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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: MRS. ANNAPURNA GUPTA & MS. SUCHITRA R. KAMBLE
O R D E R आदेश आदेश आदेश PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order passed by the learned Principal Commissioner of Income-tax-3, Ahmedabad [hereinafter referred to as “PCIT” in short] dated 10.03.2022, in exercise of his revisionary powers under Section 263 of the Income-tax Act, 1961 [hereinafter referred to as “the Act” in short], for the Assessment Year 2017-18.
The grounds of appeal
raised by the assessee are as under :- “1. The order passed by the PCIT is bad in law and required to be quashed.
2. Ld. PCIT erred in law and on facts in initiating proceedings u/s 263 of the Act ignoring fact that issue raised in show cause notice u/s 263 of the Act has been properly verified by AO during scrutiny assessment proceedings.
3. Ld. PCIT erred in law and on facts in proceedings with revision jurisdiction ignoring fact that order passed by AO is neither erroneous nor prejudicial to the interest of revenue.
Dhirubhai Mohanbhai Patel, HUF Vs. PCIT AY : 2017-18
4. Ld. PCIT erred in law and on facts in setting aside the order by observing that proper inquiry for cash deposit was not made ignoring fact that the one of the reasons for selection of case into scrutiny was cash deposit and order was passed after adequate inquiry 5. Ld. PCIT erred in observing that AO passed an order without making any enquiry ignoring notices u/s 142(1) of the Act and it's replied by appellant. 6. Ld. PCIT erred in law and on facts in invoking revision jurisdiction ignoring fact that Assessment Order is merged with CIT(A) and accordingly revision is not permissible as per principle of merger.”
A perusal of the ld. PCIT’s order reveals that the revisionary powers were exercised by the ld. PCIT finding the assessment order erroneous on account of the cash deposits of Rs.30 lakhs in the bank account of the assessee not having been examined by the Assessing Officer with respect to its source.
The facts of the case are that during the impugned year the assessee has made cash deposits to the tune of Rs.52 lakhs odd, of which Rs.30 lakhs was deposited in the bank account prior to demonetization of specified bank notes declared by the government and Rs.22 lakhs deposited during demonetization period. During assessment proceedings, the Assessing Officer examined the genuineness of the cash deposited to the bank account and made addition of the cash deposited during the demonetization period amounting to Rs.22 lakhs. No addition was made of the cash deposited during the period prior to demonetization amounting to Rs.30 lakhs, and it was on this account that the ld. PCIT found the assessment order erroneous. He noted that, though the assessee had explained the source of cash deposits as from withdrawals made from the same bank account, he held that considering the facts of the case this explanation of the assessee could not have been accepted by the Assessing Officer. He further noted that there was no whisper in the assessment order of the Assessing Officer accepting this Dhirubhai Mohanbhai Patel, HUF Vs. PCIT AY : 2017-18 contention of the assessee, nor any notings or Office Note to draw an inference that the addition of Rs.30 lakhs was not made by the Assessing Officer after proper application of mind. Further noting that the Assessing Officer had treated the cash deposited during the demonetization period as unexplained, he held that the Assessing Officer probably missed out on taking action with regard to cash deposited during the period prior to demonetization and noting that the assessee had failed to satisfactorily explain the source of cash deposited in bank, he held that it was a case of mistake or error on the part of the Assessing Officer not to have made addition to the extent of Rs.30 lakhs. For this reason, he held the assessment order erroneous for having failed to treat the cash of Rs.30 lakhs as unexplained. He accordingly restored the matter back to the Assessing Officer for making desired inquiry and verification on the said issue.
The contention of the ld. Counsel for the assessee before us was the reiteration of his submission made before the ld. PCIT that this issue has been duly examined during assessment proceedings and the entire source of cash deposits of Rs.30 lakhs was explained as out of cash withdrawals made earlier. That this was evidenced with copy of cash books and other documentary evidences, and therefore, the Assessing Officer had taken a plausible view on this issue and there was no error in his assessment order on this count.
