his retirement funds and monthly pension. The Ld. AR further submitted that prior to make cash deposits aggregating to Rs. 14,00,000/-, the assessee has made cash withdrawals and accumulated cash from 12/04/2010 to 24/10/2016 for the purpose of his health expenses and for his daughter’s marriage as well as to meet the assessee’s family maintenance every month. The total cash withdrawn from 12/04/2010 to 24/10/2016 was Rs. 30,10,000/- and out of such withdrawals the assessee left with Rs.14,00,000/- and the same was deposited in the assessee’s bank account due to demonetization. This explanation was not properly appreciated by 7 the Ld. Revenue Authorities while making the addition U/s. 69A of the Act. The Ld. AR further submitted that even before the Ld. CIT- NFAC, the assessee has made an elaborate submission with respect to the assessee’s three daughters’ savings with their mother (assessee’s wife) along with the submissions made before the Ld. AO. However, the Ld. CIT(A)-NFAC sustained the addition of Rs. 8,90,000/- and granted only a part relief to the assessee. Therefore, the Ld. AR pleaded that considering the cash withdrawals made by the assessee in the earlier years, the assessee may be granted substantial relief as deemed fit by the Hon’ble Bench.

On the other hand, the Ld. Departmental Representative [DR] heavily relied on the orders of the Ld. Revenue Authorities and argued in support of the same. The Ld. DR further submitted that in the absence of any documentary evidence to substantiate the claim made by the assessee, the Ld. Revenue Authorities have rightly decided the matter and therefore, the order of the Ld. CIT(A)-NFAC may be upheld.

I have heard both the sides and perused the material available on record as well as the orders of the order of the Ld. Revenue Authorities. During the demonetization period, the assessee made 8 cash deposits in two instances in his bank account with State Bank of India, Gopalapatnam Branch aggregating to Rs. 14,00,000/-. However, during the assessment proceedings, before the Ld. AO the assessee did not produce any explanation / documentary evidence to substantiate the said cash deposits and therefore, the Ld. AO made an addition of Rs. 14,00,000/- U/s. 69A r.w.s 115BBE of the Act. Matter travelled to the Ld. CIT(A)- NFAC and on appeal, the Ld. CIT(A)-NFAC after considering the submissions made by the assessee as well as based on the material available before him, granted part relief to the assessee to the extent of Rs. 5,10,000/-. Before the Tribunal it is the contention of the assessee that the assessee is having cash withdrawals from the year 2010 onwards from his bank account which is proved by the assessee. The assessee has withdrawn some amount from his account and made the cash deposits due to demonetization. However, the assessee has neither explained before the Bench as to why the assessee has retained the huge cash to the extent of Rs. 14,00,000/- nor has produced any documentary evidence to demonstrate the flow of receipts and expenditure from the year 2010 onwards. Therefore, simply withdrawing the money is not sufficient to say that the assessee has explained the cash deposits during the demonetization period. However, the Ld. CIT(A)-NFAC 9 has liberally considered the cash withdrawals from April, 2016 and granted part relief to the assessee by observing as under:

From the above, it is evident that the Ld. CIT(A)-NFAC has taken into account all the facts and circumstances of the case and granted relief to the assessee to the extent of Rs. 5,10,000/- even though the assessee has not submitted any cash flow statement demonstrating how the assessee earned the receipts and how the assessee spent for the capital expenses and revenue expenses including his compulsory expenses like family maintenance of every month. Therefore, I am of the considered view that since the assessee has not explained the source for the cash deposit of Rs. 8,90,000/- , the Ld. CIT(A)-NFAC has rightly sustained the addition to the extent of Rs.8,90,000/-. Before me also the assessee has not filed any evidence to substantiate his claim and therefore, I find no infirmity in the order of the Ld. CIT(A)-NFAC and it does not call 10 for any interference. Accordingly, all the grounds raised by the assessee are dismissed.

In the result, appeal of the assessee is dismissed.