HARISHBHAI G. CHOVATIYA,SARTHANA, SURAT vs. INCOME TAX OFFICER, WARD 3(3)(1), SURAT

Aggrieved by the addition made by Assessing Officer in assessment order, the assessee filed appeal before Ld. CIT(A). Before ld. CIT(A) the assessee filed detailed statement of fact along with Form-35 as well as detailed written submission. The written submission of assessee is recorded in para-6.2 of the order of ld. CIT(A). In his submission, assessee submitted that section 68 is not applicable on impugned 3 (A.Y 16-17) Harishbhai G Chovatiya addition, as the conditions required for application of section 68. Section 68 is applied when the assessee maintained books of account, which contains the credit amount and that assessee offered no explanation about source and nature of such credit, or the explanation offered by assessee in the opinion of Assessing Officer is not satisfactory. Undisputedly opening cash balance of Rs.6,77,106/- was cash-in-hand. Further, there is a cash withdrawal from the bank during the year and there is correspondence debit entry in the cash book as per books of account resulting in the closing cash balance of Rs.45,38,189/-. No amount in cash or cheque was credited in the books of account represented in the addition. Thus, the conditions of Section 68 are not fulfilled and addition are liable to be deleted. In the show cause notice dated 02.12.2018, the Assessing Officer accepted that assessee made withdrawal from bank of Rs.42,42,700/-, however, assessing officer stated in his show cause as to why the cash-in-hand of Rs.45,38,189/- should not be added in the income of assessee under section 68 of the Act. It is absurdity of Assessing Officer in treating disclosed cash-in-hand of Rs. 45,38,189/- which is reflected as asset of cash credit under section 68. The assessee further submitted that cash-in-hand was generated out of loan availed from bank accounts and the source was established. The assessee has obtained a loan of Rs.36.00 lakh which was disbursed in bank account No. 34670600000548 and Rs.8,85,000/-from bank account No.5429010001295 respectively. The said loan amount was transferred to saving bank account 4 (A.Y 16-17) Harishbhai G Chovatiya No.34670100008105 and account No.5429010001295 and cash withdrawal was made after making some personal and business expenses. The cash balance of Rs.45,38,189/- is supported by cash book and there is no element of unaccounted income and complete statement of accounts in pass book and statement to prove of cash- in-hand. The Assessing Officer accepted the opening cash balance of Rs.6,77,106/- out of cash-in-hand of Rs.45,38,189/- and rest of the amount was explained as loan availed from Bank of Baroda. The assessee has shown the nexus of loan amount and withdrawal. The cash was withdrawn in anticipation of purchase of agricultural land but deal was not materialized and said cash remained in hand. The assessee further stated that cash book was not rejected by Assessing Officer by invoking of provision of 145(3). There was no finding of Assessing Officer that cash withdrawal was utilized into any unaccounted expense or unaccounted investment. To support assessees submission, assessee relied on various case laws.

The ld. CIT(A) after considering the contents of assessment order and submission made by assessee noted that primary issue for his consideration is whether the assessee was able to justify the source of closing cash balance available with him. The assessee explained the source of closing balance with the help of cash withdrawal out of loan received by assessee that he has made sufficient withdrawals from his bank accounts. The Assessing Officer noted that assessee has cash withdrawal of Rs.42,42,700/- during the period from 27.04.2015 to 10.07.2015 out of which Rs.25.00 lakh was withdrawn 5 (A.Y 16-17) Harishbhai G Chovatiya by assessee on 27.04.2015. The entire cash-in-hand for long period was not accepted by Assessing Officer and added to Rs.38,61,083/-. The ld. CIT(A) concurred with the finding of Assessing Officer that long time gap between withdrawal and showing it in the closing balance as on 31.03.2016 remained unexplained. The theory of human probability as has been laid down by the Hon’ble Apex Court in the case of CIT Vs Durga Prasad More (1971) 82 ITR 540 (SC) and Sumati Dayal Vs CIT (1995) 214 ITR 8801/ 125 CTR 124/80 Taxman 89 (SC) clearly justifies the consideration of surrounding facts and circumstances to determine the genuineness of the transaction. The ld. CIT(A) by applying such rational and not accepted the explanation made by assessee and confirmed the action of Assessing Officer. However, Ld.CIT(A) accepted the objection raised by assessee that addition cannot be made under section 68 of the Act. The Ld.CIT(A) treated the said addition under section 69A instead of Section 68 thereby upheld the addition of Rs.38,61,083/-. Further aggrieved the assessee has filed present appeal before the Tribunal.

