SH. SURESH KUMAR AGARWAL,B-9, GOVIND MARG, RAJA PARK, JAIPUR vs. ITO, WARD-6(4), JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ds le{k BEFORE: HON’BLE SHRI SANDEEP GOSAIN, JUDICIAL MEMBER vk;dj vihy la-@ITA No. 426/JP/2022 fu/kZkj.k o"kZ@Assessment Year : 2017-18. cuke Shri Suresh kumar Agarwal The Income Tax Officer, Vs. B-9, Govind Marg, Raja Park, Ward 6(4), Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No. AAYPA 5992 K vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri P.C. Parwal, C.A. jktLo dh vksj ls@ Revenue by : Shri Anoop Singh (Addl.CIT) lquokbZ dh rkjh[k@ Date of Hearing : 11/01/2023 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 3/04/2023 vkns'k@ ORDER

PER: SANDEEP GOSAIN, J.M.

This appeal by the assessee is directed against the order of ld. CIT(A),

National Faceless Appeal Centre (NFAC), Delhi dated 18.11.2022 for the assessment year 2017-18. The assessee has raised the following grounds of appeal :- 1. The ld. CIT (A), NFAC has erred on facts and in law in confirming the addition of Rs. 60,000/- u/s 69A of IT Act by treating the cash deposit to this extent in the bank account as unexplained income of assessee by not appreciating that the source of such cash deposit is the cash withdrawn earlier from the same bank account and past savings. 2. The ld. Lower Authorities have erred on facts and in law in taxing alleged unexplained cash deposit in the bank account u/s 115BBE @ 60% instead of taxing the same @ 30% by ignoring that section 115BBE substituted by Taxation Laws (Second Amendment Act), 2016 which received the assent of President on 17.12.2016 and made applicable from 01.04.2017 is not applicable to AY 2017-18.

2 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.

Ganganagar Motors Ltd. and partner in firm M/s. Royal Exports. He filed his return of

income on 22.01.2018 declaring total income of Rs. 7,99,850/-. The assessee

declared the income under the head salary, profit and gains from business &

profession and income from other sources. The case of the assessee was selected

for limited scrutiny for the reason of Cash Deposit during the demonetization for the

assessment year under consideration. The AO observed that assessee has deposited

cash of Rs. 60,000/- in his savings bank account on 19.11.2016 maintained with

Punjab National Bank. On being asked, the assessee filed the relevant required

documents/evidences for the verification of the source of the cash deposits made by

him during the year under consideration and submitted that the source of such cash

deposit is earlier withdrawal from same bank account and accumulated saving. The

AO, however, held that assessee failed to explain the source of such cash deposit

and accordingly made addition of Rs. 60,000/- under section 69A of the IT Act,

1961. On appeal, the ld. CIT (A) confirmed the addition made by the AO by holding

that bank statement revealed that Rs. 60,000/- was withdrawn on 10.08.2016. The

assessee contended that it is this very money which was deposited on 19.11.2016

appears farfetched. Just because he appears to have money some three months

back does not mean same was also available to be deposited in November, 2016.

Withdrawal of money in August 2016 would have been for a purpose which cannot

be deposited in the wake of demonetization. Similarly, the statement that it was

3 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.

partly on account of accumulated savings is also not substantiated. Aggrieved by

the order of the ld. CIT (A), the assessee is in appeal before the Tribunal.

The first ground of the appeal relates to confirming the addition under section 69A of the IT Act by treating the cash deposit in the bank account as unexplained income of the assessee.

as under :

“ 1. At the outset it is submitted that CBDT vide Instruction No.3/2017 dt.

21.02.2017 (copy enclosed) has issued Standard Operating Procedure to be

followed by the AO in verification of cash transactions relating to

demonetisation. In this instruction the source specific verification guideline has

been given in the Annexure which provides that in case of an individual not

having any business income, no further verification is required to be made if

total cash deposit is upto Rs.2.5 lakhs. In the present case, the cash deposited

in the bank account is only Rs.60,000/-. From the computation of total income

and capital account (copy enclosed) it can be noted that assessee is not

having any business income. The income shown under the head income from

business or profession is remuneration received from firm M/s Royal Exports in

which he is a partner. Thus, in view of CBDT Instruction, the addition

confirmed by CIT(A) be deleted since no verification is required for such small

amount.

out of the cash of Rs.60,000/- withdrawn earlier on 10.08.2016 and out of past

savings. The Ld. CIT(A) has not accepted this contention of assessee on the

4 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.

ground that there is time gap of 3 months from the date of cash withdrawal

and cash deposit and the withdrawal of money in August 2016 would have

been for a purpose which cannot be deposited in the wake of demonetisation.

