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Order PER VIKRAM SINGH YADAV, A.M. : This is an appeal filed by the Assessee against the order of the Ld. CIT(A)-43, New Delhi dt. 13/10/2022 pertaining to Assessment Year 2017-18 wherein the assessee has challenged the sustenance of addition of Rs. 81,10,924/- under Section 69A of the Act.
Briefly the facts of the case were that the return of income declaring total income of Rs. 2,02,365/- was filed by the assessee on 03/06/2017 which was selected for limited scrutiny on issue of “Large value cash deposits during the year and High value cash withdrawal during the year”. Thereafter notice under section 143(2) and 142 (1) alongwith questionnaire were issued, calling for specific information regarding the nature and source of the deposits so made in the assessee’s bank account.
2.1 In response, the assessee filed his submissions which were considered but not found acceptable to the AO and an addition of Rs. 81,10,924/- was made under Section 69A of the Act. As per the AO, the assessee had deposited cash amounting to Rs. 81,10,924/- in the bank account which is in name of the assessee as established through KYC obtained from the bank and since assessee has failed to offer any acceptable and cogent explanation regarding the source of the money so deposited in the bank account, provision of Section 69A were attracted. It was held by the AO that the assessee reply in respect of cash withdrawal and cash deposits during the year are without any documentary evidence and therefore the same cannot be accepted.
Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A). Before him, the asssessee sought permission to file additional evidence under Rule 46A and it was also submitted that there was only cash deposit of Rs. 7,50,000/- in the Canara Bank and the source of the same was the earlier withdrawal made from the Canara Bank from time to time and detailed explanation were given regarding the various cash withdrawals as well as the other credits and inter-bank transfers with supporting documentation.
3.1 The Ld. CIT(A) called for the remand report from the AO wherein the AO reiterated the findings in the assessment order and thereafter the Ld. CIT(A) stated that the assessee application under Rule 46A does not quantify to the ground submitted in the appeal and the assessee’s appeal was summarily dismissed.
4. Against the said finding and the direction of the Ld. CIT(A), the assessee is in appeal before us.
During the course of hearing, the Ld. AR submitted that the case of the assessee was selected for limited scrutiny to verify the cash deposit made during the year under consideration and in the instant case, there were cash deposits of Rs. 7,50,000/- and rest of all are credit entries in the bank account of the assessee and in respect of which the necessary explanation have been submitted before the AO alongwith copy of the bank statement which has been duly acknowledged by the AO and thereafter also by the Ld. CIT(A).
5.1 In this regard, our reference was drawn to the written submission wherein against the each of the deposits, the assessee has provided the necessary explanation as under:
“3. The Appellant is providing a comprehensive list of all deposits made in his bank account during the FY 2016-17, accompanied by a proper explanation of the source of each deposit, for the consideration of this Hon'ble Tribunal.
