MAHENDRA BHIKHUBHAI BHAGAT,SURAT vs. INCOME TAX OFFICER,WD.1(3)(3), SURAT

On the basis of such observations, the Assessing Officer issued show cause notice to the assessee as to why such credit in the undisclosed bank account should be treated as undisclosed cash credit under /AY.2016-17 Mahendra Bhikhubhai Bhagat section 68 of the Act. In response to said show cause notice, the assessee has filed his reply vide reply dated 04.12.2018. In the reply, the assessee submitted that the entire credit of Rs.6,48,483/-, are not cash deposited. The assessee explained that he has made cash deposit of Rs.2,28,000/- only, there is interest credited of Rs.685/-, further the assessee received dividend amounting to Rs.105/- and credit entries of RS. 4,19,696/- relates to share transactions. The cash deposit of Rs.2,28,000/- in ICICI Bank was out of cash withdrawal from Dena Bank and out of cash on hand. The assessee also explained that he has entered into the sale transactions and suffered short term capital loss of Rs. 7,056/- and speculative loss of Rs.1,95,665/-. As the assessee suffered loss in stock market. The assessee wanted to hide such stock market loss from family and friends, therefore, such transaction was not shown by assessee. The assessee has also shown cash deposits and withdrawal from Dena Bank as recorded by Assessing Officer on page no.4 of assessment order.

The reply of assessee was not accepted by Assessing Officer. The Assessing Officer recorded that most of the withdrawn from Dena Bank was made through ATM and deposits in ICICI Bank is after 2 to 3 days. In one or two cases, the gap between withdrawals and deposits are more than 20 to 30 days. The assessee is practicing doctor and offered income on presumptive basis. The explanation given by assessee for withdrawal from one bank and deposits in another bank is nothing but afterthought. In a common practice, the person withdraws amount /AY.2016-17 Mahendra Bhikhubhai Bhagat from ATM to meet his household expenses or any other expenses and not for depositing the same other bank account. The household expenses of a middle class family in the City like Surat, can approximately be estimated at Rs. 30,000/- per month. Therefore, the assessee is required at least to spent Rs.3.60 lacs as household expensed for whole of the year. The assessee failed to furnish any details of such household expenses other than cash withdrawal. The bank account of ICICI Bank was not disclosed in the return of income, thus, the Assessing Officer treated the credited entries of Rs.6,47,693/- (by excluding the dividend and dividend fund of Rs.105 and Rs.685/- respectively), and remaining amount was added as an undisclosed investment.

Aggrieved by the additions in the assessment order, the assessee is filed before the ld. CIT(A). Before ld. CIT(A), the assessee filed detailed written submissions. The submission of assessee is recorded on para no.5 at page no.5 to 7 of the order of ld. CIT(A). In the submission, the assessee stated that assessee incurred loss in the stock market and was mentally upset and wanted to hide such loss from his family members. The ICICI Bank account was opened exclusively for carrying out share transaction. The assessee suffered short term capital loss of Rs.7,056/- and speculative / trading loss of Rs.1,88,609/-, thus suffered total loss of Rs.1,89,665/-. The assessee has no mala fide intention of not disclosing any share transactions maintained on ICICI Bank account. During assessment, the assessee furnished detail and /AY.2016-17 Mahendra Bhikhubhai Bhagat summary showing the cash withdrawal from Dena Bank and deposits in ICICI Bank. The assessee also furnished copy of passbook of Dena Bank and ICICI Bank. The assessee further stated that Assessing Officer disbelieved the explanation of the assessee by taking view that it is an afterthought and withdrawal from Dena Bank must have been used for household expenses. The assessee explained that his family consists of three members, i.e., assessee himself, his wife Vasudha M. Bhagat and daughter Bhargavee M. Bhagat. Wife of the assessee also assessed to tax from last many years. The assessee has incurred and debited an amount of Rs.1,02,000/- (Rs.8,500 x 12) for household expenses. In addition to the household withdrawal of his wife is Rs.1,68,000/- who is also assessed to tax. The assessee also furnished bank passbook of his wife showing withdrawal. On the basis of such submissions, the assessee claimed that total household withdrawals of husband and wife was Rs.2,70,000/-. The assessee submitted that such withdrawals for a family consisting of three family members, is quite fair and reasonable. The assessee further explained that cash withdrawals of Rs.4,33,000/- from Dena Bank during the year and after considering the household expenses of Rs.1,02,000/- the assessee was still having closing balance of Rs.4,86,079/- as on 31.03.02016 which is evident from balance sheet. Even if the cash amount of Rs.2,28,000/- deposited in ICICI Bank, is treated as used from above cash balance then also the net closing cash in hand would still remain at Rs.2,58,079/-. The assessee was having excess cash in in till /AY.2016-17 Mahendra Bhikhubhai Bhagat 31.03.2021, over and above Rs.2,28,000/- to cover up the said amount of Rs.2,28,000/- used and utilized for depositing in ICICI Bank account in AY.2016-17 for carrying out share transaction. To substantiate such contention, the assessee filed balance sheet for AY.2017-18 reflecting the closing cash on hand for all years. The assessee on the basis of such fact contended that the cash deposited of Rs.2,28,000/- in ICICI Bank account was required to be treated as explained and the addition made by the Assessing Officer required to be deleted.

On the other credits in ICICI Bank Rs.4,19,696/-, which pertains to the share transaction, the assessee explained that he entered into sale transaction from money deposits with ICICI Bank to the tune of Rs.2,28,000/-. The credit entries reflected amounting to Rs.4,19,696/- in ICICI Bank was pertaining to transactions in shares as evident from copy of passbook. The Assessing Officer totally ignored the debit entries of Rs.6,29,918/- available in ICICI Bank Account, which pertains to purchase cost of shares, brokerage, service tax and other charges for carrying out the share transactions. All such submissions were made before the Assessing Officer; however, the Assessing Officer has not accepted such submissions. Thus, considering the debit and credited entries, the assessee as the incurred loss from share business to the tune of Rs.1,88,609/- and short term capital loss at Rs.7056/-, total loss of Rs.1,95,665/-.

