ANSHU SHARMA ,JAIPUR vs. INCOME TAX OFFICER , JAIPUR

ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal is filed by assessee and is arising out of the order of the National Faceless Appeal Centre, Delhi dated 13/01/2023 [here in after (NFAC)] for assessment year 2017-18, which in turn arise from the order of the ITO Ward 3(5), Jaipur dated 16.12.2019 passed under 143(3) of the Income Tax Act, [ here in after referred to as Act ].

2. The assessee has marched this appeal on the following grounds:-

3. That the Ld. CIT(A) and AO have erred in law and on facts of the case i) by treating the cash deposit of Rs. 2499800/- during 01/4/2016 to 31/10/2016 out of the opening cash balance as on 01/4/2016 as 'explained", ii) by treating the cash deposit of Rs. 1522500/- during 09/11/2016 to 30/12/2016 as unexplained' out of the cash balance brought forward from 31/10/2016 4. That the Ld. CIT(A) and AO have failed to consider that the assessee was audited u/s 44AB for real-estate business for the AY 2013-14. They have further erred by assuming that assessee has not kept books of accounts for the AY 2014-15, 2015-16 and 2016-17.

5. That the appellant craves leave to reserve to itself the right to add, alter, amend, substitute, withdraw and/or any ground(s) of appeal at or before the time of hearing.”

4. Being aggrieved, the assessee carried the matter in appeal before the ld. CIT/NFAC. The ld. CIT(A) vide paras 6.0 to 7.0 stated that :

“6.0 ANALYSIS OF THE FACTS AND ADJUDICATION OF THE GROUNDS: 6.1 The assessee has raised five grounds of appeal, out of which Ground Nos. 1 and 5 are general in nature and, hence, do not call for adjudication. Ground Nos. 2 to 4 are raised against the AO’s action in making addition of Rs. 15,22,500/- u/s 69A of the Act. These grounds are taken up for discussion and adjudication in the subsequent paragraphs of this order.

6.2 Further, during the course of appellate proceedings, the assessee filed certain written submissions and relied upon certain case laws. The relevant portion of the written submissions is reproduced below for ready reference. “This submission is in response to the Notice u/s 250 dated 30/12/2020. Appellant wishes to make following submissions against each of the grounds raised in Form No. 35:

Factual Back-Ground: 1. Assessee was engaged in business of Purchase / Sale of Land Plots and real estate. Her Books of Accounts were audited u/s 44AB in the AY 2013-14. Thereafter, she did not have much of the business and the accounts were not subjected to audit in subsequent year, including AY 2017-18. Cash Balance as on 31/03/2013 was Rs. 9,223,610.00, as appearing in the Audited Balance Sheet (See Annexure-1).

2. Assessee had kept complete 'Books of Accounts' in the electronic form. Ld. AO had asked the 'Cash Balance' on various dates vide notice u/s 142(1) dated 22/08/2019 (See Annexure-2) during the assessment proceedings.

Assessee with the help of her books of accounts furnished following information vide her reply dated 07/11/2019 (See reply at Annexure-3):

Cash balance on different dates

S No Cash Balance as on Amount (Rs.) 1 1-Apr-14 61,44,867.00 2 8-Nov-14 45,34,127.00 3 31-Dec-14 46,59,127.00

S No Cash Balance as on Amount (Rs.) 1 1-Apr-15 46,24,127.00 2 8-Nov-15 40,08,396.00 3 31-Dec-15 36,96,730.00

S No Cash Balance as on Amount (Rs.) 1 1-Apr-16 31,20,912.00 2 8-Nov-16 15,26,112.00 3 31-Dec-16 73,612.00

Thus, it can be observed that Cash Balance which was Rs. 92.23 Lacs on 31/03/2013 had come down to Rs. 61.44 Lacs on 01/04/2014, Rs. 46.24 Lacs on 01/4/2015 and Rs. 31.20 Lacs on 01/4/2016. Cash Balance available on 08/11/2016 (SBNs) was deposited during the demonetization period and the Cash-in-hand was Rs. 73,612/- on 31/12/2016 (Post-monetisation)g.

1. Further, there was no abnormal activity of 'Amount of Cash Deposit/Specified Bank Notes (in short 'SBNs) during the demonetization period i.e. 08/11/2016 to 31/12/2016, as can be observed from her past cash- transaction practice:

Assessee's Past Practice of Cash-handling FINANCIAL OPENING CASH CASH USED CASH USED CLOSING YEAR BALANCE OF WITHDRAWN FOR BANK FOR BALANCE OF CASH DURING THE DEPOSIT DRAWINGS CASH YEAR DURING THE DURING THE YEAR YEAR 2014-15 6144867/- 835000/- 1550000/- 805740/- 4624127/- 4624127/- 692585/- 1420800/- 775000/- 3120912/- 2015-16 2016-17 ( 3120912/- 1050000/- 2499800/- 145000/- 1526112/- 01/04/2016 TO 8/11/2016 2016-17 1526112/- 120000/- 1522500/- 50000/- 73612/- (8/11/16 TO 31/12/16) 2016-17 73612/- 850000/- 75000/- 848612/- (1/01/17 TO 31/03/17

Thus, the level of deposit of cash during the Demonetization Period" was normal looking to movement of cash in past years.

