HASMUKH KANJIBHAI TADHANI,SURAT vs. INCOME TAX OFFICER, WARD- 3(2)(3), SURAT

The grounds of appeal

1. On the facts and in the circumstances of the case as well as law on the subject, the learned commissioner of the Income Tax (Appeals) has erred in confirming the addition of Rs.5,07,000/- on account of cash deposits in the bank account during the demonetization period treated as alleged unexplained money u/s.69A of the Act.

Briefly stated, the facts of the case are that the assessee has filed his return of income for assessment year (A.Y.) 2017-18, on 05.03.2018, declaring total income of Rs.6,77,840/-. The return of income was processed u/s 143(1) of the Income Tax Act. Later on, the case of the assesse was selected for scrutiny, under manual scrutiny criteria as per Para-1(vi) of Instructing No. 4/2018 dated 20.08.2018 of CBDT read with subsequent directions issued vide F.NO.225/282/2018/ITA.II dated 19.9.2018. Therefore, notice u/s 143(2) of the Act was issued by the assessing officer, on 29.09.2018 and duly served upon the assessee.

As per the information available with the assessing officer, the assessee has maintained bank Account No.2700101110007725 with Bank of India and deposited total cash of Rs.5,07,000/- in this bank account during the demonetization period. Therefore, assessing officer issued notice to the assessee, u/s 142(1) of the Act, on 14.08.2019 and 21.09.2019, calling for certain details as per Annexure to the said notice.

In response to the above said notice, the assessee filed a written submission. As regards the source of cash deposited in bank accounts during the demonetization period, the assessee has stated that he had cash on hand, as well as withdrawn during the year, out of which cash

Another show cause notice was subsequently issued by assessing officer on 17.12.2019, wherein the assessee was requested to submit details of cash deposit made during demonetization period with source thereof. In response to the said notice, the assessee filed a written submission and explained the cash deposited during the demonetization period, amounting to Rs.5,07,000/-. The assessee stated that he has deposited cash of Rs. 5,07,000/- on 1.12.2016 and the source of the same was, cash from cash withdrawal from bank of Rs.2,67,000/- and capital withdrawal from Shivam Polishing LLP in cash of Rs. 2,40,000/-.

However, assessing officer rejected the contention of the assessee and held that the deposits of Rs.5,07,000/- in its bank account, during the demonization period is the undisclosed income for the year under consideration, as the assessee has failed to prove the source of the cash deposited of Rs.5,07,000/- in the bank account. Therefore, the cash deposited of Rs.5,07,000/- in the assessee's bank account, during the demonetization period was treated as unexplained money u/s 69A of the Act and accordingly the same was added to the total income of the assessee.

Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the addition made by the Assessing Officer, observing as follows: “7.1 The facts and grounds of the appeal have been carefully considered.

Aggrieved by the order of ld. CIT(A), the assessee is in further appeal before us.

Shri P. M. Jagasheth, the Learned Counsel for the assessee submitted that in response to notice under section 131 of the Act, the assessee has explained the source of cash deposit to the tune of Rs. Rs.5,07,000/-, during the demonetization period. The assessee stated that he has deposited the cash, out of earlier savings of Rs.1,89,500/- and cash withdrawal from the Bank of India of Rs.3,17,500/-. However, during the assessment proceedings, the assessee has also explained that assessee was having sufficient opening balance and out of that assessee has deposited the cash during the demonetization period. The Ld. Counsel also stated that assessee submitted the cash follow statement for financial years 2015-16 and 2016-17, which is placed at page no.16 of the paper book and stated that since the assessee was having sufficient opening cash balance to deposit during the demonetization period, the addition should not have been made by the assessing officer. The ld Counsel also stated that the basic exemption limit is Rs. 2,50,000/-, that is, the maximum amount which is not chargeable to tax. Therefore out of cash deposit to the tune of Rs.5,07,000/-, the amount of Rs. 2,50,000/-, has deemed to be explained. For this, ld Counsel relied on the judgment of the Co- ITA.19/SRT/2023/AY.2017-18 Hasmukh Kanjibhai Tadhani ordinate Bench of ITAT, Surat in the case of Jitesh Vithalbhai Rashiya vs. ITO, in for AY.2017-18, order dated 18.10.2022. The assessee also submitted the cash book for financial year 2016-17, which is placed at page no.12 to 15 of the paper book and ld Counsel stated that considering the balance in the cash book, it is evidently clear that assessee has sufficient cash balance before the demonetization period starts, therefore, the addition should not have been made in the hands of the assessee and therefore ld Counsel prays the Bench that addition made by assessing officer may be deleted.