In this connection it is submitted that the gap between the amount withdrawn

and that deposited is only 3 months. No material is brought on record by the

lower authorities that this withdrawal has been utilised elsewhere. Hence, the

credit of such withdrawal ought to be allowed to the assessee against the

subsequent deposit more particularly when the time gap between the

withdrawal and the deposit is not large and falls in the same year. Reliance in

this connection is placed on the following cases:-

Vinatha Madhusudan Reddy Vs. ACIT (2018) 54 CCH 0151 (Mum) (Trib.)

It is seen that the cash deposits in the bank account are preceded by withdrawal from the very same bank account. The cash flow statement filed by the Assessee explaining availability of cash on the various dates of deposit of cash in the bank account has not been disbelieved by the Revenue authorities. They have proceeded on the basis that since there was sufficient time lag between the dates of withdrawal of cash from the bank account and the dates of deposits, the availability of cash cannot be believed. The legal position in this regard is that if the deposit of money in the bank account is preceded by withdrawal of money from the very same bank account then the source of funds is prima facie demonstrated or explained by the Assessee. The Karnataka High Court in the case of S.R. Ventakaratnam Vs. CIT (1981) 127 ITR 0807 has held that once the Assessee discloses the source as having come from the withdrawals made on a given date from a given bank, it was not open to the revenue to examine as to what the Assessee did with that money and cannot chose to disbelieve the plea of the Assessee merely on the surmise that it would not be probable for the Assessee to keep the money unutilized. The ratio laid down in such judgment will apply to the facts of the present case. If the revenue wants to disbelieve the plea of the Assessee then it must show that the previous withdrawal of cash would not have been available with the Assessee on the date of deposit of cash in the bank account. The AO and CIT(A) have proceeded purely on assumption and surmises that cash would not be lying idle with the Assessee for such a long time.

5 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.

The Assessee has satisfactorily explained the source of funds out of which deposit of cash was made in the bank account. Therefore, addition is deleted.

Ramilaben B. Patel Vs. ITO (2019) 71 ITR (Trib) 0048 (Ahd.)

Certain credit entries were reflecting the cash deposit in the bank account of the assessee. But the assessee failed to substantiate his claim for the source of such cash deposit. Therefore, the same was treated as undisclosed income and added to the total income of the assessee. The CIT(A) subsequently confirmed the view taken by the AO. CIT(A) rejected the contention of the assessee that the cash was deposited out of the cash withdrawal from the bank without adducing the cogent reasons. The cash withdrawal has not been doubted by the lower authorities, and nothing has been brought on records suggesting that the cash withdrawn from the bank has been incurred either as revenue expenses or capital expenses. In the absence of any documentary evidence, we can safely presume that the cash withdrawn from the bank was available with the assessee which was subsequently deposited with the bank. Therefore, we cannot treat the same as undisclosed income of the assessee.

ACIT Vs. Baldev Raj Charla & Ors. (2009) 18 DTR 413 (Del.) (Trib.)

The Hon’ble ITAT vide Para 27 held as under:-

We find that this explanation of the assessee was found correct that against these five deposits on dt. 14.06.1996, Rs. 31,000; 21.07.1997, Rs.1,27,000; 18.09.1997, Rs. 22,000; 4.10.1997, Rs.26,000 and on 7.11.1997, Rs. 52,000 there were sufficient cash withdrawals from AWI and from SBI, Mayapuri, but this addition has been confirmed by learned CIT(A) on the basis that there is time gap between the assessee’s withdrawals from his own partnership M/s AWI or from his own bank. There is no finding recorded by the learned AO or by learned CIT(A) that apart from depositing these cash into bank as explained by the assessee, there was any other user by the assessee of these amounts and in the absence of that, simply because there was a time gap, the explanation of the assessee cannot be rejected and hence the addition confirmed by the learned CIT(A) is not correct.

Sh. Hemant Prabhakar Vs. DCIT ITA No.684/JP/98 order dt.12.03.04 (Jpr.) (Trib.)

It was held that the where the assessee has withdrawn cash from the bank account and deposited the same after 14 months which was

6 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.

shown as cash balance in cash flow statement, the said cash is fully explained and the addition is deleted.

Vinod Kumar Goyal Vs. ACIT ITA No.310/JP/08 order dt.30.05.08 (Jpr.)(Trib.)

In this case the assessee withdrawn the amount from the bank around one to one and half year back and re-deposited the same. It was held that the lower authorities were not justifying in disbelieving the explanation of the assessee that the money withdrawn from the bank was lying with the assessee till it was introduced in M/s Goyal Brothers.

R.K. Dave Vs. ITO (2005) 94TTJ 19 (Jodh.) (Trib.)