Ld. AO has miserably failed to appreciate above facts and even did not issue any 'Show Cause Notice' for seeking explanation of the assessee about deposit of cash during demonetization period."

Hon'ble Gujarat High Court observed as under in the recent case of Salem Sree Ramavilas Chit Company Pvt Ltd. Vs DCIT(2020) (423 ITR 525) (Copy of order attached as Annexure-7)

Aforesaid judgement compared the cash movement during the past period vis-a-vis demonetization period, and ruled in favor of assessee."

6.3 I have carefully considered the grounds of appeal raised by the assessee and written submissions made in support of the same, and examined the issue under dispute in the light of the facts and circumstances of the case and relevant provisions of the statute and applicable judicial precedents. The following documents are also submitted during the appeal proceedings as part of written submissions.

• Uncertified balance sheet for the FY 2012-13 . • The details submitted before the AO are submitted now as part of written submissions • Cash book for the FY 2016-17 showing opening balance of Rs.31,20,912/- • A news paper report of Varanasi City about rush at the bank counters for exchange of SBNs with new currency and deposits of SBNs.

6.4 The appellant mainly raised the following points against the addition made in the assessment order. a). She has maintained books of account including cash book for the AY 2017- 18. The books of accounts maintained by the appellant are not examined by the AO during the e- assessment proceedings. b). The books of accounts of the appellant are audited for the AY 2013-14 and she was in real estate business during the FY 2012-13. c). Submitted an explanation against the AO's reasoning that the cash was not available with the appellant as on first day of depositing the cash during the demonetisation period by saying there was an extraordinary rush at the bank counters to deposit entire impugned cash during the demonetization period. d). Appellant questioned the decision of AO for not considering the regular activity of cash deposits and withdrawals during the FY 2016-17 and also not accepting the opening balance of cash in hand as on 01.04.2016. Also, pointed out the differential treatment given to cash deposits made during the pre-demonetization and demonetization period. e). Contended that there are no evidences to make the addition of cash deposits and additions are driven by assumptions and surmises.

6.5 The above points raised by the appellant are addressed one by one in the subsequent part of the appeal order. a. It is clear from the assessment record that the proceedings are carried out by the AO through e-proceedings. AO would not prevent the taxpayer to upload the cash book, bank book and any other evidence in ITBA during the assessment proceedings. No permission is required from the AO to submit the specific documents if the same are useful for substantiating the stand of the appellant's to substantiate the correctness of the returned income. If such evidences are readily available with the appellant, the same could have been submitted during the appellate proceedings. Vide letter dated 15.10.2018, the appellant submitted in her written submissions asked the AO to tell what are the evidences to be submitted. b. To examine the correctness of the claims made by the appellant in respect of availability of cash in hand at end of each AYS from the returns of Income. It is noticed that the appellant is not into any business activity. The details from the returns are tabulated below. S. No. A.Y Return Form Amount of Cash Remarks in hand (Rs.) 1 2013-14 ITR-4 9223610 Not an audited case. Business income is offered u/s 44AD. The audit information in the return clearly shows that assessee did not maintain books of account. Therefore, hers is not an audited case. 2 2014-15 ITR-4 NA Not an audited case. Business is shown as Other Sector. The assessee did not maintain books of account as per the return. So, assessee’s case is not an audited case. 3 2015-16 ITR-1 (Sahaj) NA No business income. The sources of income are only under the heads House Property and Other Sources. 4 2016-17 ITR-1(Sahaj) NA No business income. The sources of income are only under the heads House Property and Other Sources. 5 2017-18 ITR-2 NA No Business income. The sources of income are only under the heads House Property and Other Sources. c. From the above details it can be understood that the appellant is not into the business activity three years prior to impugned FY 2016-17. The assessee placed reliance heavily on the cash in hand reflected in the FY 2012-13. No proofs are shown by the appellant in the form of bank account statements and transactions made by her during the period of 3 years 7 months after FY 2012- 13. All the explanations and information submitted related to the cash. availability as on 09.11.2016 is not substantiated by the evidences. Though the amount of Rs. 9223610/- is claimed as source of cash deposits is not reliable unless the same is supported by the documentary evidences. The assessee did not offer any business income for the last four years. The claim of the appellant that she is into the real estate business is not evidencing from the returns of income. Assessee was also claimed to be engaged in business of Purchase / Sale of Land Plots and real estate. The sale and purchase transactions including advancing the amounts for purchase of plots/flats is not allowed to be carried out in cash for the amounts exceeding Rs.20,000/- as per the S.269SS w.e.f. 01.06.2015. Keeping the cash for such transactions as argued by the appellant in her written submissions is not tenable legally. No prudent person will try to do the transactions of the nature as stated by the appellant. d. The receipt of rental income does not involve the transactions of cash deposits and withdrawals, Further, the rental income is received from the corporate entity viz. L&T Ltd. All the receipts are made through Bank and TDS made is also reflecting the same. No prudent person will keep such large amount of cash in hand without depositing the same into the bank accounts. The receipt of the interest income also routed through banking channels only. Therefore, generation of cash in the case of appellant is ruled out. The explanations submitted about the purposes of the cash deposit and withdrawals in the bank account is devoid of any merit in the absence of correlation between the income/loss generating activity of the appellant for the last 4 years and cash transactions made. e. One of the arguments of appellant is on differential treatment of cash deposits made in to the bank account during the pre-demonetisation period and demonetisation period. She contends that the AO has accepted the sources of cash deposits in the bank are explainable but the same is not considered for the demonetisation period. At this juncture, there is a need to clarify the reasons for the appellant's case is selected for the scrutiny. The case here is selected under CASS to verify the cash deposits made during the demonetisation period. The case is also under the category of LIMITED SCRUTINY. The AO is not allowed to go beyond the issue on which the case is selected. Therefore, the AO is silent and not made any additions or comments on the sources of cash deposits made in bank accounts prior to the demonetisation period during the FY 2016-17. Therefore, the submissions on the aspect of differential treatment of sources of cash deposits of different periods of the same FY are devoid of merit. f. The AOs observation of multiple tranches of cash deposits is also one of the reasons for considering the sources of cash is unexplainable with the appellant. The appellant deposited the cash in 4 trances into the bank account. No assessee would be willing to go to bank several times to deposit the cash to the extent of Rs. 15,00,000/-. It is important to mention here that the amount deposited is not so huge say if the denomination is only Rs.500/-, then all put together there will be 30 bundles. If the SBNs are also includes of Rs.1,000/- then the cash bundles would be between 15 to 30 bundles only. The bank staff will not take much time to accept the deposits of entire SBNs at one go. Further, there are many instances which show several Crores of rupees is accepted as deposits within 3 to 4 days of demonetisation announcement. Further, the psyche of the depositors will be to deposit the entire amount of SBNs at one go if the amounts are not so large like in the case of appellant. g. Appellant's argument of AO's action is lacking of supporting documents is not acceptable for the reason that the only evidence in possession of the AO is the information of cash deposits in the appellant's bank account. The sources of such cash deposits are known to the appellant and the onus is on her to prove the correctness of sources of cash deposits. The evidences to prove the satisfactory explanation of cash deposits is not on the AO but on the appellant. h. The explanation of availability of cash as submitted as on particular date by the appellant is not worth to consider and examine in the absence of support from the returns of income. The pattern of cash availability is shown in the written submissions is having a tapering style from Rs.92.24 lakhs to Rs.15.23 lakhs. This explanation of the appellant is not appealing to any prudent person. It's a common sense to refute the explanation of a person who returns a meager income of Rs.2,31,510/- is keeping large amount of cash in hand which is several times of annual income without generating income. i. The case law relied on by the appellant vide citation 423 ITR 525 is perused and found that the assessee in that case is into the chit funds business and the Hon'ble court in that case found the analogy between the demonetisation period cash deposits and earlier period deposits during the earlier financial year and remanded the matter to the AO for assessment. Here, in the present case, the appellant is not into the business activity as already provided the facts after verifying from the returns of the assessee elsewhere in this order. Therefore, the ratio decidendi of the case relied on is not applicable to the facts of the appellant's case. Further, it is pertinent to note that the appellant has filed an appeal against the order passed by the AO u/s. 272A(1)(d) of the Act. In the Form No. 35 of that appeal, the appellant has clearly stated she is a housewife and not carrying out any business. Therefore, the maintenance of books is not applicable to the facts of the appellant case and appears to be an afterthought on selection of the case for the scrutiny.

