SADHANA ASHOK BHANDARI,PUNE vs. ITO WARD 5(1), PUNE

Findings & Analysis : 2. We have heard both the parties and perused the records. In this case, Assessee has filed Return of Income for A.Y.2017-18 on 31.01.2018. During the scrutiny proceedings, assessee was asked to explain the cash deposits of Rs.7,27,000/- made during the Demonetization Period. Assessee submitted before the Assessing Officer(AO) that the cash was out of her accumulated cash balances. Assessee submitted cash book and bank statement for verification. Assessee submitted that she has income from house property, income from other sources and share of profit from the partnership firm. The Assessing Officer(AO) in the assessment order observed that there are withdrawals as well as cash deposits at regular intervals in the Bank. The Assessing Officer made an addition of Rs.6,79,000/- u/sec.69A of the Act. The relevant paragraphs 3.5 and 3.6 of the assessment order is reproduced as under : “3.5 Another aspect that requires mention here is the pattern shown in depositing the amount into the bank account during demonetization i.e. on 10.11.2016 she deposited a meager amount of Rs. 45,000/- . Then subsequently, after a gap of one week i.e. on 17.11.2016 she has deposited Rs. 6,79,000/- and then after nearly one month she has deposited Rs. 3,000/-. As depicted in the cash book, if she had a cash balance of Rs. 7,27,000/- as on 10.11.2016 i.e. the date of first deposit, why had she not deposited the entire money on the same day and why wait for one week to deposit cash of Rs. 6,79,000/-. As regards the cash deposited on 10.11.2016, I am ready to give the benefit of doubt to the assessee and hold that this cash of Rs. 45,000/- is the actual cash in hand as on that date i.e. 10.11.2016 because a nexus can be drawn to the availability of cash in hand of Rs. 45,000/- to the withdrawals made by the assessee on 21.10.2016 and 29.10.2016 of Rs. 20,000/- each i.e. just a week prior to demonetization and add to it some balances from the previous withdrawals. My inclination to allow the assessee’s theory of cash in hand to the extent of Rs. 45,000/- is further strengthened by the fact that immediately on deposit of the cash of Rs. 45,000/- (in SBN) on 10.11.2016, she has transferred the amount of Rs. 45,000/- to her own savings account No. 910010037952122 with Axis Bank on the same date i.e. 10.11.2016. As regards the cash deposit of Rs. 6,79,000/- on 17/11/2016, it is seen that immediately on deposit of cash, she has transferred the amount to New Pipada Corporation on the same date i.e. 17/11/2016.

3.6 Having regard to the conduct of the assessee, as disclosed through her cash book, bank statements and other material available on record, as enumerated above, an inference can reasonably be drawn that the claim of cash balance of Rs. 7,27,000/- as on 08.11.2016 is fictitious and not the real cash balance with the assessee. As stated in the foregoing para and for the reasons stated therein, I allow the claim of the assessee to the extent of cash deposit of Rs.45,000/- and hold that amount of Rs. 45,000/- is the actual cash balance as on 08.11.2016. However, regarding cash deposit of Rs.6,79,000/-, the story set up by the assessee^ to explain the source of cash in hand at the time of deposit during demonetization is unacceptable and hard to believe and the ‘ preponderance of probabilities, the common course of human livings point to the contrary. I find no substantial evidence to accept the submission of the assessee that cash of Rs.6,79,000/- deposited into the bank account on 17.11.2019 is out of cash in hand available with her at that time.”

2.1 Thus, AO has made an addition of Rs.6,79,000/- out of the cash deposit of Rs.7,27,000/- made during the Demonetization Period. Assessing Officer accepted that Cash of Rs.45,000/- was actual cash in hand. However, AO has not given any specific reason for accepting only Rs.45,000/-, AO has merely estimated it.

2.2 During the assessment proceedings, assessee had submitted copy of cash book for F.Y.2015-16 and F.Y.2016-17. On perusal of the cash book, for F.Y.2016-17, it is observed that Cash-in-hand on 08.11.2016 was Rs.7,27,000/-. On perusal of the cash book, it is observed that there were regular cash withdrawals and deposits. Once AO has accepted the cash deposits made by Assessee prior to 08.11.2016(Demonetization Date) based on the cash book, there is no reason for the AO to disbelieve assessee’s submission regarding cash deposits during Demonetization. Even for the Demonetization Period, out of total cash deposited of Rs.7,27,000/- Assessing Officer has presumed that Rs.45,000/- was cash-in-hand based on cash book. Thus, AO has accepted cash book entries for period prior to Demonetization Period and part of the cash book entry during the Demonetization Period. AO has not given any specific reason for not accepting the same. In these facts and circumstances of the case, we are of the opinion that once Assessing Officer accepted the cash book, there is no reason for AO to make an addition of Rs.6,79,000/-.

2.3 The Hon’ble Supreme Court in the case Mehta Parikh & Co Vs. CIT [1956] 30 ITR 181 dated 10.05.1956 has observed as under :

“This being the position, the state of affairs, as it obtained on 12th January 1946, had got to be appreciated, having, regard to those entries in the cash books and the affidavits filed before the Appellate Assistant Commissioner, taking them at their face value. The entries in the cash books disclosed that, taking the number of high denomination notes at 18 on 2nd January 1946, there came in the custody or possession of the appellants after 2nd January 1946 and up to 12th January1946, 49 further notes of that high denomination, making 67 such notes in the aggregate, out of which 61 such notes could be encashed by the appellants on 18th January 1946 through the Eastern Bank. A mere calculation of the nature indulged in by the Income tax Officer or the Appellate Assistant Commissioner was not enough, without any further scrutiny, to dislodge the position taken up by the appellants, supported as it was, by the entries in the cash book and the affidavits put in by the appellants before the Appellate Assistant Commissioner.”

2.4 Thus, the above observations of the Hon’ble Supreme Court are squarely applicable in the case of the assessee. In the case of assessee also, AO has accepted part of cash book entries and dislodged part of it without any basis or further collecting any evidence.

2.5 In identical circumstances, ITAT Mumbai Bench in the case of Ajit Bapu Satam Vs. DCIT [2023] 147 taxmann.com 22 (Mumbai Tribunal) has held as under:

“11. Thus, in view of the above, we find no reason to sustain the addition made by the lower authorities, particularly when both cash withdrawal and deposit are duly substantiated from the bank statement of the very same branch. Accordingly, we direct the AO to delete the addition of Rs.22 lakh made under section 69A of the Act. As a result, ground No.1 raised in the assessee’s appeal is allowed.”

2.6 Similarly, ITAT Ahmedabad Bench in the case of Sudhirbhai Pravinkant Thaker Vs. ITO [2017] 88 taxmann.com 382 (Ahd Tribunal) has held as under : “4. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements relied upon by the ld.counsel for the assessee. There is no dispute with regard to the fact that the assessee had deposited the cash of Rs.11,27,800/- starting from 07/06/2007 to 31/02/2008. The cash withdrawn from the bank was of Rs.4,20,000/- on 01/07/2006, Rs.4,90,000/- on 06/07/2006, Rs.83,000/- on 26/06/2007, Rs.51,000/- on 20/11/2007, Rs.1,28,000/- on 14/12/2007 and Rs.2,00,000/- on 07/01/2008. However, the cash was deposited on 07/06/2007 of Rs.2 lacs, on 08/06/2007 of Rs.2 lacs, on 11/06/2007 of Rs.1,50,000/-, on 12/06/2007 of Rs.2 lacs, on 13/06/2007 of Rs.2,25,000/-. The total deposits till 13/06/2007 was of Rs.9,75,000/- and the amount withdrawn till 06/07/2006 was of Rs.9,10,000/- (Rs.4,20,000 + 4,90,000). Rest of the deposits of the total addition were made on 18/06/2007, 26/06/2007 and 13/02/2008. However, withdrawal after 06/07/2006, the assessee had withdrawn on 26/06/2007 of Rs.83,000/-, on 20/11/2007 of rs.51,000/-, on 14/12/2007 of Rs.1,28,000/- and on 07/01/2008 of Rs.2,00,000/-. From 20/11/2011 to 07/01/2008 the assessee had withdrawn total amount of Rs.3,79,000/-. However, cash was deposited in the bank account after 13/06/2007 of Rs.1,52,800/-. So far as the amount of Rs.83,000/- is concerned, i.e. matching from withdrawals and deposits and rest of the amount, there is a gap between withdrawals and deposits of the amount. In respect of deposit made on 13/02/2008 is also within one month from the withdrawal of amount on 07/01/2008. In respect of other entries, the cash withdrawal is even before one year of deposit of the amount. The contention of the assessee is that the amount was kept as cash in hand. The authorities have doubted about the explanation furnished by the assessee. The authorities below have doubted the source of the cash deposits, however, the contention of the ld.counsel for the assessee is that he had withdrawn the amount from his bank account and there is no finding by the authorities below that the cash withdrawn by the assessee was utilized for any other purpose. In the absence of such finding, addition is not justified. We find merit into the contention of the ld.counsel for the assessee that there is no dispute that the amount which was withdrawn by the assessee on various dates during the year 2006 was available with him for making deposits. In the absence of finding that the amount which was previously withdrawn by the assessee had been utilized for any other purpose merely on the basis of conjecture that the amount might have been utilized for any other purpose and was not available with the assessee for making the deposits, we are unable to accept the reasoning of the authorities below. In our considered view, when the assessee has demonstrated that he had withdrawn cash from the bank and there is no finding by the authorities below that this cash available with the assessee was invested or utilized for any other purpose, in that event, it is not open to the authority to make the addition on the basis that the assessee failed to explain the source of deposits. Moreover, the authorities below have not disputed the fact that the assessee had withdrawn amount of Rs.9,10,000/- before the deposits made on various dates during the FY 2007-08. Therefore, the orders of the authorities below are set aside and the AO is directed to delete the addition. Thus, ground raised in the assessee’s appeal is allowed.”

2.7 In these facts and circumstances of the case, respectfully following the judicial precedence we hold that there was no merit in the addition made by the Assessing Officer of Rs.6,79,000/-, accordingly, AO is directed to delete the addition. Accordingly, grounds of appeal raised by the assessee are allowed.