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Income Tax Appellate Tribunal, DELHI
Before: SH. R.K.PANDA & SH. ANUBHAV SHARMA
PER ANUBHAV SHARMA, JM:
The assessee has come in appeal against the order u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as the “Act”) dated 25.03.2021 passed in appeal no. CIT(A), Dehradun/10755/2019-20 for the assessment year 2017-18 by NFAC ( hereinafter referred as Ld. First Appellate Authority or in short FAA) against order
2 ITA No. 18/Del./2021 Sh. Vardhan Ghildiyal dated 26.12.2019 u/s 144 of the Act passed by Income Tax Officer, Ward 1 (2)(5), Dehradun (hereinafter referred to as “the Ld. AO).
The facts in brief are that the assessee is a salaried employee and also engaged in farming. A notice dated 30.01.2018 was issued u/s 142(1) of the Act for filing the return of income for the assessment year 2017-18. The ld. AO observed that Rs. 1,64,552/- was taxable on account of salary, Rs. 55,433/- were added to the income of assessee under capital gain, Rs. 5,990/- under income from other sources, Rs. 3,50,000/- as agricultural income, Rs. 13,380/- as dividend income and Long Term Capital Gain for equity shares. Apart from that Ld. AO noticed that during demonetization period a sum of Rs. 15,00,000/- was deposited in specified bank notes in account no. 3018008800012252 held with the Punjab National Bank.
The assessee explained that this amount of Rs. 15,00,000/- was withdrawn from same loan account on 23.09.2016. However, the fund could not be utilized and it was deposited in same account after it failed to become a legal tender.
3.1 On enquiry, it was found by the Ld. AO that amount was withdrawn with the denomination of notes 500 X 3000 on 23.09.2016 while when deposited on 18.11.2016 the denominations were as under :-
500 X 1600 = 8,00,000/-
1000 X 700 = 7,00,000/-
3.2 Thus, on account of this mismatch of denominations, the Ld. AO invoked Section 69A of the Act and added Rs. 7,00,000/-, whichever deposited in nominations of Rs. 1,000/-.
3 ITA No. 18/Del./2021 Sh. Vardhan Ghildiyal 4. The assessee had preferred an appeal and Ld. F.A.A. allowed the same partly with following relevant observations :- “As para 7.1 of the Assessment Order, the Assessing Officer has accepted Rs.3,50,000/- as agricultural income. Further besides Rs.8,00,000/- out cash deposit of Rs.15,00,000/-. The Assessing Officer has also accepted cash deposit of Rs. 13,48,000/-. Further, the assesse has made cash deposit of Rs.1,96,000/- as discussed above in various accounts. Thus, there is force in the arguments of the assesse that out of available cash with him, notes of Rs.1000/- were kept by him and tried to make payments by Rs.500/- notes. The only ground of the Assessing Officer for addition of Rs.7,00,000/- (Rs.1000 X 700) is that the entire cash withdrawal on 23.09.2016 was in the denomination of Rs.500 notes. As per the assesse, the Assessing Officer has accepted the source of cash deposit of Rs. 15,00,000/- in principal and made addition as the denomination of the notes withdrawn and notes deposited were not matching. There is some force in the argument of the assesse that he had other sources of income and cash was available with him which was deposited before and after the date of deposit on 18.11.2016. In view of the above, there is every chance of mixing of notes, human nature of keeping/saving higher denomination notes for ease of storing and carrying also cannot be denied. Further, the assesse may also be having cash availability on account of past savings. Looking into the overall facts of the case, it will be reasonable to give allowance of Rs.3,50,000/- for past savings and mixing of denomination of notes. This will result in relief of Rs.3,50,000/- and the addition will be restricted to Rs.3,50,000/-.”