6.6 Due to the above reasons, the CIT(A) is not inclined to accept the explanations submitted by the appellant to delete the additions made in the assessment order. Accordingly, the grounds of appeal filed by the appellant are dismissed.

7.0 In result, the appeal filed by the appellant for the AY 2017-18 against the addition made u/s 69A is dismissed.”

5. As the assessee has not found any favour from the appeal so filed before the ld. CIT(A), the assessee filed an appeal before this tribunal on the various grounds as reproduced here in above. To support grounds so raised by the assessee the ld. AR of the assessee relied upon the following written submissions.

“Factual Background:

1. 1. Assessee has responded to the `Online Verification’ of the Income Tax department for cash deposit during demonesation period, by submitting the `Cash Transaction 2016’ (Please see PB No. 26). Assessee submitted that during the period from 09/11/2016 to 30/12/2016, cash amounting Rs. 1522500/- has been deposited out of the `Withdrawals during the year and in earlier years’.

2. Assessee filed ITR-2 return form on 28/07/2017. Assessee’s case was selected for `Limited Scrutiny’ by the ACIT, Nagour vide notice dated 13/08/2018. Assessee requested the concerned AO vide online response to transfer her case to the jurisdictional ward at Jaipur.

3. Thereafter, a fresh notice dated 29/09/2018 was issued by ITO, Ward 3(5), Jaipur informing that the following issue has been identified for the Limited Scrutiny:

“Cash deposit during the demonetization period”

61,44,867/- 2014-15 92,23,610/- (30,78,743/-) 2015-16 61,44,867/- (15,20,740/-) 46,24,127/- 2016-17 46,24,127/- (15,03,215/-) 31,20,912/-

7. Cash Balance available as on 01/04/2016 amounting Rs. 31,20,912/- was disposed of as under: i) Period prior to demonetization:

AY 2017-18 OPENING WITHDRAWALS DEPOSIT / CLOSING BALANCE USE BALANCE 01/04/2016 to 31,20,912/- 10,50,000/- (2644800/-) 15,26,112/- 08/11/2016 ii) Period during demonetization:

