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Assessee represented by Ms. Chaitali Shah, C.A. Department represented by Shri Vinod Kumar, Sr. DR Date of Institution of Appeal 18/04/2023 Date of hearing 28/11/2023 Date of pronouncement 30/11/2023 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) (in short, the ld. CIT(A)) dated 30/03/2023 for the Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “1. On the facts and circumstances of the case as well as law on the subject, the ld. CIT(A) has erred in confirming the action of Assessing Officer in making the addition of Rs. 15,35,000/- on account of unexplained cash deposits u/s 68 of the I.T. Act, 1961.
2. On the facts and circumstances of the case as well as law on the subject, the Assessing Officer has erred in levying tax on the addition amount of Rs. 15,35,000/- by invoking provisions of Section 115BBE of the Act.
3. On the facts and circumstances of the case as well as law on the subject, the Assessing Officer has erred in taxing the income u/s 115BBE @ 77.25% by Hareshkumar Jayantilal Mahadevwala HUF Vs ITO applying the newly substituted Section 115BBE retrospectively instead of taxing it at 35.54% as per the old provisions of Section 115BBE.
4. It is therefore prayed that penalty levied by the Assessing Officer and confirmed by CIT(A) may please be deleted.
5. The appellant craves leave to add, alter or delete any ground(s) either before at in the course of hearing of the appeal.”
2. Brief facts of the case, relevant for adjudication of the grounds of appeal raised are that the assessee is an HUF, filed its return of income for A.Y. 2017-18 on 03/02/2018 declaring income of Rs. 11,82,250/-. The case was selected for scrutiny for the reasons “large value of cash deposits during demonetization period as compared to returned income.” The Assessing Officer after serving notice under Section 143(2) of the Income Tax Act, 1961 (in short, the Act), issued various notices under Section 142(1) of the Act for seeking details to substantiate the cash deposits. The Assessing Officer noted that the assessee made cash deposit of Rs. 2.00 lacs in HDFC bank and Rs. 13,35,000/- in Bank of Baroda. The assessee in response to 6th show cause notice, filed its reply on 07/11/2019. In support of cash deposit, the assessee submitted cash book from 07/06/2011 to 31/03/2017. On perusal of such details, the Assessing Officer was of the view that the source of cash deposit is shown by assessee mainly from withdrawal in the month of October, 2012 and thereafter the assessee withdrew the cash regularly from Rs. 10,000/- to Rs. 15,000/- on monthly basis for household expenses. If the assessee has enough cash balance in hand, still the assessee has regularly withdrawn cash of Rs. 10,000/- to Rs. 15,000/-, thus the explanation of Hareshkumar Jayantilal Mahadevwala HUF Vs ITO assessee has no justification by looking at the pattern of cash withdrawal. The assessee was again issued show cause notice as to why cash deposit of Rs. 15.35 lacs should not be treated as unaccounted cash as an unaccounted money and added to the total income. The assessee again filed its reply on 25/11/2019. The assessee in such reply, contended that the cash in hand as per cash book were kept in a separate safe to meet the sudden emergency. The assessee also submitted that it is customary in Surat to keep cash at home in safe. The purpose of keeping the cash in hand to meet any emergency need, therefore, the monthly household expenses were withdrawn as and when required. The explanation of assessee was not accepted by Assessing Officer. The Assessing Officer on perusal of return of income for A.Y. 2014-15 to 2017-18 was of the view that the assessee has shown income from house property and other sources in all assessment years, which has not been earned by assessee in the form of cash as apparent from the cash book furnished by assessee since 01/04/2011. There is no scope of cash generation from their earning activities. The source of cash deposit during demonetization period was shown from the withdrawal made in the month of October, 2012. The Assessing Officer further noted that the cash balance between 01/04/201 to 30/09/2011 ranges from Rs. 936/- to Rs. 1.50 lac. On the basis of such observation, the Assessing Officer took his view that the assessee was not in the habit of keeping cash for emergency fund. Daily Hareshkumar Jayantilal Mahadevwala HUF Vs ITO cash balance prior to October, 2012 itself contradict the contention of assessee. The assessee is claiming cash withdrawal in 2012 were kept in safe till deposit made in bank during demonetization period. No prudent person regularly withdrawn small amount of Rs. 10,000/- to Rs. 15,000/- regularly from bank account for incurring expenses and same time will keep such huge cash in safe from October, 2012. The Assessing Officer held that the assessee failed to justify the source or cash deposit and treated the same as unexplained cash credit under Section 68 of the Income Tax Act, 1961 (in short, the Act) and brought to tax under amended provisions of Section 115BBE of the Act @ 60%.
3. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submission. The submission of assessee is duly recorded in para 5 of ld. CIT(A)’s order. In the submission, the assessee stated that the Assessing Officer made addition of Rs. 15.35 lacs under Section 68 of the Act by treating the cash deposit as unexplained cash credit. The assessee furnished computation of income and capital account for the year ended on 31/03/2017 and the balance sheet as on 31/03/2017. The assessee further explained that they keep cash balance in hand in safe to meet any emergency need of HUF. The cash in hand was out of withdrawal from banks only. Keeping all cash in hand is the discretion of assessee. The cash in hand is reflected in their cash book. The assessee Hareshkumar Jayantilal Mahadevwala HUF Vs ITO is assessed to tax for last sixteen years and due to demonetization, it was necessary to deposit cash in hand in the bank. The assessee furnished cash book from the period 01/04/2011 to 31/03/2017. The assessee also furnished bank book from 01/05/2015 to 31/03/2017 in respect of bank account with Bank of Baroda, HDFC and ICICI banks. Explanation of assessee regarding the source of cash deposit was not accepted by Assessing Officer on the ground that the cash was withdrawn in the month of October, 2012 and was deposited after a gap of four years in November and December, 2016 and in spite of huge cash in hand, the assessee has regularly withdrawn cash from bank of Rs. 10,000/- to Rs. 15,000/- on monthly basis. The assessee submitted that the cash on hand as per cash book was kept by the assessee under separate safe for emergency purpose. There is no bar under law for the persons to withdraw and deposit their money in the bank. The period of four years for depositing the amount in bank is not a long period to rebut the presumption regarding continuing availability as has been held by the Hon'ble Kerala High Court in CIT Vs. K. Shreedharan (1992) 106 CTR 0012 (Ker). The assessee also relied on the decision of Lucknow Bench in DCIT Vs Veena Avasthi and Hon'ble Karnataka High Court in CIT Vs Basetteppa B. Badami (2018) 93 taxmann.com 66 (Kar) and the decision of Jaipur Tribunal in Smt. Pinki Devi Agarwal Vs ITO in ITA No.
Hareshkumar Jayantilal Mahadevwala HUF Vs ITO 515/JP/2018. On the basis of aforesaid submission, the assessee requested to delete the entire addition.
The ld. CIT(A) after considering the submission of assessee, upheld the order of Assessing Officer by holding that the assessee is offering the explanation about withdrawal of cash in October, 2012 and depositing the same in bank in November and December, 2016. The Assessing Officer has cited instances where cash in hand was much below Rs. 1.00 lacs trying to puncture argument offered by assessee that money was kept in safe to meet the emergency expenses. The Assessing Officer have built up his case on the basis of logic and applied principle of preponderance of probabilities. Further aggrieved, the assessee has filed present appeal before this Tribunal.
I have heard the submission of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue and have perused the orders of the lower authorities carefully. The ld. AR of the assessee submits that the assessee is an HUF. The assessee is filing regular return of income since A.Y.2010-11 showing substantial income ranging from about Rs. 7- 8 lacs to Rs. 12.00 lacs in preceeding assessment years. For the year under consideration, the assessee has shown income of Rs. 11.82 lacs. The case of assessee was selected for scrutiny on the ground that the assessee made cash deposit during demonetization period. The assessee Hareshkumar Jayantilal Mahadevwala HUF Vs ITO was having sufficient cash withdrawal from bank. The assessee has given complete details of cash boo. The assessee has made cash withdrawal on 01/10/2012 of Rs. 8.00 lacs from HDFC bank and Rs. 5.90 lacs from Bank of Baroda. The assessee again made a cash withdrawal of Rs. 3,32,500/- from Bank of Baroda on 03.10201. The assessee made regular withdrawal from household expenses or day to day need. The Assessing Officer has not rejected the cash flow statement and the cash book and merely doubted that the cash withdrawal from October, 2012 onwards was not available with the assessee. The Assessing Officer has not proved the application of fund or other investment by assessee. The stand of assesse right from the beginning is that the cash in hand was available in the cash book of assessee. The Assessing Officer has not made any comment on the cash flow statement on various bank accounts and merely doubted on the ground that no body keep the cash in hand and rather the assessee was withdrawing Rs. 10,000/- to Rs. 15,000/- on monthly basis despite the fact that the assessee was having huge cash in hand. The ld. AR of the assessee submits that since the assessee was having sufficient cash balance for the deposit during demonetization period, therefore, no addition is to be sustained.
