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Income Tax Appellate Tribunal, SURAT (SMC
Before: SHRI DR. A. L. SAINI
आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2016-17, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre (in short ‘the NFAC’), Delhi, dated 06.04.2023, which in turn arises out of an assessment order passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 05.12.2018.
2. The grounds of appeal
raised by the assessee are as follows: “1. That the CIT(A) erred not accepting the source investment made in property through own funds accumulated of Rs.12,10,871/-.
2. That the addition of Rs.12,10,871/- may kindly be deleted.
3. The appellant craves leave to add, amend, alter, vary and/or withdraw any or all the above grounds of Appeal.”
ITA.378/SRT/2023/AY.2016-17 Hemant Jashubhai Gandhi HUF 3. Brief facts qua the issue are that the assessee had filed return of income for the year under consideration on 05.08.2018 declaring total income at Rs.2,63,460/-. The return of income of the assessee was selected under limited Scrutiny through CASS for which notice u/s 143(2) of the IT Act was issued on 27.07.2017 and duly served upon the assessee. Thereafter notice u/s 142(1) dated 03.07.2018 was issued and duly served upon the assessee. The assessee had purchased two properties during the year under consideration alongwith five other persons. The assessee had purchased one land at Block No. 94/D, Saniya Kande, Kharvasa Road, Surat and other at Block No. 94/D, Saniya Kande, Kharvasa Road, Surat. As regards land at 94/D, Saniya Kande, Kharvasa Road, Surat the assessee had 8.12% share in the said property and he had invested an amount of Rs. 10,74,601/- and land at Block No. 94/C, Saniya Kande, Kharvasa Road, Surat the had 8.81% share in the property wherein he had invested Rs.23,19,770/-. The assessee was asked to furnish the source of investments in the land in response to which it was submitted that the source was from unsecured loans taken and out of cash on hand. The assessee furnished copy of cash book for verification. On perusal of the cash book of the assessee it was noticed that the opening balance as on 01.04.2015 stood at Rs.10,31,066.84, but the said figure did not reflect in the return of income for the said year. The bank statement of the assessee was called for and it was noticed that it reflected huge cash deposits. In view of the matter vide letter dated 26.11.2018, the assessee was intimated that since the opening balance of the cash book did not reflect. In the returns, the cash deposits in bank accounts remained unexplained and in case of failure to furnish any explanation the AO issued show cause notice stating that as to why the same amount should not be treated. as from unexplained sources.
ITA.378/SRT/2023/AY.2016-17 Hemant Jashubhai Gandhi HUF 4. In response to the same, the assessee submitted reply before the Assessing Officer, which is reproduced below: “As per book for A.Y. 2016 - 2017 Opening Balance is of Rs.10,31,067/- but is no cash balance written in ITR for A. Y. 2015 - 2016, as the is not requires to maintained books of account u/s 44AD. Justification for opening balance as on 01/04/2015 :- Sir, I herewith Flow A.Y. 2014 - 2015 & A.Y.2015 - 2016 for justification of opening cash as on 01/04/2015 of Rs. 10,31,087. Sir, from summary of cash book your honour will satisfied that the cash is accumulated from withdrawn from and business income earned which is as on hand and not in bank as the has to purchase land @ Block No. 94C & 94D, Saniya Kande in A.Y.2014 - 2015. The seller Pravinbhai Ishverbhai Patel requested to some payment in cash against purchase of land. Hence for the of land the assessee had withdrawn cash from his Bank a/c of Baroda of Rs. 6,00,000/- in A.Y. 2014 - 2015. Majority of all the payment for Block No. 94C is paid in A.Y. 2014 - 2015 but suddenly seller were went to USA in A.Y.2014 – 2015. The assessee had requested to seller for executing the purchase deed on payment for both land. The seller had informed that he will return soon for executing purchase deed hence the assessee had kept cash on hand and not deposited in bank. Thereafter the assessee has deposited Rs.5,03,500/- In the same year as the seller not responded. Ultimately the seller returned to India only in A.Y.2016 -2017. The Law is changed w.e.f. 01/06/2015, no cash payment can be made for purchase of immovable property. Hence in A.Y.2016-2017 at the time of making purchase deed the assessee has deposited cash in his bank account and issued the cheque for payment of Block No. 94D. From above your Honour satisfy that the reason for keeping opening cash balance of Rs.10,31,067/- is fully explained and justified and accept the cash deposited in bank a/c during the year.”
However, the Assessing Officer rejected the contention of the assessee and observed that the contention of the assessee that since the assessee was filing return u/s 44AD, and the assessee need not to keep books of accounts, was not accepted by the AO. Even u/s 44AD of the Act, the assessee has to maintain cash book. The contention of the assessee that cash was withdrawn from the bank and then redeposited later on, is just an afterthought and not found to be justified. Since the assessee has failed to furnish the source of cash in his bank account, which is used for purchasing the land at Block No. 94/D Saniya Kande, Kharvasa Road, Surat and meeting the incidental expenses. Therefore,
ITA.378/SRT/2023/AY.2016-17 Hemant Jashubhai Gandhi HUF assessing officer made addition of Rs.12,10,871/-, on account of unexplained Investments.
Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has confirmed the action of the Assessing Officer. The ld CIT(A) has just reiterated the findings of the assessing officer and confirmed the addition made by the Assessing Officer. Aggrieved by the order of ld. CIT(A), the assessee is in appeal before this Tribunal.