AY 2017-18 OPENING WITHDRAWALS DEPOSIT / USE CLOSING BALANCE BALANCE 09/11/2016 to 15,26,112/- 1,20,000/- (15,72,500/-) 73,612/- 31/12/2016

8. Real estate business, by very nature, is uncertain and unpredictable. Summary of the assessee’s business activities during the last four assessment years was as under:

AY 2013-14 AY 2014-15 AY 2015-16 AY 2016-17 AY 2017-18 Opening Stock 2254400/- 8027204/- 7186604/- 7186604/- 7186604/- Purchases 8293004/- Sales 3321000/- 1740000/- Closing Stock 8027204/- 7186604/- 7186604/- 7186604/- 7186604/- Status of ITR Audit u/s Declared 8% No transaction No No 44AB profit u/s transaction transaction 44AD

9. Assessee was regular in the maintenance of books of accounts including the cash book/bank book, despite NIL activity during the last two years. The fact of maintenance of books of account was duly informed to Ld. AO.

Cash balance on different dates (As informed to Assessing Officer in reply dated 07/11/19) S No Cash Balance as on Amount (Rs.) 1 1-Apr-14 61,44,867.00 2 8-Nov-14 45,34,127.00 3 31-Dec-14 46,59,127.00

S No Cash Balance as on Amount (Rs.) 1 1-Apr-15 46,24,127.00 2 8-Nov-15 40,08,396.00 3 31-Dec-15 36,96,730.00

S No Cash Balance as on Amount (Rs.) 1 1-Apr-16 31,20,912.00 2 8-Nov-16 15,26,112.00 3 31-Dec-16 73,612.00

The very nature of the above information i.e. Cash Balance on odd dates can not be compiled without the help of the books of accounts

Assessee is making submissions on each of the grounds raised before the Hon’ble ITAT: GROUND NO. 1:

That the AO has grossly erred by not giving the opportunity to produce the Books of Account/Cash Book as evidence for the cash transactions, despite the specific request of the assessee. Ld. CIT(A) has further erred by not considering the `Cash Book’ for AY 2017-18 submitted as evidence during appellate proceedings for proving the deposit of demonetized cash balance amounting Rs. 1522500/-. These evidences may please be considered and addition be deleted SUBMISSIONS:

1.1 Assessee, on receipt of the scrutiny notice dated 29/09/2018, had informed the AO on 15/10/2018 that cash deposit is supported by the cash book & other books of account and please inform the documents to be submitted as evidence. 1.2 Thereafter, AO issued a notice u/s 142(1) dated 22/08/2019 (Please see PB No. 43 to 44) raising 10 queries related to cash deposits.

Assessee submitted the replies of the queries on 04/11/2019 and 08/11/2019 (Please see PB No. 45 to 51) and further requested at the end of reply

‘Please raise further queries, if required’ 1.3 However, AO, without raising further queries or asking for evidence, passed an assessment order on 16/12/2019. The assessment order mentions on the second para of page No. 3 as under: “………However, she has not provided copy of cash book, cash flow statement or other supporting documents in support of her contention.” Observations of the AO are in complete violation of the `Principles of Natural Justice’. Natural Justice plays a vital role in Income Tax assessments as the authorities before delivering any order in assessment and collection of taxes are required to consider the documents and evidences submitted. Natural Justice in Income tax hearings includes provision of adequate & proper opportunity of being heard, to ensure a fair hearing and fair dealing with the assessee. Undue haste is against the principle of fairness and such a conduct on the part of assessing officer is required to be deprecated. The words used in Section 69 - “assessee offers no explanation about the nature and source of the investments or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory” The words conspicuously indicate that there must be an opportunity of being heard to the assessee. 1.4 To counter the observations of the AO, assessee submitted `Cash Book’ for the AY 2017-18 (Please see PB No. 52 to 54), during the first appeal proceedings. However, Ld. CIT(A) has not taken any cognizance of the `Cash Book’ and alleged that the assessee has not maintained any books of accounts (Please See Page No. 13-14 of the appeal order). GROUND NO. 2: That the Ld. CIT(A) and AO have erred in law and on facts of the case by treating the cash deposit of Rs. 1522500/- during the demonetisation period as unexplained money under Section 69A . SUBMISSIONS:

2.1 Section 69A reads as under: “Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.” Following is the status of the conditions for the applicability of section 69A in the case of assessee:

S. NO LIMB OF THE SECTION WHETHER FACTS OF THE ASSESSEE SATISFY THE CONDITIONS Assessee is found to be Yes satisfied. owner of any money, I Assessee is the owner of money amounting Rs. Bullion, Jewellery etc. 1522500/- deposited during demonesation Such Money is not Condition Not satisfied. recorded in the books of Transactions of deposit were duly recorded in the accounts, If any maintained books of account/ cash book and there was by him for any source of II sufficient opening cash balance, being brought income forward from the preceding assessment year Assessee offers no Condition Not satisfied. explanation or explanation Explanation of the assessee was not sought before is found not satisfactory by treating Rs. 15,22,500/- as unexplained money u/s AO III 69A.

2.2 There was sufficient Cash Balance as of 01/04/2016 to justify the deposits made during the ‘pre-demonetisation period’ and ‘during the demonetization period’. It is trite law that the brought forward cash balance from the preceding assessment year as opening balance in the subsequent year i.e. on 01/4/2016 can not be treated as unexplained.

