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Facts
The assessee, an NRI, filed a return declaring income from interest. The AO observed a cash deposit during demonetization and added it to the total income. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the assessee was able to explain the source of cash deposited during demonetization from earlier withdrawals. The addition made by the AO was deleted.
Key Issues
Whether the source of cash deposits made during demonetization was sufficiently explained by the assessee, an NRI, and if the addition by the AO was justified.
Sections Cited
143(3), 250, 143(2), 142(1), 46A, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI “D” BENCH: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI MANISH AGARWAL
Year : 2017-18] Kasiraj Rengappa vs ITO, 6313, Clover Hill Drive, Ward-1(1)(1) San Jose Foreign, International taxation, United States of America OR Civic Centre, Minto Road, [Indian address] - 3/226, New Delhi-110002. Navaneethkrishnapuram Sevlkulam, Tirunelveli, Tamil Nadu-627754. PAN-BRJPR2094A APPELLANT RESPONDENT Appellant by Shri T.Vasudevan, Adv. (through VC) Respondent by Shri Vikram Singh Sharma, Sr.DR Date of Hearing 09.10.2025 Date of Pronouncement 09.10.2025 ORDER
PER MANISH AGARWAL, AM :
The present appeal is filed by the assessee against the order dated 29.12.2021 by Ld. Commissioner of Income Tax (A), National Faceless Appeal Centre (“NFAC”), Delhi-42 [“Ld. CIT(A)”] in Appeal No. CIT(A), Delhi-42/10502/2019-20 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 26.12.2019 passed u/s 143(3) of the Act pertaining to assessment year 2017-18.
Brief facts of the case are that assessee is NRI and earned income from interest only during the year and filed his return of income on 17.03.2018, declaring total income of INR 85,320/-. The case of the assessee was selected for scrutiny by issue of notice u/s 143(2) of the Acton 24.09.2018. Thereafter notices were issued u/s 142(1) in response to which assessee filed reply from time to time. The AO observed that assessee deposited cash in SBN during demonetization period from 09.11.2016 to 30.12.2016 into his bank account with State Bank of India, NRO Account No.33350651335 of INR 22,50,000/-. After considering the submission filed, AO passed the order on 26.12.2019 u/s 143(3) of the Act wherein total income of the assessee was assessed at INR 23,35,320/-.
Against the said order, assessee filed an appeal before Ld. CIT(A) who vide order dated 29.12.2021, dismissed the appeal of the assessee.
Aggrieved by the order of Ld. CIT(A), assessee is in appeal before the Tribunal by taking following grounds of appeal:- [ 1. “The appellate order u/s.250(6) of the Income-tax Act, 1961 dated 29.12.2021 passed by the learned Commissioner of Income- tax(Appeals) Delhi-42, is erroneous, opposed to law and facts of the case.
2. The learned Commissioner of Income-tax(Appeals) erred in holding that the agreement for purchase of property was filed during appeal as part of 'additional submissions' for the first time on 24.03.2021 without appreciating the fact that the same was filed before the Assessing officer vide letter dated 10.12.2019.
3. The learned Commissioner of Income-tax (Appeals) erred in holding that the appellant was specifically asked to submit paper-book of all submissions filed before the AO, however the appellant has not submitted such copy of such submissions.
4. The learned Commissioner of Income-tax(Appeals) failed to appreciate the fact that as directed by him, the appellant had duly submitted a paper book with all the correspondence and documents Page | 2 submitted before the Assessing officer during the course of the assessment proceedings before the learned CIT(A) which is also acknowledged by him vide para 5 of the appellate order.
5. The learned Commissioner of Income-tax(Appeals) erred in treating the documents submitted as fresh and additional evidence which is without appreciating the facts that they were already filed before the Assessing officer.
The learned Commissioner of Income-tax(Appeals) erred in not considering the submission of the appellant and holding that a new evidence was produced and that appellant had not made an application under Rule 46A which is against the facts of the case.
The learned Commissioner of Income-tax(Appeals) erred in not appreciating the fact that, even in the absence of an application being filed by the appellant under Rule 46A, the Appellate Authority is empowered to verify the claim of the appellant with the Assessing officer if it is observed that a new evidence is produced at the time of appellate proceedings and arrive at a conclusion and cannot summarily reject the claim of the appellant on technical grounds.
8. The learned Commissioner of Income-tax(Appeals) erred in not calling for a remand report from the Assessing officer on the documents and submissions of the appellant before concluding them as additional evidence filed by the appellant at the stage of appellate proceedings and rejecting the same without giving the appellant an opportunity of being heard.