I have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. The Ld. Counsel for the assessee at the outset stated that during the assessment proceedings, the assessee has explained the source of cash deposits. The assessee’s case is covered under section 44AD of the Act, therefore, the assessee need not to maintain books of accounts. However, relevant summary of cash receipt and cash payment were available before the Assessing Officer which is reproduced below:
ITA.378/SRT/2023/AY.2016-17 Hemant Jashubhai Gandhi HUF
The ld Counsel also argued that since the assessee is a small businessman and covered under the provision of section 44AD, and filed its return of income in previous years as well as in subsequent years and the assessee has explained the sources of the cash deposits, therefore no addition should be made in the hands of the assessee. The Ld. Counsel invited the attention of the Bench towards page no.24 of the paper book and explained the entries mentioned in the bank account. Finally, the ld Counsel prays the Bench that based on the factual position the addition may be deleted.
On the other hand, Learned Departmental Representative (ld. DR) for the Revenue submitted that assessee has failed to explain the source of the cash deposits. The ld DR reiterated the findings of the Assessing Officer and pleaded that addition made by the Assessing Officer should be upheld.
ITA.378/SRT/2023/AY.2016-17 Hemant Jashubhai Gandhi HUF 10. I have given my thoughtful consideration to the submissions made by the assessee and examined the same in the light of the factual matrix of the case. I note that during the assessment stage, in order to explain the source of the cash deposit, the assessee submitted the following documents and evidences; viz: (1) ITR, computation, Trading, Profit & Loss account, Balance sheet of AY.2016-17 (vide Pb.17 to 21), (2) Surat People’s Bank statement for AY.2016-17 (vide Pb.22 to 24), (3) ITR and Computation for AY.2014-15 and 2015-16 (vide Pb.25 to 31), (4) Surat People’s Bank statement for AY.2014-15 (vide Pb.32), (5) Cash book for AY.2016-17 (vide Pb.33 to 37), (6) Cash Flow statement for AY.2014-15, 2015-16 and 2016-17 (vide Pb.38 to 40), (7) Reply filed in response to notice u/s 142(1) of the Act and reply filed in response to Show Cause Notice dated 03/12/2018 (vide Pb.41 to 53).
I note that for assessment year (AY) 2016-17, the source of cash deposited in the bank account for purchase of property in Block No.94/C and Block No.94/D has been explained by the assessee in the following manner:
“Hemant Jashubhai Gandhi HUF A.Y. 2016-2017 Source of Investment in property purchase 1. Block No. 94/C, Saniya Kande, Kharvasa Road, Surat:- Date of Amount Source Details submitted payment 11/03/2013 13,33,500 Unsecured Loan Ledger of Vinaven A.Y. 2014-15 from Vinaben N. N. Patel for A. Y. Patel which is repaid 2013 -2014 & 2014 - in A.Y. 2014-15 2015 is attached vide Annexure K. 1,50,000 Income declared (Earth u/s-44AD Filing Exps.) 2,00,000 Income declared (Earth u/s-44AD ITA.378/SRT/2023/AY.2016-17 Hemant Jashubhai Gandhi HUF Filing Exps.) 23/12/2013 5,00,000 Income declared A.Y. 2014-15 u/s-44AD Total 21,83,500 Stamp Duty 92,750 Income declared Copy of Cash Book & u/s-44AD Bank Statement for A.Y. 2016 -2017 is attached. Registration 25,000 Income declared Copy of Cash Book & & Vakil Fees u/s-44AD Bank Statement for A.Y. 2016 -2017 is attached. IDS 18,520 Income declared Copy of Cash Book & u/s— 44AD Bank Statement for A.Y. 201 6 -2017 is attached. Total 23,19,770 Sir, the assessee has herewith furnished the copy of ledger a/c of Vinaben N. Patel for A.Y. 2013 - 2014 & 2014 - 2015. From above table your Honour will be satisfied that the Source of Investment for Block No. 94C. Sariya Kande is fully explained & justified. The source of property Block No. 94C Sariya Kande pertains to A.Y. 2013 - 2014 & 2014 -2015 & A.Y. 2016 - 2014. Kindly accept the same.
Block No. 94/D, Saniya Kande, Kharvasa Road, Surat Date of Amount Source Details submitted payment 28/03/2016 10,00,000 Out of Income Copy of Bank book declared u/s-44AD in for A.Y. 2016 - 2017 A.Y.2014-15 & 2015- is attached. 16 Stamp Duty 49,500 Out of Income Cash Book for A.Y. declared U/S-44AD 201 6 -20 17 is attached. Registration 15,000 Out of Income Cash Book for A.Y. declared U/S-44AD 201 6 -201 7 is attached. 10,101 Out of Income Cash Book for A.Y. declared 2016 -2017 is U/S-44AD attached. Total 10,74,601 The assessee has attached the copy of Cash Book for A.Y. 2016-2017. From above table your Honour will be satisfied that the Source of Investment for Block No. 94D, Saniya Kande is fully explained & justified. Kindly accept the same.”
ITA.378/SRT/2023/AY.2016-17 Hemant Jashubhai Gandhi HUF 12. I have gone through the above documents and evidences and find that assessee has submitted before the assessing officer a plethora of documents and evidences to explain the source. I note that assessing officer has not refuted or discredited these evidences and documents. The assessing officer does not mention why he is not accepting these evidences. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises. Hence, I am not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made is deleted. Hence this ground of the assessee is allowed.
In the result, appeal filed by the assessee is allowed.
Order is pronounced on 29/12/2023 in the open court.