The ld. CIT(A) after considering the submission of assessee held that the assessee has not disclosed the bank account in his return of /AY.2016-17 Mahendra Bhikhubhai Bhagat income and the addition made by Assessing Officer under section 68 is in accordance with law and not need to be interfered with, thereby upheld the action of Assessing Officer Further aggrieved, the assessee has filed present appeal before this Tribunal.

I have heard the submissions of learned authorized representative (ld. AR) of the assessee and the learned senior departmental representative (ld. Sr. DR) for the Revenue and have gone through the order of lower authorities carefully. The ld. AR of the assessee submits that before assessing officer, the assessee explained that the credit in the ICICI bank that assessee incurred loss in the stock market and was mentally upset and wanted to hide such loss from his family members. The ICICI Bank account was opened exclusively for carrying out share transaction. The assessee suffered short term capital loss of Rs.7,056/- and speculative / trading loss of Rs.1,88,609/-, thus suffered total loss of Rs.1,89,665/-, had has no mala fide intention of not disclosing any share transactions maintained on ICICI Bank account. During assessment, the assessee furnished detail and summary showing the cash withdrawal from Dena Bank and deposits in ICICI Bank.

The ld AR for the submits that the assessee furnished copy of passbook of Dena Bank and ICICI Bank and cash flow and cash in hand, before assessing officer. The Assessing Officer disbelieved the explanation of the assessee by taking view that it is an afterthought and withdrawal from Dena Bank must have been used for household expenses. The ld AR for the assessee submits that wife of the assessee is also income tax /AY.2016-17 Mahendra Bhikhubhai Bhagat assessee and the assessee has substantiated that part withdrawal of assessee and withdrawal of his wife were sufficient to meet the house hold expenses. The ld AR for the assessee further submits that cash deposit of Rs. 2.28 Lakhs was from withdrawal from Dena Bank and remaining of credit amounting to Rs.4,19,696/- in ICICI Bank was pertaining to transactions in shares as evident from copy of passbook. The Assessing Officer totally ignored the debit entries of Rs.6,29,918/- available in ICICI Bank Account, which pertains to purchase cost of shares, brokerage, service tax and other charges for carrying out the share transactions. All such submissions were made before the Assessing Officer. The ld AR for the assessee submits that the lower authorities have not considered the submissions of the assessee. The ld AR for the assessee submits that in fact the assessee has suffered losses in the share transaction, still the assessing officer made addition of entire credit in ICICI bank without appreciating the facts properly. The ld AR prayed to delete the entire addition, which is made without appreciating the facts. In alternative the ld AR for the assessee submits that matter may be restored to the file of assessing officer with the direction to examine the cash available with him on withdrawal from Dena Bank.

On the other hand, the ld Sr DR for the revenue supported the order of lower authorities. The ld Sr DR for the revenue further submits that assessee has not disclosed the bank account in ICICI bank, through which the assessee was making transactions in shares. If the assessee /AY.2016-17 Mahendra Bhikhubhai Bhagat has suffered losses in the share transaction, how, the assessee was having credit in the undisclosed bank account.

I have considered the rival submissions of the parties and have gone through the orders of the lower authorities carefully. I find that the assessing officer made addition of Rs. 6,47,693/- by taking view that withdrawn from Dena Bank was made through ATM and deposits in ICICI Bank is after 2 to 3 days in some instances gap between withdrawals and deposits are more than 20 to 30 days. The explanation given by assessee for withdrawal from one bank and deposits in another bank is nothing but afterthought. The assessing officer further recorded that household expenses in a middle class family in the City like Surat, can approximately be estimated at Rs. 30,000/- per month. The assessee is required at least to spent Rs.3.60 lacs as household expensed for whole of the year and that the assessee failed to furnish of household expenses other than cash withdrawal. The ICICI Bank account was not disclosed in the return of income, thus, the credited entries of Rs.6,47,693/- was added as an undisclosed investment.

As recorded above, before ld CIT(A), the assesse filed detailed written submissions and explained that in the share trading the assessee has in fact suffered losses. The assessee also furnished the cash available with him. The ld CIT(A) instead of verifying such details simply upheld the action of assessing officer by taking view that the assessee has not disclosed bank account in ICICI Bank in his return of income and /AY.2016-17 Mahendra Bhikhubhai Bhagat assessing officer made addition under section 68 in accordance with law. Before me the ld AR for the assessee submits that the assessee was having sufficient cash available with him to make deposit in ICICI Bank and that the assessee suffered losses in the share transaction and the credit in undisclosed bank was a result of transaction and the debit entry in the said account was not which was not appreciated by lower authority.

Considering the submissions of both the parties, I am of the view that the entire credit in the bank account cannot be added as undisclosed income by ignoring the debit entry, particularly when the assessee has shown that cash deposit was made out of withdrawal from Dena Bank. Therefore, I restore back the case to the file of assessing officer to reconsider the issue afresh and pass order in accidence with law. The assessee is at liberty to prove that the cash deposit was out of the withdrawal from Dena Bank and remaining credit in ICICI bank was also a result of share transaction. Needless to direct that before passing the order afresh, the assessing officer shall grant opportunity of hearing to the assessee. The assessee is also directed to provide complete details, evidences and information to the assessing officer and not to take adjournment without any valid reasons. In the result, the grounds of appeal raised by the assessee are allowed for statistical purpose.