On the other hand, Ld. Departmental Representative (ld. DR) for the Revenue submitted that assessee has not explained the source of cash deposit during the demonetization period with help of concrete evidences. The assessee submitted before the Assessing Officer the cash book, cash flow statement, bank statement, and amount withdrawn from bank and amount withdrawn from partnership firm, in cash, which are not the sufficient evidences and documents, hence ld DR prays the Bench that addition made by the assessing officer may be sustained.

I have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. Before me, Ld. DR for the Revenue reiterated the stand taken by the Assessing Officer. However, on the other hand, Ld. Counsel for the assessee submitted, the return of income and computation of income for assessment year (AY.) 2017- 18 (vide paper book page nos.3 to 5), wherein I have noticed that ITA.19/SRT/2023/AY.2017-18 Hasmukh Kanjibhai Tadhani assessee has income from house property and also has income from business and profession to the tune of Rs.10,70,000/-, as a remuneration received from Shivam Polishing LLP. The assessee also received profit from Shivam Polishing LLP to the tune of Rs.12,73,620/-. The assessee also submitted the detail of cash deposited during the year under consideration of Rs.5,07,000/-, vide paper book page no.6, wherein it is stated that cash was deposited out of cash withdrawal from bank and out of capital withdrawal from Shivam Polishing LLP in cash. The Ld. Counsel also submitted the bank statement of the assessee, which is placed at paper book, page no.7, wherein the deposit in the bank and withdrawal from the bank, are clearly stated. The assessee also submitted the copy of the cash book from period of 01.04.2016 to 31.03.2017, wherein all the transactions relating to the cash withdrawal from the bank and deposited in the bank, have been duly recorded. The Ld. Counsel also submitted before me the cash flow statement, which is placed at paper book page no.16, and I have observed that, as per cash flow statement, the closing cash balance is Rs.10,40,779/- as on 31.03.2016. The assessee also submitted the details of cash deposited for the period under consideration which is placed at paper book page nos.18 and 19. The assessee also submitted the return of income and ledger account of Shivam Polishing LLP wherein the assessee is a partner.

From the above facts, it is vivid that assessee has sufficient cash in hand, at the beginning of 01.04.2016, and the documents and evidences submitted by assessee, prove the cash in hand, as on 01.04.2016, which has not been rebutted and discredited by the Assessing Officer. The assessee has submitted plethora of documents

I note that assessee has submitted cash book, cash flow statement and cash book, which shows that assessee has sufficient opening cash balance at the beginning of 01.04.2016. Apart from this, the assessee is a partner in M/s Shivam Polishing LLP and from the partnership firm, the assessee has received remuneration to the tune of Rs.10,70,000/- and profit to the tune of Rs.12,73,620/-. The assessee has submitted the cash deposited during the demonetization and the summary thereof which is placed at paper book page nos.18 to 19 and hence it is quite clear from the cash book, cash flow statement and cash withdrawal from the bank, that assessee has explained the source of cash deposit in bank account in a satisfactorily manner. Hence, I am not inclined to accept the contention of the Assessing Officer in ITA.19/SRT/2023/AY.2017-18 Hasmukh Kanjibhai Tadhani any manner and hence the addition so made is deleted. Hence this ground of the assessee is allowed.

Ground No.2 raised by the assessee relates to initiation of penalty under section 271AAC of the Act, which is premature in nature, hence does not require adjudication.

In the result, the appeal filed by the assessee is allowed.