ITAT Jodhpur Deletes Section 69A Addition on Demonetisation Cash Deposits

Vimal Chatur Vs ITO (ITAT Jodhpur)

Summary: The appeal was filed by the assessee against the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi dated 21.08.2023 for Assessment Year 2017-18, arising from the assessment order dated 17.12.2019 passed under section 143(3) of the Income Tax Act by the ITO, Ward-2(2), Udaipur.

The assessee, a senior citizen, retired Government employee and pensioner, had declared total income of Rs.7,72,480/- in his return filed on 21.07.2017. During scrutiny proceedings, the Assessing Officer noticed cash deposits of Rs.18,29,500/- in the assessee’s bank accounts during the demonetisation period. The assessee explained that the cash represented savings of himself and his wife from earlier years.

The Assessing Officer accepted Rs.2,20,000/- as explained and treated the balance Rs.16,09,500/- as unexplained money under section 69A. On appeal, the CIT(A) found the source of Rs.5,42,400/- explained and restricted the addition to Rs.12,87,100/-.

Before the Tribunal, the assessee relied upon cash flow statements, day-wise cash withdrawal and deposit details, a family settlement under which his wife had received Rs.3,61,000/-, and an affidavit of his wife stating that she had deposited Rs.15,59,000/- in the jointly owned bank accounts. The Department relied upon the orders of the lower authorities.

The Tribunal observed that the lower authorities had doubted the cash flow statements but had not disproved the withdrawals and their sources through contrary evidence. It further noted that the family settlement and the wife’s affidavit had been discarded or disbelieved without examination or adverse evidence. The affidavit remained uncontroverted.

Relying upon the Supreme Court decision in Mehta Parikh & Co. v. Commissioner of Income-tax, the Tribunal held that the addition of Rs.12,87,100/- was not sustainable without controverting the facts stated in the affidavit and the material furnished by the assessee. The Tribunal accordingly directed deletion of the addition. Grounds relating to sections 115BBE and 234A, 234B and 234C were treated as consequential, while the general grounds were not adjudicated. The appeal of the assessee was allowed.

Facts of the Case

The assessee filed his return of income for Assessment Year 2017-18 declaring total income of Rs.7,72,480/- on 21.07.2017. His case was selected for scrutiny and notice under section 143(2) was issued on 13.08.2018.

The Assessing Officer noticed cash deposits aggregating to Rs.18,29,500/- in the assessee’s bank accounts during the demonetisation period. The assessee explained that the deposits were sourced from savings accumulated since Assessment Year 2012-13 by himself and his wife.

The Assessing Officer noted that the assessee’s wife, Smt. Kanak Lata Chhajed, had also reported cash deposits aggregating to Rs.7,35,000/- in her own bank accounts. The Assessing Officer accepted Rs.2,20,000/- as available cash balance and treated Rs.16,09,500/- as unexplained money under section 69A.

Findings of CIT(A)

The CIT(A) considered the assessee’s explanations and the documents submitted during the proceedings. It found that cash deposits to the extent of Rs.5,42,400/- were explained, comprising the opening cash balance and cash withdrawals after considering household expenses.

The CIT(A) also considered the affidavit filed by the assessee’s wife claiming that she had deposited cash in the assessee’s bank accounts. However, it held that the claim was not supported by corroborative evidence explaining her creditworthiness.

The CIT(A) further rejected the contention that section 69A was not applicable because the assessee did not maintain books of account. It referred to the words “books of account, if any, maintained by him” in section 69A and held that maintenance of books was not mandatory for application of the provision.

Accordingly, the CIT(A) restricted the addition from Rs.16,09,500/- to Rs.12,87,100/- and granted relief of Rs.3,22,400/-.

Submissions and Evidence Before ITAT

To support the grounds raised before the Tribunal, the assessee relied upon the documents contained in the paper book, including the following:

The assessee submitted cash flow statements for the preceding five years and day-wise details of cash withdrawals and deposits. The assessee also relied upon the family settlement under which his wife had received Rs.3,61,000/- and the affidavit of his wife stating that she had deposited Rs.15,59,000/- in the bank accounts.

The Departmental Representative, on the other hand, relied upon the orders of the lower authorities.

ITAT Jodhpur Observations

The Tribunal heard the rival contentions and perused the material on record. It observed that the assessee and his wife were senior citizens, retired Government employees and pensioners.

The Tribunal noted that the assessee had filed cash flow statements for the preceding five years and day-wise cash withdrawal and deposit details. According to the Tribunal, the lower authorities had doubted the cash flow statements but could not disprove, through contrary evidence, the withdrawals and their sources.

The Tribunal also noted the family settlement filed by the assessee, under which his wife had received Rs.3,61,000/-. It observed that the lower authorities had discarded or disbelieved the material without examining it and without bringing adverse evidence.

The Tribunal further considered the affidavit of Smt. Kanak Lata Chhajed. According to the Tribunal, she had clearly stated in the affidavit that the bank accounts were jointly owned and that she had deposited Rs.15,59,000/- in those accounts. The Tribunal noted that the affidavit remained uncontroverted.

Reliance on Supreme Court Decision

To support the assessee’s arguments, the ld. AR relied upon the Supreme Court decision in Mehta Parikh & Co. v. Commissioner of Income-tax, [1956] 30 ITR 181 (SC).

