BRAJESH KUMAR AGARWAL,INDORE vs. THE ITO 3(2), BHOPAL

Feeling aggrieved by appeal-order dated 06.03.2023passed by learned Commissioner of Income-Tax (Appeals),National Faceless Appeal Centre, Delhi[“Ld. CIT(A)”], which in turn arises out of assessment-order dated 29.03.2016, passed by ITO-3(2), Bhopal[“Ld. AO”]u/s 143(3) of Income-tax Act, 1961[“the act”] for assessment-year [“AY”] 2008-09,the assessee has filed this appeal.

Heard the learned Representatives of both sides at length and case- records perused.

Briefly stated the facts are such that the assessee is a retired employee of Oriental Insurance Company Limited and earning income from pension. Ld. AO issued notice u/s 148 followed by notice u/s 142(1) and interrogated the assessee to assess the source of cash-deposits of Rs. 16,21,000/- made in SB A/c, Dena Bank, Bhopal, during the previous year 2007-08 relevant to AY 2008-09 under consideration. In response, the assessee submitted that he retiredfrom service during the previous year 2003-04 and received a total sum of Rs. 16,08,504/- as retirement benefits. Further, he sold a residential property for Rs. 25,00,000/- during the previous year 2005-06. The assessee submitted that those receipts were deposited in bank account. However, the AO observed that the assessee had not deposited any huge amount in the bank account; therefore the claim that the assessee had deposited receipts of retirement benefits and sale proceeds of property is not acceptable. This way, being unconvinced with the submission of assessee, the AO applied section 69 of the Act and made addition of Rs. 16,21,000/- on account of unexplained deposits.

Aggrieved, the assessee carried matter in first appeal and made a detailed submission, which is reproduced in the order of CIT(A) in para 6. However, Ld. CIT(A) was not satisfied with the submission of assessee who upheld the addition. Now the assessee has come before us assailing the orders of lower-authorities.

Ld. AR representing the assessee carried us to orders of lower authorities and made a preliminary submission on factual matrix of assessee’s position. He submitted that the assessee and his wife were victims in Bhopal Gas Tragedy andowing to that suffered several chronic diseases and ailments of lungs, kidney, liver, heart etc. due to which the assessee had to take voluntary retirement from service at a very early age of just 48 years. He submitted that the assessee and his wife had to obtain multiple surgeries and variety of medical treatment from time to time and, therefore, the assessee had to withdraw cash from Bank for medical

Then Ld. AR drew our attention to the copy of Bank Pass-Book placed in Paper-Book and demonstrated that the assessee has made frequent withdrawals as well as depositsfrom/in Bank A/c.Ld. AR has compiled a statement for the period 01.04.2007 to 31.03.2008 (being the previous year 2007-08 relevant to AY 2008-09 under consideration) as well as for the period 01.04.2006 to 31.03.2007 (being the immediately preceding year) on the basis of entries of cash withdrawals and deposits in Bank A/c. Drawing our attention to this working and correlating it with the Bank Pass-Book, Ld. AR demonstrated that the assessee has not made a single cash deposit of Rs. 16,21,000/- in Bank A/c (this very fact is also admitted by AO in assessment-order). Ld. AR submitted that the assessee has made deposits of smaller amounts such as Rs. 20,000/-, Rs. 1,50,000/-, Rs. 2,00,000/- etc. on as many as 9 occasions during the year and prior to making such deposits, the assessee has made withdrawals on about 14 occasions. Ld. AR strongly contended that the assessee is in the habit of making frequent withdrawals from Bank A/c for personal needs, mainly medical emergencies, and also re-depositing the same to the extent unutilized. Ld. AR argued that a cursory examination of the patten of withdrawals and deposits itself makes it very clear that the assessee has made re-deposits out of preceding withdrawals from the very same Bank A/c.Thus, the source of re-deposits is traceable and very much explained. Ld. AR submitted that the AO has just made a mathematical aggregation of various sums deposited during the whole previous year; ignored the withdrawals made by assessee and made addition which is patently wrong. Ld. AR submitted that the revenue- authorities have not disputed the cash withdrawals made by assessee from very same bank account, in such a situation it is a wrong approach to just add up the deposits as unexplained income of assessee. Lastly, Ld. AR also submitted that the assessee is a medically unfit person to earn any income, the only source of income is pension and therefore the revenue-authorities