6. We have noted that this contention of the assessee is recorded by the ld. PCIT also at paragraph No.5 of his order noting the fact that the assessee had furnished an explanation regarding the source of cash deposit of Rs. 30 lakhs as being out of opening cash balance and out of cash withdrawals made in the month of April and May 2016, evidenced with necessary documentary evidences. The relevant paragraph No.5 of the order of the ld. PCIT noting the aforesaid facts is as under:-
Dhirubhai Mohanbhai Patel, HUF Vs. PCIT AY : 2017-18
“5. Submission filed by the assessee alongwith the evidences/details viz. Cash Book copy, copy of Bank Statement etc. have been duly considered and details available on assessment records have been thoroughly verified. Issue in this case is very limited i.e whether source of cash deposit of Rs.30,00,000/- made in Bank A/c. on 27.05.2016 was explained or not. The assessee has basically tried to explain the source as (i) out of Opening Cash Balance and (ii) out of cash withdrawals made in the months of April & May, 2016. It is true that during the assessment proceedings, the then AO raised query and issued a Show Cause Notice dated 09.12.2019 asking the assessee as to why cash deposits (including Rs.30 Lacs) should not be treated as unexplained in absence of genuine explanation supported by documentary evidence but this remained partially complied with. As far as explanation filed before AO vide letter dated 13.10.2019 is concerned, the assessee has taken the refuge of the same argument that deposits were made out of cash on hand & withdrawals made from Bank time to time. However, I find from the plain reading of the assessment order that explanation even with regard to cash deposit of Rs.30 Lacs (before demonetization) was not found acceptable by the then Assessing Officer but she failed to incorporate her findings in the assessment order and thus failed to make addition of Rs.30 Lacs.”
What transpires thereafter from the order of the ld. PCIT is that he inferred that the Assessing Officer could not have been satisfied with the reply of the assessee and was not satisfied with the reply of the assessee, but by mistake had failed to make addition on account of this cash deposits. The ld. PCIT reiterates this at paragraph no.5 of his order which is reproduced above and also at paragraph No. 6 of his order which is reproduced hereunder:-
Nonetheless, submission along with details filed by the assessee are duly considered and I find no substance in the claim of the assessee. First of all, it is not believable that any man of common prudence will keep on withdrawing CASH from Bank and without any immediate need, he will keep it with him for some time and then redeposit in the Bank. This is quite unusual as well as abnormal and beyond any human comprehension. On verification of Cash Book of M/s. Balaji Real Estate Developers, it is seen that the assessee has taken refuge of withdrawals made from Axis Bank on various dates which are even in odd figures say Rs.9,93,430/- on 23.04.2016, Rs.93,430/- on 02.05.2016 etc. Most importantly, the assessee has not explained the deposits made in Axis Bank just before (few days before) the date of withdrawal which created
Dhirubhai Mohanbhai Patel, HUF Vs. PCIT AY : 2017-18 sufficient balance in Axis Bank, out of which such cash withdrawals were made. For example Rs.6,00,000/- deposited on 05.04.2016; Rs.20,93,430/- on 27.04.2016; Rs.9,00,000/-, Rs. 10,00,000/- and Rs.1,93,430/- on 28.04.2016 (although through clearing). And most important, assessee failed to explain the source and nature of such deposits. In absence of such crucial details, the claim of the assessee cannot be accepted that source of deposit of Rs.30 Lacs was out of Opening Balance of Cash Book (which was merely Rs.95,109/-) and cash withdrawals made in months of April and May on various dates. In view of the above, explanation furnished by the assessee is not found acceptable, hence, rejected. The assessee has argued that this issue was examined by erstwhile Assessing Officer and she being satisfied, no addition was made on this count, but there is no whisper in the assessment order to accept this contention. So presumption of the assessee is based on conjuncture and surmises Neither the then AO has left any notings or Office Note to draw an inference that addition of Rs.30 Lacs was not made by AO after proper application of mind. On face of it, one can draw a conclusion that inadvertently she failed to make addition although she was not satisfied with the explanation of the assessee because common explanation was furnished by the assessee for cash deposit of Rs.22,00,000/- (during monetization period) which was treated unexplained and addition was made but the AO fail to take action with regard to cash deposit of Rs.30,00,000/- (made during non-demonetization period). Most importantly the assessee has failed to discharge his onus to satisfactorily explain the source of cash deposited in his Bank A / C From this, only one logical conclusion can be drawn that it was a case of pure mistake/error on the part of the Assessing Officer in not making addition to the extent of Rs.30,00,000/-. In view of the above, I am of considered view that impugned assessment order was erroneous because AO failed to treat the cash deposit of 30 ,00,000/- as unexplained and therefore the impugned assessment order was prejudicial to the interest of revenue.”
There are, therefore, two aspects to the findings of the ld. PCIT of having committed error by the ld. AO in the assessment order :-
(i) That in the facts of the case there could not have been a plausible view that the cash deposits of Rs. 30 lacs stood duly explained to the AO;
(ii) The act of the Assessing Officer in not making addition on account of the same was a mistake on his part, that though he
Dhirubhai Mohanbhai Patel, HUF Vs. PCIT AY : 2017-18 intended to do so but by mistake missed out from the making addition.
So far as the aspect of the Assessing Officer’s view of the cash deposits of Rs.30 lakhs being duly explained not being a plausible view is concerned, paragraph no. 6 of the ld. PCIT’s order reveals that the basis with the ld. PCIT for finding so was that the assessee’s explanation of deposit from cash withdrawals was not plausible because the withdrawals were made in odd figures on different dates, i.e. say Rs.9,93,430/- on 23.04.2016, Rs.93,430/- on 02.05.2016. Also, as per ld. PCIT, the explanation was not acceptable for the reason that there was deposits in the bank prior to withdrawal which had remained unexplained with regard to its source. The ld. PCIT, though notes that these deposits were through clearing, i.e. by banking channel, he holds that since the assessee failed to explain the nature and source of these deposits which was subsequently withdrawn and explained to be re-deposited amounting to Rs.30 lakhs, the assessee’s explanation of the deposits being made out of withdrawals was not acceptable and not a plausible explanation.
We are unable to agree with the above findings of the ld. PCIT. That there were sufficient cash withdrawals for the deposits of Rs. 30 lakhs is not disputed. The judicial view in such circumstances has consistently been that where the cash deposits is explained out of cash withdrawals and there is no case of the Revenue of the cash withdrawn as having been utilized elsewhere, there is no reason for doubting the explanation of the assessee. It is not the case of the ld. PCIT that the cash withdrawn has been utilized elsewhere. Therefore, the acceptance of the explanation offered by the assessee to the Assessing Officer cannot be faulted or for that matter doubted.
Dhirubhai Mohanbhai Patel, HUF Vs. PCIT AY : 2017-18 11. Now, coming to the point made by the ld. PCIT that since the assessee had not explained the source of deposits in the bank which were subsequently withdrawn in cash and redeposited, the onus of explaining the source of cash deposits was not discharged by the assessee - we are not in agreement with the same. The ld. PCIT has himself noted the deposits to have been made by banking channels. There arises, therefore, no question of any doubt regarding their sources which is through transparent sources only. Even otherwise, we failed to understand how the source of these deposits would in any way affect the genuineness of their withdrawals and subsequent re-deposits. Neither has the ld. PCIT demonstrated as to how the source of these deposits effect the genuineness of the subsequent deposits. Therefore, we are not in agreement with this finding of the ld. PCIT.
Coming to the other contention of the ld. PCIT that the Assessing Officer by mistake failed to make this addition, there is no basis we find for the same. The assessment order has to be read as it is and there is no scope for drawing any inference or reading between the lines of an assessment order. Once an issue has been shown to be examined during the assessment proceedings and the assessment order does not reveal any addition made on account of the same, it is to be treated as having been accepted by the Assessing Officer. Nothing can be added or subtracted from a detailed assessment order passed. Further, if it was a mistake by the Assessing Officer and not having made addition of Rs.30 lakhs, the Assessing Officer could very well have exercised his power of rectification of mistake under Section 154 of the Act which has not been done in the present case.
In view of the same, we hold that the issue of cash deposits of Rs.30 lakhs has been duly examined during the assessment proceedings and the Assessing Officer has arrived at a plausible view of the source of the same
Dhirubhai Mohanbhai Patel, HUF Vs. PCIT AY : 2017-18 having been duly explained from cash withdrawals and opening cash balance duly evidenced with documents, and there is, therefore, we hold that that no error in the assessment order accepting the source of cash deposits of Rs.30 lakhs in the bank account as duly explained and making no addition on account of the same. The order of the ld. PCIT is, therefore, set aside and the appeal of the assessee is allowed.
In effect, the appeal of the assessee is allowed.
Order pronounced in the open Court on 23/02/2024 at Ahmedabad.