SH. RAJ KUMAR,YAMUNA NAGAR vs. ITO, WARD -3, YAMUNA NAGAR

At the outset, it is noted that there is delay in filing the present appeal by 329 days as pointed out by the Registry. In this regard, the assessee moved an application for seeking condonation of delay alongwith an affidavit. During the course of hearing, the ld AR drawn our reference to the affidavit so filed by the Counsel for the assessee and it was submitted that the Counsel who was instructed to file the present appeal was under serious mental depression and indisposition due to death of his wife as well as his son and which has resulted in unintentional and inadvertent mistake in delayed filing of the present appeal. It was submitted that as soon as the assessee came to know of the same, necessary remedial steps were taken to file the present appeal. It was accordingly submitted that there was a reasonable cause for the delay in filing the preset appeal and in the interest of substantial justice, the same may be condoned and the appeal be heard on merits of the case.

Per contra, the Ld. DR has objected to the condonation application. It was submitted that there is a substantial delay in filing the present appeal and the assessee has failed to point out any specific reason for the delay so happened in filing the present appeal and it is a clear case of negligence on the part of the assessee and therefore, the delay so happened in filing the present appeal doesn’t deserve to be condoned.

We have heard the rival contention and perused the condonation application filed by the assessee. We also find that the Counsel of the assessee Shri Harish Kumar Luthra has also filed his personal affidavit and the contents thereof have not been rebutted by the Revenue. Considering the totality of facts and circumstances of the case, we find that there was a reasonable cause for the delay in filing the present appeal due to bereavement in the immediate family of the Counsel and consequent medical complication and indisposition of the Counsel, the delay is hereby condoned and the appeal is admitted for adjudication on merits.

Briefly the facts of the case are that the case of the assessee was selected for limited scrutiny through CASS for examining cash deposits during the course of demonetization. Thereafter notice under section 143(2) and 142(1) were issued and submissions were called from the assessee. As per the AO, the assessee has deposited a sum of Rs. 13,00,000/- during the period 09/11/2016 to 30/12/2016 in his bank account maintained with PNB, Jagadhari and in this regard, necessary explanation was called from the assessee which were considered but not found acceptable to the AO and the amount was brought to tax under section 69A of the Act. As per the AO, the assessee has not explained the nature and source of such cash deposits satisfactorily alongwith any cogent documentary evidence and therefore deposits so made remained unexplained and provision of Section 69A of the Act are clearly attracted.

Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) who has since sustained the said addition.

Against the said findings and the directions of the Ld. CIT(A), the assessee is in appeal before us.

During the course of hearing, the Ld. AR submitted that the assessee is a retired railway employee and he has received his retirement benefits in the month of January 2016 which were deposited in the bank account and subsequently, an amount of Rs. 8,50,000/- was withdrawn on 24/02/2016 and another amount of Rs. 3,40,000/- was withdrawn on 22/04/2016 for certain specific purpose which could not be fulfilled and therefore the said amount was kept at home and thereafter, the Demonetization was announced by the Government of India in the month of November 2016 and the assessee left with no option, had to deposit the said amount in the bank account and the amount so withdrawn was re-deposited in the bank account. It was further submitted that the assessee had other personal savings kept at home for meeting day to day requirement and even the same was withdrawn from time to time and the same was also deposited in the bank account on account of Demonetization. It was accordingly submitted that the assessee has duly explained the source of the deposit during the period of Demonetization as withdrawal made in the earlier period and which were in turn out of the retirement benefits received from the Railway Department. It was further submitted that the assessee has also submitted the copy of the bank statement as well as cash flow statement for the F.Y. 2015-16 and 2016-17 which were totally ignored by the AO as well as by the Ld. CIT(A) giving detail explanation regarding individual deposits and withdrawals. It was accordingly submitted that the addition so made be directed to be deleted.

Per contra, the Ld. DR has relied on the findings of the AO. It was submitted that when the assessee was asked to explain the source of cash deposit made during demonetisation period, the assessee submitted "the cash was deposited out of cash available from previous withdrawals and personal savings, but on examination of the pattern of deposit and withdrawals of the bank account following facts were noticed by the AO. It was noticed that the withdrawals were made 8-10 months prior to the deposits and even after these withdrawals, the assessee has made regular ATM withdrawals, which itself proves that the assessee has no funds with him and that is why he has to make ATM withdrawals for day to day expenses. Further, before demonetisation period, assessee has deposited Rs. 2,00,000/- on 18.07.2016 and if the assessee was having withdrawals of 24.02.2016 and 22.04.2016 still with him, then why that amount was not deposited with the deposit of Rs. 2,00,000/- made on 18.07.2016. It was submitted that regular ATM withdrawal for household expense and deposition of Rs. 2,00,000/- on 18.07.2016 proves that the assessee was not having any other funds available with him after July, 2016. Further, assessee is a retired railway employee. He is well educated and well aware about banking facilities and also availing the same as per his requirement then there is no logical reason of keeping the huge cash at home instead of safe banking custody. The assessee has never deposited such huge cash before and after the demonetisation and he is in a habit of keeping the funds in bank account and then making ATM withdrawals as per requirement.