Amount (Rs.) Nature of Deposit Explanation 7,50,000/- Cash Deposits The details of the cash deposit made by the Appellant in his bank account are as under: (i) Rs. 6,00,000/- (Rupees Six Lakh) deposited on 04.04.2016 (Rs. 1,00,000/-), 10.05.2016 (Rs. 2,00,000/-), 11.05.2016 (Rs. 2,00,000/-) and 24.05.2016 (Rs. 1,00,000/-) towards previous cash withdrawal of Rs. 8,57,500/- in FY 2015-16 from the same bank account. Thus, a substantial amount withdrawn in the FY 2015-16 was deposited back by the Appellant in the FY 2016-17. This amount had been withdrawn by the Appellant in view of the anticipated medical expenses in the form of hospital treatment. The same was not required and hence an amount of Rs. 6,00,000/- was deposited by the Appellant in his bank account in the FY 2016- 17. Hence the deposit of Rs. 6,00,000/- does not tantamount to any income; (ii) Rs. 1,20,000/- (Rupees One Lakh Twenty Thousand) deposited on 24.08.2016 post currency exchange as he had come back to Jammu from United Arab Emirates where his two sons were working for livelihood; (iii) Rs. 30,000/- (Rupees Thirty Thousand Only) of old notes deposited on 06.12.2016 post demonetisation during the period, viz. 09.011.2016 to 31.12.2016. 20,00,000/- Personal Loan Personal loan of Rs. 20 lakhs advanced by Canara Bank to the Appellant. From the statements it is evident that the loan was released by Canara Bank on 01.09.2016 in the bank account of the Appellant, maintained with Canara Bank itself. In the bank statement, a Fund Transfer of Rs. 20 lakhs from loan account no. 2068793000029 to personal account no. 20681005697 of the Appellant is reflected on 01.09.2016 itself. Thus, by no stretch of imagination this loan amount of Rs. 20 lakhs can be included as an income of the Appellant. 47,49,824/- Amount received by An amount of Rs. 47,49,824/- was deposited in the the Appellant from his bank account of the Appellant by his sons viz. Shri sons in UAE via direct Vishal Jolly and Shri Vikas Jolly residents of United Arab bank transfer Emirates through fund transfer from United Arab Emirates which is evident from the bank statement itself and the submissions scribbled by the Appellant in the bank statement itself against the individual entries of these deposits, disclosing its origin and the name of the person who has transferred the funds, cumulatively totalling to Rs. 47,49,824/-. Section 56(2)(vii)(a) of IT Act provides that where an individual receives in any previous year from any person or persons any sum of money without consideration and the aggregate value of which exceeds Rs. 50,000/-, the whole of the aggregate value of such sum shall be chargeable to income tax under the head income from other sources. However as per clause (a) of the second proviso to Section 56(2)(vii) of the IT Act, if the said amount is received from any relative then the same cannot be included as an income. The term relative is defined in clause (e) of the second proviso itself to include any lineal ascendant or descendant of the individual. Rs. 47,49,824/- was deposited in the bank account of the Appellant by his sons viz. Shri Vishal Jolly and Shri Vikas Jolly which is evident from the bank statement itself. The said amount qualifies as income from other source under Section 56(2)(vii)(a) which is exempted from income tax under clause (a) of the second proviso to Section 56(2)(vii) of the IT Act as the funds have been transferred by the sons of the Appellant who are his lineal descendants and therefore exempted from imposition of any tax. 1,04,272/- House Rent Income An amount of Rs. 1,04,272/- is towards house rent received by the Appellant from Johnson Controls- Hitachi Air Conditioning India Limited for which the Appellant has duly filed its return disclosing the same. Thus, an amount of Rs. 1,04,272/- which already stood taxed in the return filed by the Appellant has been taxed again. 17,882/- Bank Interest An amount of Rs. 17,882/- is towards bank interest received by the Appellant for which he has duly filed its return disclosing the same. Thus, an amount of Rs. 17,882/- which already stood taxed in the return filed by the Appellant has been taxed again. 2,50,000/- NEFT Shweta Gupta Shweta Gupta whoJs the sister-in-law of Shri Vikas Jolly son of the Appellant had gone to visit her sister and Shri Vikas Jolly in Dubai in December 2016 and had transferred an amount of Rs. 2,50,000/- into the account of the Appellant as her tickets, travel and accommodation were arranged by Shri Vikas Jolly. Since, she could not transfer the amount directly in the account of Shri Vikas Jolly, therefore she transferred an amount of Rs. 2,50,000/- to the account of the Appellant. The said amount is not an income of the Appellant and thus no tax is payable on the same. 1,18,300/- Currency Exchange The Appellant was given some amount in the form of foreign currency by his sons when he was returning from United Arab Emirates to meet any exigency or emergency of myriad nature. On his return he exchanged the foreign currency for a value of Rs. 1,18,300/- which was fund transferred to his account. The said amount qualifies as income from other source under Section 56(2)(vii)(a) which is exempted from income tax under clause (a) of the second proviso to Section 56(2)(vii) of the IT Act as the funds have been given by the sons of the Appellant who are his lineal descendants and therefore exempted from imposition of any tax. 1,596/- Gas Subsidy An amount of Rs. 1,596/- is towards Gas Subsidy received by the Appellant and the same is not an income of the Appellant and thus no tax is payable on the same. 19,050/- Income Tax Refund An amount of Rs. 19,050/- is towards Income Tax refund received by the Appellant and the same is not an income of the Appellant and thus no tax is payable on the same. 80,10,924/- Total
The total deposits made by the Appellant in his bank account during the FY 2016-17 comes to Rs. 80,10,924/-. It is relevant to note that one cheque of Rs. 1,00,000/- had bounced on 27.10.2016 and therefore reversed by the banker. Hence the total credit entries are of Rs. 80,10,924/- only and not Rs. 81,10,924/- as added by the Assessing Officer 5.2 In this regard, it was submitted that the CIT (A) and the Assessing Officer failed to consider the various notings made by the Appellant in the bank statement which were his submissions before the Assessing Officer with respect to the various deposits made in his bank account, to show that the same is not a taxable income. This noting/submissions against the various entries establish without a shadow of doubt that the deposits made in the bank account of the Appellant ought not to be included in his income and thus could not have been chargeable to tax.
5.3 That the CIT(A) and the Assessing Officer failed to consider the responses submitted by the Appellant, wherein he had clearly stated that the Appellant has not deposited cash amount to Rs. 81,10,924/- nor withdrawn cash of Rs. 69,59,187/-. The amount, viz. Rs. 81,10,924/- seems to be the total amount deposited in the bank account of the Appellant, viz. Canara Bank was Rs. 47 lakhs by both sons, Shri Vishal Jolly and Shri Vikas Jolly, residents of Sharjah, UAE. Further an amount of Rs. 20 lakh was towards a personal loan taken by the Appellant from Canara Bank on 01.09.2016 which was released by the Canara Bank in his sole and only bank account maintained with Canara Bank and bearing account no. 20681005697. The Appellant also submitted that the other deposits made in this account were towards rental income, cash deposit and other deposits together totalling to Rs. 81 lakhs.
5.4 That the CIT (A) and the Assessing Officer have erred in failing to appreciate that an amount of Rs. 47,49,824/- is income from other source under Section 56 (2)(vii) of the IT Act which has been adequately and sufficiently explained by the Appellant through his bank statement and the submissions inscribed in the bank statement against every entry. In this context, it is submitted that Section 56(2)(vii)(a) of IT Act provides that where an individual receives in any previous year from any person or persons any sum of money without consideration and the aggregate value of which exceeds Rs. 50,000/-, the whole of the aggregate value of such sum shall be chargeable to income tax under the head income from other sources. However as per clause (a) of the second proviso to Section 56(2)(vii) of the IT Act, if the said amount is received from any relative then the same cannot be included as an income. The term relative is defined in clause (e) of the second proviso itself to include any lineal ascendant or descendant of the individual. 5.5 The CIT (A) and the Assessing Officer have ignored that in the present case, an amount of Rs. 47,49,824/- was deposited in the bank account of the Appellant by his sons viz. Shri Vishal Jolly and Shri Vikas Jolly residents of United Arab Emirates through fund transfer from United Arab Emirates which is evident from the bank statement itself and the submissions scribbled by the Appellant in the bank statement itself against the individual entries of these deposits, disclosing its origin and the name of the person who has transferred the funds, cumulatively totalling to Rs. 47,49,824/-. The said amount qualifies as income from other source under Section 56(2)(vii)(a) which is exempted from income tax under clause (a) of the second proviso to Section 56(2)(vii) of the IT Act as the funds have been transferred by the sons of the Appellant who are his lineal descendants and therefore exempted from imposition of any tax.