9. The learned Commissioner of Income-tax(Appeals) failed to appreciate the fact that the appellant being and Non-Resident he had withdrawn the money from his account when he was in India and given it to his parents in order to identify and buy a property which was the reason for paying the advance in cash.
The learned Commissioner of Income-tax(Appeals) failed to appreciate the fact that the appellant being and Non-Resident, he was physically not present in India and was not in a position to personally interact with the prospective sellers and finalize a deal as and when it could materialize and thus he was handicapped from carrying out the transactions through banking channels which should not be reason for rejecting the genuine claim of the appellant.
The learned Commissioner of Income-tax(Appeals) erred in holding that no reasons were adduced by the appellant why the transactions for purchase of property did not materialize which is against the facts, the appellant had duly explained the reasons with supporting documents which were omitted to be considered in arriving at the conclusion.
The learned Commissioner of Income-tax(Appeals) erred in not considering the fact that the claim of the appellant is supported by Page | 3 documents which could be verified by the Assessing officer at any given point of time, however confirmed the addition made holding the claim of the appellant as not genuine.
The learned Commissioner of Income-tax(Appeals) erred in holding that the claim of the appellant that the cash deposits made by the appellant were out of the cash withdrawals made earlier is not plausible and is a concocted one which is against the facts of the case.
The learned Commissioner of Income-tax(Appeals) erred in observing that the appellant had not shown that he had ever made such huge deposit earlier or subsequently as a reason for rejecting the genuine claim of the appellant.
The learned Commissioner of Income-tax(Appeals) erred in concluding the claim of the appellant as no genuine which is without appreciating the fact that the appellant is an NRI, and he has no business activities in India and the appellant's only source of income is from salary earned in U.S.Dollars which is transferred to his NRO Account and was withdrawn for purchase of property and re-deposited during demonetization period as the transaction did not materialize.
The learned Commissioner of Income-tax(Appeals) erred in not appreciating the fact that being a salaried NRI there is no scope for any undisclosed income being earned by the appellant as concluded by him to be assessed u/s.69A of the Act.
For these and other grounds which the appellant may be permitted to submit at the time of hearing the appeal, it is prayed, the order of the learned Commissioner of Income-tax(Appeals) may be set aside and justice rendered.”
Ld.AR for the assessee submits that immediate source of cash deposited during demonetization period of INR 22,50,000/- was out of the cash withdrawal made on 16.08.2014 from the bank account and were kept with the family members who were living in the village and did not have access to banking facilities. Since the assessee had to return back to outside India therefore, the said cash was kept with his parents. He further submits that parents of the assessee had used certain cash for their daily needs and medical expenses. When the assessee came back to India in the month of November, 2016, after going back in July, 2015, he immediately deposited in SBN available out of such withdrawal in bank. In support, Ld.AR drew our attention to the bank statement and further submits the necessary documents alongwith return of income for the year under appeal. He submits that immediate source of the cash deposited in SBN is duly explained as out of the bank withdrawals. He further submits that assessee is having only salary as source of income however, the AO at page 4 of the assessment order, alleged that there was substantial increase in cash sales for which no proper explanation is given and accordingly, cash deposits was held as unexplained. Ld.AR submits that entire case of the AO is based on the wrong footings which observations have been confirmed by Ld.CIT(A) without considering the facts.
6. On the other hand, Ld. Sr. DR supports the orders of lower authorities and requested for the confirmations of the same.
7. Heard the contentions of both parties and perused the material available on record. From the perusal of page 4 of the assessment order, it is seen that AO while analyzing the bank entries appearing in the bank statement of the assessee, observed that there was abnormal increase in cash sales and same was not offered for taxations purposes. Based on these findings, AO made held the cash deposited during demonetization as unexplained. Before Ld. CIT(A), assessee filed all the evidences with respect to withdrawal of the cash from his NRO bank account and copies of the agreements etc. however Ld.CIT(A) dismissed the contention of the assessee for the sole reason that there was no valid explanation for keeping the cash Page | 5 for the period of 03 years with him. We find that there was no doubts on the claim of the assessee that he had made cash withdrawal on 16.08.2014 and the AO has doubted the deposits on wrong pretext of cash sales which is not the case of assessee who is NRI having salary as only source of income.
In view of above facts and circumstances of the case, we are of the view that the assessee has been able to explain the source of cash deposited in the bank accounts during the demonetization period out of the withdrawals made and therefore the addition of INR 22,50,000/- is hereby deleted. All the grounds of appeal raised by the assessee are thus, allowed.
In the result, the appeal of the assessee is allowed.