4 ITA No. 18/Del./2021 Sh. Vardhan Ghildiyal 5. Now before the Tribunal, the assessee has raised following grounds of appeal :-
1) That the learned CIT(A) has erred in law and in facts confirming the addition under section 69A of the IT Act, 1961 to the tune of Rs. 3,50,000/-. (Out of total addition of Rs 7,00,000/-) made by Assessing Officer without doubting the source of cash deposit merely on the ground that denomination of the currency at the time of cash deposit (partly) does not tally with the denomination of currency at the time of withdrawal. 2) That the learned CIT(A) has erred in law and facts in confirming addition and ignoring the position that the source of the cash deposit has not been doubted by the AO, however the change in denomination of currency has been treated as generation of Income in the hands of appellant and moreover the unexplained income, resultant invoking taxability U/s 115BBE of IT Act 1961. 3) That the part addition upheld by the learned CIT(A) is based on conjecture and surmises and needs to be set aside as the Learned CIT (A) has totally ignored the submissions filed by the appellant during the assessment proceedings and the first appeal, made the addition without having any contra evidence on records. 4) That the observation of learned CIT (Appeals) in the order are per verse, arbitrary, baseless and misleading and part addition in upheld based on purely Conjecture and surmises as evident from closing para of order:- “Looking into the overall facts of the case, it will be reasonable to give allowance of Rs 3,50,000/- for past savings and mixing of denomination of notes. This will result in relief of Rs 3,50,000/- and the addition will be restricted to Rs 3,50,000/- . Hence the addition needs to be deleted.
The appellant craves leave to reserve its right to add to, delete from, amend, alter or modify its Grounds of Appeal before or at the time of hearing.
Heard the Ld. AR and Ld. DR. It was contended by the ld. AR that once the Ld. F.A.A. had reached the conclusion that there is every chance of mixing notes, human nature of keeping higher denomination notes and the source of income being not doubted there was no reason for Ld. F.A.A. to have partly allowed the
5 ITA No. 18/Del./2021 Sh. Vardhan Ghildiyal appeal. It was submitted that being agriculturists amount was withdrawn from the KCC Limit Account and deposited in the same account due to demonetization and there was no reason for Ld. AO to have considered a part of same to be beyond the explained source. Ld. AR also relied the RBI Circular in regard to facility for exchange of notes to contend that merely change of denominations cannot be considered to be generating income in the hands of assessee.
6.1 The Ld. Sr. DR submitted that there has been no error of facts or law in the impugned order.
The Bench has given thoughtful consideration to the submissions and perused the matter on record. The grounds are all inter connected and taken together for determination with following findings.
It is not disputed by the revenue that various sources of income in the hands of assessee were identified by the Ld. AO in the form of income from salary, agricultural income, dividend income, capital gains income and also income from other sources. The fact of withdrawal of Rs. 15,00,000/- from assessee’s own account on 23.09.2016 is not disputed. It is not disputed the same is KCC ( Kisan Credit Card) Limit Account. Judicial notice can be taken of the fact that on 08.11.2016 demonetization was declared by the Central Government and factually Rs. 15,00,000/- were deposited by the assessee on 18.11.2016.
8.1 What can be held is that the amount of Rs. 15,00,000/- was not lying with the assessee for the unreasonable period after withdrawal and also there was a reason out of legal compulsion to deposit the demonetizes currency notes in the bank. Had there been no such legal requirement, assessee may not have deposited the amount back and may have used it for the purpose for which it was allowed to be withdrawn by its bankers in KCC Limit account. Since before demonetization,
6 ITA No. 18/Del./2021 Sh. Vardhan Ghildiyal there was no reason to deposit back the currency notes so there could have been no prudent reasoning for the assessee to have kept the same currency notes of the denominations as received from bank. Ld. F.A.A. has appreciated the facts and circumstances while giving a finding and appreciable reasons for change in the denominations of the holding but restricted relief to Rs. 3,50,000/-.
The Bench is of the considered view that when the onus casted on the assessee is considered to be plausible then it has to be accepted on the whole unless there are legal and factual grounds to disbelieve the explanation in part. The aforesaid discussion of the facts and circumstances, leaves no doubt in the mind of the Bench that assessee had successfully discharged its onus of explaining that the deposit of Rs. 15,00,000/- in the bank account were his own funds, as withdrawn form the same bank account and no considerable reason has been cited by the Ld. F.A.A. to have partly allowed the appeal, while reducing the addition from Rs 7,00,000/ to Rs 3,50,000/-, and same needs interference in this appeal.
Consequently, the grounds raised before this Tribunal are sustained and the appeal of the assessee stands allowed. Ld. AO is directed to delete the complete addition of Rs. 7,00,000/- made u/s 69A of the Act.
Order pronounced in open court on this 31st day of March, 2022.
Sd/- Sd/- (R.K.PANDA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 31 .03.2022 *Binita, SR.P.S* Copy forwarded to:
7 ITA No. 18/Del./2021 Sh. Vardhan Ghildiyal 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI