SHRI HARILAL LAXMIDAS VAISHNANI,RAJKOT vs. THE ACIT/DCIT(INT. TAXN.), RAJKOT

आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-

This assessee’s appeal for A.Y. 2017-18, arises from order of the CIT(A)-13, Ahmedabad dated 06-10-2020, in proceedings under section 144 rws 144A of the Income Tax Act, 1961; in short “the Act”.

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“1. That, the Ld. CIT(A) has wrongly passed the order u/s 144 r.w.s. 144A of the I.T. Act, 1961 without giving proper opportunity of being heard. 2. That, the Id. AO has issued notice without jurisdiction and also passed the assessment order without assuming proper jurisdiction under the law. 3. That, the Ld. CIT(A) has wrongly confirmed the addition of Rs. 5,62,000/- as unexplained money u/s 69A of the I.T. Act, 1961. 4. That, the Ld. CIT{A) has wrongly confirmed the addition of undisclosed interest amounting to Rs. 2,44,921/-. 5. That, the Ld. CIT(A) has wrongly confirmed application of the provisions of section 115BBE of the I.T. Act, 1961 when the source of cash balance and other transactions are duly explained in the books of account and provision of section 115BBE are not applicable. 6. That, the Ld. CIT(A) has wrongly confirmed the interest u/s. 234A, and 234B of the I.T. Act 1961. 7. That, the Ld. CIT(A) has wrongly confirmed the initiation penalty proceedings u/s 274 r.w.s. 271AAC of the IT. Act, 1961. 8. That, the findings of the Ld. CIT(A) are not justified and are bad-in-law. 9. That, the appellant craves to add, amend, alter or delete any of the above grounds of appeals. Total tax effect (see note below) Rs. 9,91,1 20/-

Bank account no. Amount (Rs.)

0003100100013869 2,50,000/-

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0003100100010196 2,50,000/- TOTAL 5,00,000/-

3.1 The AO observed that the assessee had not filed return of income for the year under consideration. The AO issued notice to the assessee proposing to add the aforesaid amount as unexplained income in his hand in absence of any return of income filed by the assessee for the year under consideration. In response, the assessee filed response on 25-11-2019 and submitted that the bank accounts are joint accounts of the assessee with his wife, the deposits made were out of past savings and the assessee did not file return of income since he was not having any taxable income during the year under consideration. Further, the AO observed that apart from � 5 lakhs mentioned above, the assessee also deposited the sum of � 62,000/- in the bank account mentioned at serial number 1 above. The assessee submitted that the same was deposited out of cash in hand available with the assessee from earlier withdrawals. The AO further observed that during the year under consideration, the assessee earned interest income of � 2,44,921/- which has not been offered to tax by the assessee. Accordingly, the AO determined total income of the assessee at � 8,06,921/- (� 5 lakhs plus 62,000/-as undisclosed income under section 69 A and � 2,44,921/- as interest income).

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“5. Decision 5.1 The assessment order alongwith the remand report has been perused and the appellant's submissions alongwith rejoinders to the remand report have been considered.

5.2 As to the ground no, 1 challenging the proceedings u/s. 144 rws 144A, I do not find any infirmity as the AC) has followed the due process of law under the Income Tax Act and that adequate opportunities were provided to the assessee by way of various statutory notices and also final show causes on the issues which have been added by the AO towards determination of total income. It is also seen that the assessee had made his explanation and they were not accepted by the AO because those explanations were found to be unsubstantiated. There being no merit, the ground is rejected.

5.3 As to the ground no. 2 challenging the addition of Rs.5,62,000/- as unexplained money u/s. 69A of the Act, it is seen that the appellant has only stated that Rs.5,00,000/- was his income/savings of earlier years held as cash in hands and Rs.62,000/- was deposited out of earlier withdrawals from the bank accounts. However the AO has held that there were no supporting evidences of cash in hand and there was no withdrawals from the hank accounts. The assessment order has dealt with the facts, the provisions of the Act and the related case laws. The appellant has not furnished evidences as to his income and sources of income which could be taken as a reasonable basis as to plausibility of having cash in hand of Rs.5,00,000/- and also as per the AO there is no withdrawal from the bank which could be taken as acceptable. explanation of deposit of Rs.62,000/-. Though it is trite law that an Explanation of the tax payer if it is reasonable should normally be accepted and that explanation can be rejected only if cogent materials refuting the explanation are brought on record by the Revenue. However, as the explanation by the appellant has been mere assertions and not supported by even circumstantial evidences, the above principle cannot invoked to protect the appellant. Moreover the cash deposits in SBNs during de-monetization would by its nature and objective require higher level of evidences covering the sources of income, the cash in hand and the justification of SBNs. The appellant/depositor of SBNs would have to prove the availability of cash in such denomination earned out of legal and disclosed sources. Mere plausibility and reasonableness of explanation would not be sufficient. The appellant has failed to discharge his onus. Under the circumstances, I do not find any basis to interfere in the addition made by the AO.