Ld. AR also relied upon the following decisions wherein the cash deposits made by the assessee in bank account out of withdrawals from bank account have been accepted as genuine and the additions made by AO have been deleted:- (i) Shri Narayan Shibaroor Shibaraya vs. ITO, Ward 3(3)(3), Bengaluru, I.T.A.No. 684/Bang/2022 dated 23.11.2022. (ii) Om Prakash Nahar vs. ITO, (2022) 135 Taxman.com. 377 (Del. Trib) dated 27.01.2022. (iii) Shri Girigowda Dasegowda vs. ITO Bengaluru, I.T.A.No. 360/Bang/2022 dated 10.08.2022. (iv) Dheeraj Thakran vs. ITO Ward 1(4), Gurgaon, (2021) 129 taxmann.com 169 (Delhi – Trib) dt. 28.05.2021.

With these submissions, Ld. AR very humbly prayed that taking into account the fact that the assessee has re-deposited cash out of preceding withdrawals coupled with the inability of assessee to earn any income from any source (except pension), the addition made by AO is not valid, the same must be deleted.

Per contra, Ld. DR representing the Revenue supported the orders of the lower authorities and argued that the assessee is not having direct sources to explain the deposits aggregating to Rs. 16,21,000/- made during the year. He further argued that the retirement-benefits and sale proceeds of property were received by assessee way back in the previous year 2003-04 and 2005-06 but the present case concerns with previous year 2007-08, therefore the AO has rightly observed that the assessee does not have explainable sources. Ld. DR submitted that in such circumstances the AO has rightly made addition, which must be upheld.

We have considered rival submissions of both sides and perused the material held on record including the orders of lower-authorities and the copies of bank pass books filed by Ld. AR. After our mindful consideration, we observe that the explanation offered by Ld. AR from assessee’s side with regard to the source of deposits are satisfactory and therefore no addition could be made on account of unexplained cash. As rightly contended by Ld. AR that the withdrawals of cash from the bank a/c prior to deposits is not disputed by revenue. Notably, the assessee has also given a convincing explanation for the reason behind cash withdrawals and re-deposit in bank a/c, which is the medical exigencies caused by Bhopal Gas Tragedy. On perusal of various decisions cited by Ld. AR, we find that the Hon’ble Courts/Benches of ITAT have vehemently accepted that if the sources of deposits are explained from prior cash withdrawals and the department has not disputed prior cash withdrawals, subsequent deposits cannot be treated as explained and no addition could be made. At the cost of repetition, we may mention that the assessee has not made a single deposit of Rs. 16,21,000/- (or huge deposits constituting Rs. 16,21,000/-); the sum of Rs. 16,21,000/- is a mere mathematical aggregation done by AO for the whole year. The assessee has in fact made smaller deposits on several days and prior to that, made cash withdrawals which is clearly evident from entries of deposits and withdrawals. Regarding the receipt of retirement benefits and sale proceed of property in past, Ld. AR submitted it is a fact that there were such receipts and those moneys were available to assessee. However, the assessee re-circulated those moneys by way of deposits, withdrawals and re- deposits in the Bank A/c from time to time and the deposits/withdrawals made in current year also have the same genesis but since the assessee is a medical challenged retired employee, a complete track of the same could not be maintained/explained. We find weightage in this submission of Ld. AR. Lastly, we also find merit in the submission of Ld. AR that the assessee is unfit to earn any income due to several diseases and the only source of income is pension. Taking into account all aspects, we are of the considered

Resultantly, this appeal of assessee is allowed.