Assessee invested a sum of Rs.15,000/- in NSCs on 08.02.1991, and Rs. 5,000/- in PPF. It stated that amounts of Rs. 15,000/- and Rs. 5,000/- were deposited out of withdrawals of Rs. 45,000/- made on 9.07.1990 & 10.07.1990 & investment in the NSC’s was made on 08.02.1991, i.e., after a gap of seven months. AO made addition of Rs. 20,000/- by holding that there was no evidence that the amount withdrawn on earlier dates was available with the assessee for making investment in NSCs. The same position was found with reference to investment in PPF. On appeal, the Ld. CIT(A) upheld the addition on the ground that there was a time gap between the withdrawals and for making investment in the NSCs which the assessee could not explain satisfactorily. Hon’ble ITAT held that assessee had placed cash flow statement before the authorities below. It is also not in dispute that the assessee had withdrawn an amount of Rs. 45,000/- on 09.07.1990 and 10.07.1990. It is not the case of the revenue that amounts so withdrawn were utilized elsewhere. Mere fact that the assessee could not explain the time gap between the amount withdrawn and the investment in NSCs or where the amount was kept would not itself justify the addition. The claim of the assessee could have been rejected only if the source of balance in the bank account was not established or it could have been demonstrated that the amount so withdrawn was utilized elsewhere. This is not the case here. Therefore, there is no justification for sustaining the impugned addition.

In view of above, addition confirmed by Ld. CIT(A) be directed to be deleted.”

Authorities.

7 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.

record and also gone through the orders of the revenue authorities. I have also

gone through the CBDT Instruction No. 3/2017 dated 21.02.2017 placed on record,

whereby the CBDT has issued Standard Operating Procedure to be followed by the

AO in verification of cash transactions relating to demonetization. In this instruction

the Source Specific General Verification Guideline has been given in the Annexure is

reproduced herein below :-

“ 1. Cash out of earlier income or savings:

1.1 In case of an individual (other than minors) not having any business income, no further verification is required to be made if total cash deposit is upto Rs. 2.5 lakh. In case of tax payers above 70 years of age, the limit is Rs. 5.0 lakh per person. The source of such amount can be either household savings/savings from past income or amounts claimed to have been received from any of the sources mentioned in Paras 2 to 6 below. Amounts above this cut-off may require verification to ascertain whether the same is explained or not. The basis for verification can be income earned during past years and its source, filing of ROI and income shown therein, cash withdrawals made from accounts etc.”

In the present case, the cash deposited in the bank account is only Rs. 60,000/-.

From the computation of total income and capital account, it is noted that the

assessee is not having any business income. The income shown by the assessee

under the head income from business or profession is remuneration received from

firm M/s. Royal Exports in which he is a partner. Therefore, taking into

consideration the CBDT Instruction, supra, the case of the assessee does not require

any verification being below the limit prescribed by the CBDT.

8 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.

the Ld. CIT(A) rejected the contention of the assessee that the cash was deposited

out of the cash withdrawal from the bank without adducing the cogent reasons. The

cash withdrawal has not been doubted by the authorities below, and nothing has

been brought on records suggesting that the cash withdrawn from the bank has

been incurred either as revenue expenses or capital expenses. The AO and the ld.

CIT (A) have proceeded on the basis that since there was a time gap of three

months between the date of withdrawal of cash from the bank account and the date

of deposit, the availability of cash cannot be believed. In the absence of any

documentary evidence, it can safely be presumed that the cash withdrawn from the

bank was available with the assessee, which was subsequently deposited with the

bank. The Coordinate Bench of the Mumbai Tribunal in the case of Vinatha

Madhusudan Reddy vs. ACIT (2018) 54 CCH 0151 (Mum-Trib.) followed the decision

of Hon’ble Karnataka High Court in the case of S.R. Ventakaratnam vs. CIT, 127 ITR

807 (Kar.) wherein it has been held that once the assessee discloses the source as

having come from the withdrawals made on a given date from a given bank, it was

not open to the revenue to examine as to what the assessee did with that money

and cannot chose to disbelieve the plea of the assessee merely on the surmise that

it would not be probable for the assessee to keep the money unutilized. Therefore,

following the CBDT guidelines, supra, and the judgment of the Hon’ble Karnataka

High Court and the various decisions of the coordinate benches of the Tribunal, I set

aside the orders of the revenue authorities by deleting the addition and allow the

appeal of the assessee.

9 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur. The Second ground of appeal relates to taxing the alleged unexplained cash deposit in the bank account under section 115BBE.

Order pronounced in the open court on 3/04/2023.

Sd/- ¼lanhi xkslkbZ½ (SANDEEP GOSAIN) U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 3/04/2023. Das/ आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant-Shri Suresh Kumar Agarwal, Jaipur. 2. izR;FkhZ@ The Respondent- The ITO Ward 6(4), Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 426/JP/2022} vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत

10 ITA No. 426/JP/2022 Shri Suresh Kumar Agarwal, Jaipur.