2.3 Ld. CIT(A) and AO have not been able to bring any material or evidence on record to claim that opening cash balance as on 01/04/2016 was used elsewhere by the assessee nor controvert the entries in the cash book, which is a pre-requisite under a deeming provision of Section 69A.

Assessment order and appeal order are based on mere presumptions, assuming the assessee is a prudent person, and applying the theory of preponderance of probability for the gap in withdrawal and deposit of cash. 2.4 It is true that property business can no more be done in cash after change in the statute wef 01/06/2015. Therefore, the cash balance available with the assessee was reducing every year. Merely keeping the cash and because there was a time gap between withdrawals of cash and its further deposit to the bank account, the amount cannot be treated as income from undisclosed sources of the assessee 2.5 As the Specified Bank Notes (SBNs) were not to be treated as `Legal Tender’ wef 09/11/2016, the assessee was forced to deposit the cash in hand available with her. Further the deposit was made at 3/4 occasions as the last date of deposit was 30/12/2016 and assessee wanted to avoid the heavy rush in bank branches during the initial days of demonetization. 2.6 The appellant wishes to place the judgement of Hon’ble Karnataka High Court in the case of [2018] 93 taxmann.com 66 in the case of PCIT, Belagavi v. Basetteppa B Badami (Please see PB No. 105 to 107) before Your honours in support of her argument, where it was held:

“.. The sole question involved in these appeals is relating to the unexplained money in the bank accounts of the assessee relying upon the brought forward balance for the subsequent assessment year based on the closing cash on hand of the preceding assessment year.,……… but while adjudicating a case, particularly, with a specific closing cash in hand of the preceding year, it is obvious that the said amount would be the opening cash in the subsequent assessment year. If that is to be considered, adjudication on the opening cash in the subsequent assessment year would not arise. If the opening cash in hand is to be modified considering the arguments of the revenue, it would certainly have an impact on the closing cash in hand of the preceding assessment year, which has attained finality.”

2.7 Hon’ble Orissa High Court in the case of Aurobindo Sanitary Stores V. CTC (2005) Reported in 276 ITR 549 (Ori) which is a unique judgement on Section 69, which has made the clarity of section 69 in a very ameliorated manner. The relevant abstract of the judgement is reproduced herewith:

“For, applying Section 69, the Assessing Officer must first come to a finding that the assessee made investments which are not recorded in the books of account and thereafter call for an explanation from the assessee about the nature and source of the investments and if he finds that no such explanation was furnished by the assessee-firm or the explanation offered by the assessee was not satisfactory, he could treat the value of the investments to be the income of the assessee- firm of the financial year in which it has made the investments” GROUND NO. 3: That the Ld. CIT(A) and AO have erred in law and on facts of the case i) by treating the cash deposit of Rs. 2499800/- during 01/4/2016 to 31/10/2016 out of the opening cash balance as on 01/4/2016 as `explained’, ii) by treating the cash deposit of Rs. 1522500/- during 09/11/2016 to 30/12/2016 as `unexplained’ out of the cash balance brought forward from 31/10/2016

SUBMISSIONS: 3.1 Ld. CIT(A) and AO have adopted two different yardsticks for treating the `Unexplained Money’ u/s 69A. Cash Balance Rs. 31,20,912/- was available on 01/04/10216 as per the cash book furnished during first appellate proceedings: i) Period prior to demonetization: AY 2017-18 OPENING WITHDRAWALS DEPOSIT IN TREATMENT BY BALANCE FROM BANK BANK REVENUE 01/04/2016 to 31,20,912/- 10,50,000/- 2499800/- Treated as 08/11/2016 explained and no addition u/s 69A. Closing Balance as on 08/11/2016 Rs. 1526112/- c/f to demonetization period ii) Period during demonetization:

AY 2017-18 OPENING WITHDRAWALS DEPOSIT IN TREATMENT BY BALANCE (c/f THE AO AND LD BANK from 08/11/2016) CITA(A) 09/11/2016 to 15,26,112/- 1,20,000/- 15,22,500/- Treated as 31/12/2016 unexplained money u/s 69A 3.2 Above two treatments of cash deposit by AO and Ld. CIT(A) are contradictory. If they are accepting the brought forward opening balance of Rs. 1526112/- as on 09/11/2016 as `explained’, then the question of treating Rs. 1522500/-, deposited out of the opening balance as `unexplained’ can not arise.

Ld. CIT(A) has dealt with this issue at para e) on the page No. 16-17 of the appeal order in the following words:

“………The case is also under the category of LIMITED SCRUTINY. The AO is not allowed to go beyond the issue on which the case is selected. Therefore, the AO is silent and not made any addition or comments on the sources of cash deposits made in bank accounts prior to the demonetization period during the FY 2016-17..”

3.3 Observations of the Ld. CIT(A) are not in accordance with CBDT instructions. LIMITED SCRUTINY can be converted into a COMPLETE SCRUTINY any time with the permission of the superior authority concerned. AO, who had sufficient time at his disposal for completing the assessment, could had got converted the LIMITED into a COMPLETE SCRUTINY, to examine cash deposits in both of the periods.

It is a well-settled principle of law that the revenue authorities cannot be allowed to blow hot and cold in the same breath and therefore, the defence of the assessment proceedings being under `Limited Scrutiny’ can not be used by Ld. CIT(A).

