HOMOEOPATH TOUFEEQ AHMED,HYDERABAD vs. INCOME TAX OFFICER, WARD-9(3), HYDERABAD

Addition in this case is made basing on the cash deposited during demonetization period. Plea of the assessee before both the authorities is that he sold a house for a consideration of Rs. 41,53,000/- and accepted Rs. 41,53,000/- in cash on 07/11/2016, on the next day demonetization was announced, and therefore, he was compelled to deposit the said in bank, but due to the fear of theft, he deposited the same in instalments in various banks. Authorities, however, did not agree with this plea taken by the assessee on the ground that if it is really the sale consideration received on 07/11/2016 that was deposited during demonetization, then there is no reason why the assessee did not deposit the same in one go, but took the pain to make rounds to the banks on various days.

Learned CIT(A) observed that considering the entirety of facts, circumstances and material on record and looking into preponderance of probabilities, the assessee miserably failed to substantiate his claim of cash deposit amounting to Rs. 41,53,000/- and also not even been able to establish that he could himself accumulate such huge amount from the sources disclosed, therefore, learned Assessing Officer is fully justified in making the addition an amount of Rs. 41,53,000/- found as unexplained money.

Learned AR submitted that on the ground of the assessee receiving the sale consideration in cash in contravention to the provision of section 269SS of the Income Tax Act, 1961 (‘the Act’), learned Assessing Officer levied penalty of Rs. 41.53 lakhs under section 271D of the Act, learned CIT(A) confirmed such penalty, but the Tribunal deleted the same in by order dated 29/11/2023. On this basis, he submitted that the Revenue accepted the fact that the assessee sold the property under sale deed dated 07/11/2016 and received the sale consideration in cash and, therefore, now it is not open for the Revenue to say that there is no known source for the assessee to explain the deposits. He further submitted that when once the assessee admittedly received the cash consideration, it explains the source and merely because he deposited it into the bank on various days, does not make such deposits as from un- known sources.

Per contra, learned DR argued that the penalty is not a ground to support the source for deposits, and such a penalty was levied on the statement of the assessee, but not on the proof of assessee possessing such cash. Learned DR further submitted that if really the assessee possessed the sale consideration in cash, nothing prevented the assessee from depositing the same into the bank on the earliest occasion, instead of depositing the same on various dates. He submitted that while appreciating the facts regard must be had to the ordinary course of human conduct and here, the conduct of the assessee does not inspire confidence to believe the same.

I have gone through the record in the light of the submissions made on either side. It could be seen from the assessment order that it is a fact that the assessee received the sale consideration of Rs. 41,53,000/- under sale deed dated 07/11/2016 in cash. Obviously, it is only for this lapse, a penalty under section 271D of the Act was levied on assessee. It is, therefore, clear that even according to the Revenue, assessee received the sale consideration in cash an as on 07/11/2016, he had such cash available with him whereas the demonetization was notified only on the evening of 08/11/2016.

Availability of cash with the assessee explains the source of deposits. Such deposits cannot be said to be the deposits from un-known sources. Here the addition is made on the suspicion that if such huge cash was available with assessee by 07/11/2016, then why should the assessee make the deposits on various dates. One important aspect having impact on this suspicion is that the sale deed is a registered one and by no stretch of imagination could it be said that the assessee resorted to reverse engineering. Sale deed cannot be disputed, because by that time it is in the nobody’s knowledge that there would be demonetization.

Be that as it may, the fact remains that the sale deed and sale consideration explains the source of deposits and it would be too much to presume that keeping such cash available with the assessee, the assessee deposited the amounts from un-known sources. It does not fit in the order of things. Merely because the assessee deposited the available cash into bank on various occasions, such a proven source cannot be doubted. I am inclined to accept the explanation offered by the assessee. Learned Assessing Officer is, therefore, directed to delete the addition so made.

In the result, appeal of the assessee is allowed. Order pronounced in the open court on this the 9th day of February, 2024.