5.6 That the CIT (A) has failed to appreciate that the Assessing Officer had wrongly invoked Section 69A of the IT Act which is not attracted in the facts and circumstances of the case as the Appellant has clearly recorded the source of the deposits in his bank account and the Appellant has explained the nature and source of such deposits through the bank statement itself and the submissions scribbled by the Appellant in the bank statement itself against the individual entries of these deposits, disclosing its origin and the name of the person who has transferred the funds (details of which are provided in the table given above).
5.7 That the CIT (A) has also failed to consider that both the sons of the Appellant are living in United Arab Emirates and when the Assessing Officer issued Notices to the Appellant, he was in United Arab Emirates with his sons, due to which the Appellant failed to respond to such notices. Thus, the Appellant was prevented by a sufficient cause from producing necessary defence/evidence before the Assessing Officer. Also, the Appellant is a senior citizen, whose both sons are living abroad. The Appellant due to his old age and multiple health conditions was prevented by a sufficient cause from producing necessary evidence before the Assessing Officer, which he was called upon to produce.
5.8 That the CIT(A) while passing the impugned order has completely ignored the documents on record and the facts and circumstances of the case. There is a complete non-application of mind on behalf of the CIT (A) which is writ large on the face of the record. The impugned Order is perverse, illegal, manifestly arbitrary, based on extraneous consideration, violative of principles of natural justice, contrary to well-settled principles of law, based on unsubstantiated presumptions and erroneous interpretation of provisions of law. Thus, the impugned order be set aside by this Tribunal.
Per contra the Ld. DR has relied on the decision of the lower authorities. It was fairly submitted that the case of the assessee was selected for limited scrutiny to verify the cash deposits and as far as the submission of the Ld. AR on source of cash deposits are concerned, the same needs necessary verification. It was accordingly submitted that the matter may be set aside to the file of the AO for necessary verification.
We have heard the rival contentions and purused the material available on record. Firstly, it is noted that the case of the assessee was selected for limited scrutiny to verify “Large value cash deposits during the year and High value cash withdrawal during the year” and therefore, the enquiry and examination by the AO and consequent findings are required to be restricted to such an issue and scope thereof cannot be enlarged unless and until requisite approval has been taken from the Competent authority to convert limited scrutiny to full scrutiny during the course of assessment proceedings. In the instant case, there is nothing on record which has been brought to our notice whereby the limited scrutiny proceedings have been converted into full scrutiny and the ld DR has also fairly submitted that the case of the assessee was selected for limited scrutiny to verify the cash deposits and cash withdrawals. During the course of assessment proceedings, the assessee submitted copy of his bank statement and against individual entries in the bank statement, he has submitted his explanation regarding the source of such deposits and both the lower authorities have failed to appreciate that out of total deposits, there were cash deposits of Rs 7,50,000/- in the bank account of the assessee and rest all deposits were through normal bank channels (and not in form of cash deposits) in nature of personal loan, amount received from his two sons in UAE, house rent and bank interest already offered in the return of income, other receipts in terms of currency exchange, gas subsidy and income tax refund, etc. We therefore find that as far as the matter of limited scrutiny is concerned, the same has to be confined to the nature and source of cash deposits of Rs 7,50,000/-. The assessee has given his explanation regarding such cash deposits, however, we are refraining from going into the merits of the same as we do not have the benefit of findings of either of the lower authorities in this regard.
In light of aforesaid discussions and in the entirety of facts and circumstances of the case, we hereby direct the deletion of addition of Rs 73,60,924/- (Rs 81,10,924 less 7,50,000) as the same is clearly outside the scope of limited scrutiny and as far as cash deposits of Rs 7,50,000/- are concerned, the matter is set-aside to the file of the AO to examine the explanation of the assessee regarding the nature and source of such cash deposits and decide as per law after providing reasonable opportunity to the assessee.
In the result, the appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open Court on 09/07/2024. परेश म. जोशी िव"म िसंह यादव (PARESH M. JOSHI) (VIKRAM SINGH YADAV) "ाियक सद" / JUDICIAL MEMBER लेखा सद"/ ACCOUNTANT MEMBER