It was further submitted by the Ld. DR that if we go through the cash flow statements for the F.Yr. 2015-16 & 2016-17 submitted by the assessee, it is apparent that the assessee has huge cash in hand but still he is going to ATM & bank for withdrawals of small amount like Rs.2,000/-, Rs.3,000/-, Rs.5,000/- etc. The conduct of the assessee is contrary to human probabilities. In the normal course of conduct, no one will make such conduct. This appears to be a fantastic story that does not accord human probability. In support, reliance was placed on the decision dated 04.07.2019 passed in SLP (CIVIL) diary no. 15107 of 2019 in the case of Shashi Garg Vs. Principal Commissioner of Income Tax wherein the SLP filed against judgment dated 02.11.2018 of Hon'ble Delhi High Court in the case of Shashi Garg Vs. Principal Commissioner of Income Tax in and CM No. 46157/2018 was dismissed by the Hon’ble Supreme Court.

In his rejoinder, the Ld. AR submitted that the facts of the aforesaid case before the Hon’ble Delhi High Court are clearly distinguishable and thus, the reliance placed by the ld DR on the said decision is misconceived. He further relied on the order of the Coordinate Delhi Benches in case of ACIT Vs. M/s Omaxe Forest SPA and Hills Developers Ltd. (in dt. 18/08/2023) wherein the relevant findings are contained at para 8 which read as under:

8. The ld. CIT(A) has relied on the judgment of Hon’ble jurisdictional High Court of Delhi in the case of Kulwant Rai and Jaya Aggarwal observed that when the assessee has shown cash withdrawals during pre demonetization period more than the cash deposited during demonetization then the source cannot be disputed merely on the assumption that such withdrawn amount may have spent by the assessee for some other purpose without any adverse positive material showing such facts. The Hon’ble jurisdictional High Court held that in absence of any material in support of the view that withdrawals were spent for some other purpose, the conclusion of Tribunal has to be held as right in treating the cash withdrawals from the bank as source of cash found. In the present case said preposition rendered by the Hon’ble High Court of Delhi supports the conclusion of ld. CIT(A) that the source of cash deposited during demonetization period by the assessee was opening cash balance and cash withdrawals during pre demonetization period which are higher than the amount of cash deposited by the assessee. As we have noted above, the AO has ignored main cash book while disputing the source of cash and making addition and the ld. CIT(A) considered entire facts and circumstances in the right prospective and thereafter considering the totality of facts and circumstances and prepositions rendered by Hon’ble jurisdictional High Court of Delhi (supra) granted relief to the assessee. Thus, we are unable to see any ambiguity perversity or any valid reason to interfere with the findings arrived by the ld. CIT(A) and hence we uphold the same. Accordingly, grounds of revenue being devoid of merits are dismissed.

We have heard the rival contentions and purused the material available on record. The limited issue under consideration relates to nature and source of cash deposited by the assessee during the period of demonetization and the reasonability of the explanation submitted by the assessee. It is a settled legal position that the burden is on the assessee in whose account the cash has been found deposited to explain the nature and source of such deposit. It is a matter of record that the assessee had retired from the Indian Railways in the month of January 2016 and had deposited his retirement benefits in the bank account maintained by him. It is also a matter of record, as emerging from the perusal of the assessee’s bank account statement, that there were two withdrawals of Rs 8,50,000/- on 24/02/2016 and Rs 340,000/- on 22/04/2016 and as per cash flow statement submitted by the assessee, these withdrawals were available as cash- in-hand at the beginning of the year. On further review of the bank statement, we find that there were withdrawals and deposits of smaller denomination from time to time which have been stated to be relating to meeting the household expenses and savings kept at home. In this background, the assessee explains that the amount so deposited during the demonization period is out of earlier withdrawals at the beginning of the year and availability thereof as cash-in hand and secondly, out of withdrawal and savings during the year. The question is where the earlier deposits in the bank account stand accepted as out of deposit of retirements benefits, the earlier withdrawals stand substantiated by the bank statement and availability thereof as cash-in-hand at the beginning of the year as per cash flow statement, there were withdrawals during the year to meet the household expenses, and the assessee, being an individual and a retired railway employee, what more is expected from him whereby his explanation can be accepted. In our considered view, there is nothing on record to rebut the explanation and the documentation so submitted by the assessee and in absence thereof, it would be a case of mere suspicion and apprehension on part of the AO that the amount so withdrawn must have been spent somewhere else by the assessee. Once the deposits stand duly explained and out of the same, how much cash to be withdrawn, the purpose for which the cash has been withdrawn, and how much cash to be kept at home cannot be specified and defined by the Revenue and it would be the individual’s decision to decide and act accordingly. Each case has its peculiar facts and circumstances and there cannot be any common yardstick to define and lay down any rules in this regard. No doubt, with digitization, the aim is to achieve a situation where majority of the transactions are cash-less, still, the reality of the situation is that a large section of our economy still depends on cash and cash is a preferred mode of undertaking the transactions. With the announcement of demonization, no doubt, specified bank notes were stated to be no more legal tender and the people were forced to deposit their savings and past withdrawals in the bank account but the mere fact that the amount has been deposited in the bank account during the demonetization doesn’t mean that in all cases, all these deposits were unaccounted or unexplained. The explanation in each case has to be sought and appreciated in the peculiar facts of each case. The level of documentation and explanation, which can be expected from a corporate or a large tax payer which regularly maintains books of accounts and from an individual, who has just retired from the government service and has no source of income other than salary and interest and doesn’t maintain any book of accounts, cannot be same and the same has to be kept in mind whether considering the explanation of the assessee.