5.4 As to the ground no.3 related to the addition of Rs,2,44,921/- as undisclosed income, it is the matter of fact that interest were earned by the assessee (Rs. l,97,259/~ as admitted by the appellant himself though in itself it was below the taxable limit) and is thus liable to be added toward computation of total income now. The Assessing Officer hs revoked the interest which is not

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rebutted by the appellant, I am also of the view that just because the bank accounts are in the joint names of the appellant and his wife it does not necessarily imply that the interest income has to be split between them unless there is a case that the wife of the appellant also had certain income and had deposited such income in the said bank account. Under the circumstances I do not find any infirmity in the said addition and treatment by the Assessing Officer. The related ground is dismissed. 5.5 As to the ground no, 4 related to invoking the provision of Section 115BBE it is held that it is automatic in case of additions made u/s.68 to 69D and the additions of Rs.5,00,000/- and Rs.62,000/- being u/s.69A are liable for higher rate of tax as stipulated u/s. 1 15BBE, The ground is dismissed. 5.6 As to the grounds 5, 6 and 7 related to levy of interest u/s.234A and 234B and initiation of penalty proceedings u/s.271AAC, they are also rejected as the 'levy of interest is mandatary under the statute and consequential to the total income as determined and the initiation of penalty proceedings is consequential to assessment made and a matter of separate proceedings.”

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Cooperative Bank of Rajkot for the period assessment year 2014-15 to assessment year 2016-17 and submitted that the assessee had sufficient cash in hand to make the cash deposits of � 562,000/- in the aforesaid bank accounts. The counsel for the assessee further submitted that the assessee is holding an American passport for many years and only visits India for limited social activities, and it is wrong in the instant set of facts to conclude that the assessee was carrying out any activity in India as a result of which he had earned any income from undisclosed sources. The only source of cash deposited was out of past savings as is evident from the copy of the bank statement for the period assessment year 2014-15 to assessment year 2017-18. The copy of the bank statement for the aforesaid period shows that the assessee had made cash withdrawals of � 1,486,000/- and it is from these past savings/withdrawals that the aforesaid deposits were made in the above two bank accounts held by the assessee and his wife jointly, during the demonetisation period. The counsel for the assessee submitted that both the assessee and his wife are super senior citizens and they keep certain amount of cash in hand in order to meet any medical or other emergencies. So it was only in the demonetisation period that this excess cash, which was available with the assessee and his wife was deposited in the bank accounts. A perusal of the bank statement shows that the assessee has was having sufficient cash balance which was deposited in the bank account held by the assessee and his wife jointly, during the demonetisation period. In support of the aforesaid contention, the counsel for the assessee placed reliance on several judicial precedents on the subject. Further, counsel for the assessee placed reliance on Instruction Number 3/2017 issued by CBDT dated 21-02- 2017 which states that “1.1 in case of an individual (other than minors) not

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having any business income, no further verification is required to be made if total cash deposit is up to rupees 2.5 lakhs”. Further, regarding the addition in respect of interest income amounting to � 2,44,921/-, the counsel for the assessee submitted that as per the interest certificate from Bank and copy of Form 26AS, the interest income of the assessee was � 1,72,172/- and interest income of the wife of the assessee was � 74,148/-. However, the AO incorrectly added both the amounts as interest income of the assessee. The counsel for the assessee produced interest certificate of the assessee and his wife in support of the above contention and also submitted that TDS @10% has been deducted by the banks while making payment to the assessee and his wife. The counsel for the assessee also submitted that the assessee has paid TDS of � 19,877/- on above bank FDR interest, but the credit for the same was not allowed in the assessment order while calculating the tax payable by the assessee. In response, the Ld. DR relied upon the observations made by the AO and Ld. CIT(Appeals) in their respective orders.

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18 to demonstrate that the assessee and his wife had made substantial withdrawals during the aforesaid period, from which the above deposits were made with Co-Operative Bank, Rajkot branch. Further, the counsel for the assessee also submitted proof to show that only a sum of � 1,72,172/- accrued as interest income in the hands of the assessee and on which TDS was also deducted at the time of payment. In our considered view, the assessee has been able to sufficiently demonstrate that he was having sufficient cash balance from past withdrawals in order to make the aforesaid deposits. Further, we note that the assessee was a super senior citizen above 80 years of age, who was holding a US passport and only visited India for social occasions. Accordingly, the assessee or his wife are not carrying out any business activity of or any other work which could be the source of income for them in India. Therefore, in absence of the AO bringing anything on record to show that the assessee was carrying out any activity which could be the source of unexplained income earned by the assessee which was deposited in the aforesaid bank accounts, in our considered view, the assessee has been able to demonstrate that the said deposits have been made out of past savings/withdrawals from the aforesaid bank accounts in the earlier years. Therefore, in the instant set of facts, we are of the view that the assessee has been able to demonstrate that the sum of � 562,000/- was deposited by the assessee out of past savings and hence no addition is called for in the hands of the assessee in respect of the aforesaid sum. We also observe that the assessee has earned interest income of � 1,72,172/- during the year under consideration, as is evident from the certificates placed before us, for our records. However, since the accrued interest in the hands of assessee was below taxable limit during the year under consideration, in our

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view, no further tax is payable by the assessee for the year under consideration on such interest income.

6.1 In the result, in view of the discussion above and the facts placed on record before us, we are hereby allowing the appeal of the assessee.

Order pronounced in the open court on 23-12-2022

Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad : Dated 23/12/2022 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order,

Assistant Registrar, Income Tax Appellate Tribunal, Rajkot