GROUND NO. 4:

That the Ld. CIT(A) and AO have failed to consider that the assessee was audited u/s 44AB for real-estate business for the AY 2013-14. They have further erred by assuming that assessee has not kept books of accounts for the AY 2014-15, 2015-16 and 2016-17

SUBMISSIONS: 4.1 Books of Accounts of assessee were audited u/s 44AB for AY 2013- 14. Property business can not have frequent transactions and sometimes deal may not materialize for a long time. There was a transaction in AY 2014-15 but the assessee’s profit was below 8% and she preferred to declare 8% profit under the presumptive scheme. Closing Stock continued to be the same during AY 2015-16 and 2016- 17 as no deal could take place.

4.2 Ld. CIT(A) and AO have inferred that no books were kept by the assessee. This was pure surmise and presumption of the Ld. FAA. Complete books of accounts, including cash book, bank book and supporting documents such as bank statements were kept by the assessee for past years including AY 2017-18. Surprisingly both of the authorities did not direct the appellant to produce the books of accounts, any time during the assessment/appeal proceedings.

The Income Tax Law, may not prescribe for compulsory maintenance of books of accounts in every case, but assessee is always at liberty to maintain the books of account for any source of income or for compliance with any other Law such as VAT, Service Tax etc. Section 69A also talks about books of account kept for any source of income.

Further, the assessee puts her reliance on the recent judgements of the Hon’ble ITATs for deposit of cash during demonetization period during the AY 2017- 18: 1) Kavitaben Chintanbhai Patel pronounced on 03/08/2022 AY 2017-18 (Please see PB No. 55 to 62) Held at para 7 of the order: “…….So, the remaining cash in hand of Rs. 12,78,000/- in which the assessee made deposit of Rs. 12,75,000/- during the demonetization period.

The assessee’s explanation that the demonetized currency notes of Rs. 500/- and Rs. 2000/- available with the assessee as cash in hand was being deposited during the demonetization period. Thus the same cannot be treated as not properly explained by the assessee…………… “

2) Girigowda Dasegowda, pronounced on 10/08/2022 AY 2017-18 (Please see PB No. 63 to 70) Held at para 9 of the order:

“ I have carefully considered the rival submission. The Hon’ble Karnataka

High Court in the case of Smt. P. Padmavathy (supra) clearly laid down that earlier withdrawals of cash from Bank account have to be accepted as available to an assessee to explain a later deposit as source. The Hon’ble Court held that it was not open to the Revenue to contend that the assessee has to explain as to how the cash withdrawn earlier was utilized by an assessee and was still available with the assessee. The decisions cited by the learned DR are contrary to the law laid down by the Hon’ble Karnataka High Court and therefore not binding. I, therefore, hold the past withdrawals as claimed by the assessee from 2013 should be considered as being available to the assessee to explain the source of deposit. We are also of the view that a reasonable quantum of cash available out of past savings should also be considered as being available to the assessee to explain the source of cash deposited in the bank account..”

3) Om Parkash Nahar [2022] 135 taxmann.com 377 (Delhi - Trib.) pronounced on 27/01/2022 AY 2017-18 (Please see PB No. 71 to 78) Held at para 10 of the order:

“ …….. After considering the facts and material on record and on perusal of the bank statement, we find that the assessee had been making huge withdrawals from time to time. The assessee is having huge income from rent which is Rs. 2,58,750/- per month which the assessee has been receiving through cheque in his bank account and such rental income has been disclosed in the return of income of Om Prakash Nahar, HUF. Apart from that, assessee is also getting pension from Government of India. Besides this, the assessee has no source of income or is involved in any business or profession. From the perusal of the history of cash withdrawals starting from the financial year 2014-15, we find that assessee has been regularly withdrawing huge cash amount on various dates and there was hardly any credit balance left in his bank account. The funds flow statement as incorporated above clearly shows that each and every withdrawal has been mentioned and utilization thereof and the money being withdrawn from the bank account. Even after house-hold withdrawal, there was a huge amount available with the assessee in the form of cash. Under these facts and circumstances stated by the assessee, it cannot be held to be improbability that assessee did not have any availability of cash at the time of demonetisation. It has not been brought on record whether assessee was carrying out any business or profession or was having income from undisclosed sources of income which can be said to be available with the assessee in the form of cash. If the assessee had no source of income apart from rental or pension income and some interest amount and same income earned regularly has been withdrawn regularly leaving very less cash in the bank account, that shows the pattern that the assessee was indeed in the habit of keeping the money in the form of cash probably looking the old age and various ailments as explained by him. Under these circumstances, we find that the explanation of the assessee to be reasonable and plausible and preponderance of probability is in the favour of the assessee and without any adverse material it cannot be presumed that the cash deposited by the assessee is out of some his undisclosed source. Accordingly, the addition of Rs. 44,13,000/- as sustained by the CIT (Appeals) is deleted”

4) Ashish Seth ITA.No.2640/Delhi/2021 pronounced on 17/01/2023 AY 2017-18 (Please see PB No. 79 to 83) Held at para 8 of the order:

“ …….. Assessee has placed on record the copy of Cash Ledger which shows the opening cash balance of Rs.14,85,784/- which also shows that assessee has been withdrawing Rs.75,000/- from time to time from house hold expenses and also made deposits and withdrawals. The submissions of the assessee of the cash being deposited were out of the withdrawals made has not been proved to be false by the Revenue by placing any material on record. I further find that the Co-ordinate Bench of Tribunal in the case of Atish Singla (supra) after placing reliance on the various decisions cited therein has held that no addition could be made on account of unexplained cash deposits. Before me, no material has been placed on record by the Revenue to demonstrate that the ratio of the aforesaid decisions would not applicable to the present facts of the case. Considering the totality of the aforesaid facts, I am of the view that the AO was not justified in making the addition of Rs.7,77,000/- and direct its deletion”

5) Smt. Perminder Kaur Matharoo ITA.No.840/Delhi/2021 pronounced on 15/11/2022 AY 2017-18 (Please see PB No. 84 to 89)

Held at para 16,17 and 18 of the order:

“16. We fail to understand as to when availability of opening cash in hand amounting to Rs. 8,34,821/- has been verified and accepted by the Assessing Officer, then, why the ld. CIT(A) estimated the same at Rs.1 lakh. Further, when cash withdrawals have been duly reflected in the cash book, vis a vis, bank statement for the FY under consideration, why the same was not accepted by the ld. CIT(A) when no defect has been pointed out in cash books, cash flow statement and statement of affairs filed by the assessee? 17. In our considered opinion, once cash flow statement is not controverted by the Assessing Officer as well as the ld. CIT[A], when it was specifically submitted that the same is based on the entries made in the cashbook, then the source of cash deposit in the bank account cannot be discarded by the authorities below.

6) Anuya Jayant Mhaiskar ITA.No.1517/Mumbai/2021 pronounced on 21/07/2022 AY 2017-18 (Please see PB No. 90 to 98)

Held at para 9 of the order:

“ ……..Considered the rival submissions and material placed on record, we observe that Assessing Officer noticed that assessee has redeposited cash of ₹.1.012 crores in the bank account during demonetization period. In order to verify the sources for such deposit, he asked the assessee to prove the sources for the same. Assessee submitted the detailed submissions with the cash book, which disclosed the availability of sufficient cash in hand. The Assessing Officer did not accept the details of cash withdrawals declared by the assessee during the year. We observe from the submissions that the assessee has disclosed the sufficient funds available with him to deposit the same. There is no evidence with the Assessing Officer to dispute with the availability of funds with the assessee. We observe that assessee had sufficient funds more than the amount deposited in the bank. Merely because assessee did not explain the reasons for withdrawal and why not deposited full cash available in the cash book is not the proper reasons for the Assessing Officer to make addition. It is for the Assessing Officer to bring on record any contrary evidence that assessee has misused the funds available on the record. What is relevant is the source for the funds deposited in the bank account and assessee has proved that it has sufficient unutilised funds in the books. The availability of funds in the cash book supports the cash deposits in the bank. Therefore, Assessing Officer cannot go beyond the mandate unless he has contrary evidence.”

7) Sanjana R. Jain, ITA.No. 1111/Mumbai/2022 pronounced on 23/12/2022 AY 2017-18 (Please see PB No. 99 to 104)

Held at para 8 17 and 18 of the order:

“8. Then the assessee drew my attention towards cash book maintained for the period 01.04.2016 to 31.03.2017 wherein opening balance of Rs.13,20,364/- is shown and as on 08.11.2016 the assessee was having cash balance of Rs.15,99,609/-. Furthermore, bank statement brought on record from page 1 to 6 of the paper book shows that the assessee had sufficient funds in her account all the times. From the income and expenditure account available at page 8 & 9 of the paper book which is for A.Y. 2016-17 and 2017-18 wherein closing balance with the assessee i.e. cash in hand was Rs.13,20,364/- and in A.Y. 2017-18 the year under consideration the assessee has cash in hand of Rs.9,73,500/-. 10…..So the closing balance or cash in hand with the assessee is certainly disclosed income and opening balance cannot be considered as undisclosed income.”

Hence, the appeal of the assessee deserves to be allowed.

Submitted respectfully for your kind consideration ” 6. In addition to the written submission so filed. The ld. AR of the assessee also filed a copy of ITR for A.Y 2013-14 wherein she has declared the case balance of Rs. 92,23,610/-. ii Sundry Debtors iii Cash and Bank Balance A cash-in-hand 9223610 B Balance with Banks 674573 C Total (iiiA+iiiB) 9898183

The ld. AR of the assessee also drawn our attention to the ITR filed for A.Y 2015-16 which is ITR No. 01 being Form Sahaj wherein there is no column to disclose the cash on hand available with the assessee.

“7. Details of opening balance of cash as on 01.04.2014, 08.11.2014 and 31.12.2014. 8. Details of opening balance of cash as on 01.04.2015, 08.11.2015 and 31.12.2015. 9. Details of opening balance of cash as on 01.04.2016, 08.11.2016 and 31.12.2016.”

10. The ld. AR of the assessee further submitted a detailed cash book wherein this cash balance is duly reflected and ld. AO has not controverted these balances and has not raised any further query to that effect when this specific question was raised and answer were given. The assessee was of bona fide belief that when the cash has already been disclosed by her in ITR filed for A.Y 2013- 14 for an amount of Rs.92,23,610/- then there is no question that assessee cannot have an amount of Rs. 15,22,500/- deposited into the bank account maintained by the assessee with Federal Bank the assessee prayed that the addition does not survive.