The ld. AR of the assessee submits that the application of amended provisions of Section 115BBE of the Act is not retrospective. Such provision cannot be applied for the transaction made prior to substitution Hareshkumar Jayantilal Mahadevwala HUF Vs ITO of Section 115BBE of the Act. To support such submission that the addition on account of unexplained cash credit is not warranted, relied on the following decisions: (1) Narendra G. Goradia HUF Vs CIT (1998) 234 ITR 571 (Bom) (2) CIT Vs. Kulvant Rai 291 ITR 36 (Del) (3) Lakshmi Rice Mills Vs CIT (1974) 97 ITR 258 (Pat) (4) Gur Prasad Hari Das Vs CIT (1963) 47 ITR 634 (All) (5) Kanpur Steel Co. Ltd. Vs CIT (1957) 32 ITR 56 (All) (6) S.R. Venkata Ratnam Vs CIT (1980) 48 CCH 619 (Kar) (7) Vinatha Madhusdan Reddy Vs ACIT (2018) 54 CCH 151 (Mum Trib) (8) R.S. Diamond (P) Ltd. Vs ACIT (2022) 145 taxmann.com 545 (Mum Trib) (9) ACIT Vs Baldev Raj Charla & ors. 121 TTJ 366 (Del Trib) (10) Om Prakash Nahar Vs ITO (2022) 135 taxmann.com 377 (Del Trib) (11) Krishna Hiren Gujarati Vs ITO (Surat Trib) On the submission that the provisions of Section 115BBE of the Act is not retrospective, the ld. AR of the assessee has relied on the following case laws: (12) Karimtharuvi Tea Estate Ltd. Vs State of Kerela (1966) 60 ITR 262 (SC) (13) CIT Vs Vatika Township (P) Ltd. (2014) 367 ITR 466 (SC) (14) Samir Shantilal Mehta Vs ACIT ITA No. 42/Srt/2022 (Surat Trib) (15) Rajendra Ramanlal Desai Vs ITO ITA No. 293/Srt/2022 (Surat Trib) (16) DCIT Vs Punjab retail Pvt. Ltd. ITA No. 677/Ind/2019 (Indore Trib) (17) ACIT Vs Sandesh Kumar Jain ITA No. 41/Jab/2020 (Jabalpur Trib) 7. On the other hand, the ld. Sr. DR for the revenue supported the orders of the lower authorities. The ld. Sr. DR for the revenue submits that the Hareshkumar Jayantilal Mahadevwala HUF Vs ITO story cooked up by the assessee is not plausible. It is beyond imagination and human probabilities that a person would keep such huge cash in safe and would regularly make withdrawal from bank of Rs. 10,000/- to 15,000/- per month. The Hon'ble Supreme Court in the case of Sumati Dayal (1995) 80 Taxman 89 (SC) and Durga Prasad More 82 ITR 540 (SC) has clearly held whether the apparent could be considered as real, apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities. The ld. Sr. DR for the revenue submits that the assessee failed to disclose satisfactory source of cash deposit. On the taxability under amended provisions under Section 115BBE of the Act, the ld. Sr. DR supported the order of Assessing Officer.
I have considered the rival submissions of both the parties and perused the record carefully. I have also perused the orders of the lower authorities. I have also deliberated on various case laws relied upon by the ld. AR of the assessee. I find that the Assessing Officer made addition of Rs. 15,35,000/- on account of cash deposit during demonetization period by disregarding the contention of assessee that the assessee was regularly making withdrawal from bank for incurring some expenses so they will not keep such huge cash in safe from October, 2012 and to Hareshkumar Jayantilal Mahadevwala HUF Vs ITO deposit during demonetization period only. The assessing officer held that explanation furnished by assessee is baseless and has not been supported by valid reasons. The Assessing Officer treated the cash deposit as unexplained cash credit under Section 68 of the Act and taxed @ 60% under Section 115BBE of the Act. The ld. CIT(A) confirmed the action of Assessing Officer. I find that the assessee is regularly filing return of income from A.Y. 2010-11 and from 2013-14 onwards, the assessee is regularly offering income of more than Rs. 10.00 lacs per year.
I find that the assessee has shown sufficient cash withdrawal from HDFC bank and Bank of Baroda in the month of October, 2012, the only ground for suspicion by Assessing Officer was the time gap between the withdrawal and the deposit. Though the Assessing Officer doubted the availability of cash for such a long period, however, the Assessing Officer has not brought any material on record that withdrawal had been spent by the assessee. The only basis for doubting is the long period, therefore, keeping in view the return of income offered by assessee and the cash deposit during demonetization period, the assessee is given benefit of doubt to the extent of 50% of cash deposit made available with the assessee as no adverse material is brought on record by the Assessing Officer. I also find that the explanation offered by the assessee is also not cogent and does not find suitable space in human probabilities. Therefore, keeping in view the entire fact and circumstances, the addition Hareshkumar Jayantilal Mahadevwala HUF Vs ITO to the extent of 50% of Rs. 15.35 lacs is deleted and rest of the addition is confirmed/upheld. In the result, ground No.1 of the appeal is partly allowed.
So far as taxing of the addition under amended provisions of Section 115BBE of the Act is concerned, I find that Division Bench of this Tribunal in Samir Shantilal Mehta Vs ACIT (Supra), Arjunsinh Harisinh Thakor Vs ITO in and in Jitendra Nemichand Gupta Vs ITO ITA No. 211/Srt/2021 and Indore Bench in DCIT Vs Punjab Retail Pvt. Ltd (supra) and Jabalpur Bench in ACIT Vs Sandesh Kumar Jain (supra) held that applicability of amended provision of section 115BBE is not retrospective. Thus, the Assessing Officer is directed to tax the remaining addition @ 30% and applicable surcharges if any. In the result, the ground of appeal
raised by the assessee is partly allowed.
11. In the result, this appeal of assessee is partly allowed. Order announced in open court on 30th November, 2023.