I have heard the submission of Ld. Authorized Representative (Ld. AR) for the assessee and Ld. Senior Departmental Representative (Ld. Sr-DR) for the Revenue and have gone through the order of lower authorities carefully. The Ld. AR of the assessee submits that once the Assessing Officer accepted that assessee has made withdrawal from his bank accounts and has not brought any evidence that withdrawal of amount was invested elsewhere or incurred on any expense, the cash balance available with the assessee was to be 6 (A.Y 16-17) Harishbhai G Chovatiya believed. The Ld.AR of the assessee submits that he has filed cash book and bank pass books. The source of cash withdrawal is mainly from the loan availed by assessee. The lower authorities have not disputed such loan, which is otherwise clearly reflected in the bank accounts of assessee. Further there is clear withdrawal from the bank accounts in cash, the assessee right from the beginning has taken a plea that he intended to purchase some agricultural land at his native place and cash was withdrawn for making payment to seller. However, the deal was not materialized and cash was clearly available with the assessee. The only reason for lower authorities to disbelieve the theory of cash flow as to why the cash remained in hand for long period. There is no restriction or limit for keeping cash at home (hand). The Assessing Officer has not brought any adverse material or evidence that such cash was invested anywhere else. The Ld.AR of the assessee submits that once the closing balance cash of Rs.6,77,106/- was accepted and the assessee has clearly proved withdrawal from his bank account, then the lower authorities were not justified in treating the cash available with the assessee as unexplained. The Ld. AR of the assessee submits that he has filed copy of cash-flow statement, cash book and copy of pass-book. To support his submission, Ld. AR for the assessee relied upon following case law:  Nand Kumar Taneja Vs ITO [2019] 105 taxmann.com 390 (Delhi- Trib.),  Sunny Kapoor Vs ITO [2022] 142 taxmann.com 577 (Luck-Trib.),  S.R. Ventakaratnam Vs CIT, (1981) 6 Taxman 263(Kar) 7 (A.Y 16-17) Harishbhai G Chovatiya 6. On the other hand, Ld. Sr-DR for the Revenue supported the order of lower authorities. The Ld. Sr. DR for the Revenue submits that as per theory of human probability as has been held by Hon’ble Apex Court in the case of Durga Prasad More (supra) and Sumati Dayal (supra) that nobody will keep such huge amount of cash-in-hand when they are maintaining bank accounts. The assessee has availed the loan and he was bound to pay some interest to lender and keeping the cash-in-hand in idle for is not convincible. The Ld. Sr-DR for the Revenue submits that case law relied on by Ld. AR for the assessee is not applicable in the facts of the present case as fact of present case is different. In case of Nand Kumar Taneja (supra), the source was not explained by that assessee. In case of Sunny Kapoor (supra) the assessee has made deposit in bank and it was not available. Similarly, in the case of S. R. Ventakaratnam (supra) the source was not explained.

I have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. I have also gone through various documents filed by the assessee and deliberated on various case laws. The assessing officer made addition of Rs. 38,61,083/- by taking view that details working of cash balance of Rs.42,42,700/- on account of withdrawal from 27.04.2015 to 10.04.2015 from his different bank accounts are not acceptable as that it remains in cash-in-hand till the end of the year. Though, the assessing officer added cash in hand under section 68, however, the ld CIT(A) while confirming such addition treated it under section 69A. 8 (A.Y 16-17) Harishbhai G Chovatiya The ld. CIT(A) while confirming the impugned additions held that though, the assessee has cash withdrawal of Rs.42,42,700/- during the period from 27.04.2015 to 10.07.2015 and out of which Rs.25.00 lakh was withdrawn by assessee on 27.04.2015. The entire cash-in- hand for long period remained unexplained. I find that the cash in hand at the beginning of the financial year is accepted by the assessing officer, as the assessing officer while making addition reduced the closing cash balance from cash in hand shown by the assessee. I further find that the availing of loan form bank is also not in dispute. From the documents filed before the lower authorities as well as before me the assessee has also proved the cash withdrawal, even such fact is accepted by assessing officer. The only reason for making addition is as to why such cash was kept by the assessee for a longer period. The ld Sr DR for revenue also opposed the submissions of the assessee that despite having bank account, as to why the assessee kept such huge cash in hand. Before me, the ld AR for the assessee argued that there is no limit or restriction of keeping the cash at home, I find merit in his submissions that there is no such restriction in law. I find that the cash in hand shown by the assessee is duly explained and recorded in his cash book and source of which is known, which is clearly seen form the withdrawal from the bank on various dates. The assessing officer has not brought any adverse material or evidence on record that the cash in hand was beyond the withdrawal from bank. In my view, once the assessee explained the source of cash in hand, the assessing officer was not 9 (A.Y 16-17) Harishbhai G Chovatiya justified in doubting the availability of such cash in hand for the sole ground of long period of holding, without brining rebutting such contention. Thus, the grounds of appeal