It is also not disputed by the revenue that in the form Sahaj, there is no column to give the details of the cash balance available to the assessee on that particular year filed for the A.Y 2015-16. The ld. AR of the assessee also filed an affidavit to support these contentions. The evidence that she hold cash of Rs. 92,23,610/- from A.Y 2013-14 is evident from the ITR filed by her. The assessee replied to the detailed query raised by the AO during the assessment proceedings. In response to notice dated 22.08.2019 raised the questions at Serial No. 7, 8 and 9 for which the assessee has given the specific date cash on hand available with her. The same is also reproduced herein below:- information that what has been asked by the AO there cannot be belief that the assessee has utilized this cash. The ld. AR for the assessee fairly admitted that out of the cash balance alleged to have been continued only Rs. 15,22,500/- is deposited on account of demonetization period for which he has filed a detailed cash book. The ld. AR of the assessee objected to the contentions that the assessee has not produced this cash book is also not relevant because the assessee has as per the requirement of the Assessing Officer given various date wise cash available with the assessee.

These dates shows that the assessee even though not get is books of accounts audited but has maintained records of the cash available with him day to day and the same has not been disputed.

When the information asked by the AO vide its notice dated 22.08.2019 specifically given this action proves the availability of the cash book with the assessee.

“7. We have given our thoughtful consideration and perused the materials available on record including Paper Book and the Case Laws filed by the assessee. The cash loan of Rs. 50,00,000/- said to be received by the assessee from Ramesh Corporation is being clearly reflecting in the bank account of the assessee and the assessee had withdrawn Rs. 50,00,000/- on 02.01.2014. The assessee submission of redeposit of a sum of Rs. 37,00,000/- in her bank account of Bank of Baroda is also reflecting in the bank statement. So, the remaining cash in hand of Rs. 12,78,000/- in which the assessee made deposit of Rs. 12,75,000/- during the demonetization period. The assessee’s explanation that the demonetized currency notes of Rs. 500/- and Rs. 2000/- available with the assessee as cash in hand were being deposited during the demonetization period. Thus the same cannot be treated as not properly explained by the assessee. As it can be seen from the bank statement, the source of withdrawal of the money is being clearly demonstrated and their deposit of money on various occasions is also established by the assessee through her bank account. The same cannot be doubted by the Assessing Officer as unexplained money.

8. Further the Jurisdictional High Court in the case of Shaileshkumar Rasiklal Mehta cited above held as follows: “The CIT(A) while deleting the additions made by the Assessing Officer, it appears that on appreciation of evidence and considering the fact that the additions made by the Assessing Officer routed through the Bank and the assessee explained the source of income and considering the same the CIT(A) has deleted the additions made by the Assessing Officer, which was made by the Assessing Officer treating the same as undisclosed income. The assessee successfully proved the source of income and the same was routed through the Bank. Thus, the Assessing Officer was not justified in treating the same as undisclosed income and in making the additions under Section 68 of the Income Tax Act. 4. We are in complete agreement with the reasoning and the views taken by the CIT(A) as well as the ITAT in deleting the additions made by the Assessing Officer under Section 68 of the Income Tax Act. As such, no question of law, much less substantial question of law arises in the present appeals as the findings given by the CIT(A) confirmed by the ITAT are on appreciation of evidence. Under the circumstances, all the appeals deserve to be dismissed and are accordingly dismissed. 8.1. Similarly in the case of Manoj Indravadan Chokshi the jurisdictional High Court of Gujarat held as follows:

“… The contention of the assessee is that the amount was kept as cash in hand. The authorities have doubted about the explanation furnished by the assessee. The authorities below have doubted the source of the cash deposits, however, the contention of the Id. counsel for the assessee is that he had withdrawn the amount from his bank account and there is no finding by the authorities below that the cash withdrawn by the assessee was utilized for any other purpose. In the absence of such finding, addition is not justified. We find merit into the contention of the Id. counsel for the assessee that there is no dispute that the amount which was withdrawn by the assessee on various dates during the year 2006 was available with him for making deposits. In the absence of finding that the amount which was previously withdrawn by the assessee had been utilized for any other purpose merely on the basis of conjecture that the amount might have been utilized for any other- purpose and was not available with the assessee for making the deposits, we are unable to accept the reasoning of the authorities below. In our considered view, when the assessee has demonstrated that he had withdrawn cash from the bank and there is ho finding by the authorities below that this cash available with the assessee was invested or utilized for any other purpose, in that event, it is not open to the authority to make the addition on the basis that the assessee failed to explain the source of deposits. Moreover, the authorities below have not disputed the fact that the assessee had withdrawn amount of Rs.9,10,000/- before the deposits made on various dates during the FY 2007-08. Therefore, the orders of the authorities below are set aside and the AO is directed to delete the addition. Thus, ground raised in the asseessee's appeal is allowed.

9. Respectfully following the above judicial precedents, we have no hesitation in allowing the grounds raised by the assessee and the impugned addition made by the Assessing Officer of Rs. 12,75,000/- u/s. 69A is hereby deleted.

10. In the result, appeal filed by the assessee is hereby allowed.”

In the result, appeal of the assessee is allowed.