The Tribunal considered the principle stated in that decision concerning affidavits and documentary entries that had not been challenged or subjected to further scrutiny. Applying that reasoning to the material before it, the Tribunal held that, without controverting the facts stated in the affidavit of the assessee’s wife, the addition sustained by the lower authorities could not be maintained.

Deletion of Section 69A Addition

The Tribunal considered the reconciliation and cash flow statement filed by the assessee along with the family settlement deed and affidavit of his wife. It noted that the affidavit recorded that the cash deposited was from her own source and savings.

The Tribunal concluded that the addition of Rs.12,87,100/- sustained by the lower authorities was not sustainable and directed that the same be deleted. Accordingly, Ground No. 2 raised by the assessee was allowed.

Other Grounds

The Tribunal held that Grounds Nos. 3 and 4, concerning section 115BBE and interest under sections 234A, 234B and 234C, were consequential in nature and therefore did not require adjudication.

Ground Nos. 1 and 5 were treated as general grounds and were also not adjudicated as no grievance was raised by the assessee before the Tribunal on those grounds.

Final Decision

The Tribunal directed deletion of the addition of Rs.12,87,100/- sustained under section 69A of the Income Tax Act. Ground No. 2 was allowed, while Grounds Nos. 3 and 4 were treated as consequential and Grounds Nos. 1 and 5 as general.

In the result, the appeal of the assessee was allowed.

Cases Discussed

Mehta Parikh & Co. v. Commissioner of Income-tax [1956] 30 ITR 181 (SC)

FULL TEXT OF THE ORDER OF ITAT JODHPUR

This appeal filed by assessee is arising out of the order of the ld. CIT(A), National Faceless Appeal Centre, Delhi dated 21.08.2023 [here in after “ld.CIT(A)(NFAC)”] for assessment year 2017-18, which in turn arise from the order dated 17.12.2019 passed under section 143(3) of the Income Tax Act, [ here in after referred as “Act”] by the ITO, Ward-2(2), Udaipur.

2. In this appeal, the assessee has raised following grounds of appeal: –

“ 1. The impugned order u/s 143(3) of the IT Act, 1961 dated 17.12.2019 as well as the notices and proceedings or action so taken by the Id. AO are illegal bad in law, barred by limitation, without jurisdiction, and various other reasons or and further contrary to the real facts of the case hence the same may kindly be quashed.

2. Rs.12,87,100/-: The Id. CIT(A) has grossly erred in law as well as on the facts of the case in sustaining the addition of Rs. 12,87,100/- out of the addition of Rs. 16,09,500/- made by the Id. AO u/s 69A as unexplained money on account of cash deposits in the bank account, during the demonetization period. The Ld. CIT(A) and AO have also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the addition so made by the Id AO is also being contrary to the real facts of the case and not according to the provision of law, hence the same may kindly be deleted in full.

3. The Id. AO has also grossly erred in law as well as on the facts of the case invoking the provisions of Sec. 115BBE for taxing the income at the higher rate, without issue any show cause notice and also not applicable in the present case. The Ld. AO has also erred in not considering the vital facts and material available on record in their true perspective and sense. Hence the provisions of Sec. 115BBE so invoked by the Id. AO and confirmed by the Id. CIT(A) are also being contrary to the real facts of the case and not according to the provision of law, hence the same is illegal, bad in law, against the principle of natural justice the same may kindly be deleted in full.

4. The Id. AO has grossly erred in law as well as on the facts of the case in charging the interest u/s 234A, B.C. The interest so charged is being totally contrary to the provision of law and on facts of the case and hence same may kindly be deleted in full.

5. That the appellant prays your honour Indulgences to add, amend or alter ofor any of the grounds of the appeal on or before the date of hearing.

3. Brief fact of the case is that that the assessee is Senior Citizen and pensioner as he was retired as Govt. Employee. For the year under consideration he has filed his ITR declaring the total income of Rs.7,72,480/- on 21.07.2017. The case of the assesseee was selected for scrutiny by issuing the notice u/s 143(2) on 13.08.2018. The Assessing Officer has noted that the assessee has deposited cash of Rs.18,29,500/- in his bank account during the demonetization period. The asseessee has replied that the sources of the same is out of savings since A.Y. 2012-13 and also of his wife since A.Y. 2012-13. The AO mentioned the details of the bank account and deposits at page 1-2 of the assessment order. The AO has observed that he obtained the copies of return of assessee’s wife, Smt. Kanak Lata Chhajed, where she has shown cash deposits aggregating to Rs.7,35,000/- in bank accounts. The assessee has replied that he had already submitted to the department in his initial reply of cash deposit that most of the cash belongs to his wife and she assumed that it was declared in her husband’s personal return so she was not required to disclose it in her personal income tax return. However the AO has not accepted the reply of the assessee and held as under:- “wife of the assessee had not shown such deposits in her return. Further, wife of the assessee has also shown further deposit of Rs.7,35,000/- in her own return. The opening cash balance available with the assessee as on 01.04.2016 as submitted by the assessee was Rs. 1,42,100/-. Therefore, considering the facts and circumstances of the case and the reply furnished, there may be availability of cash balance of Rs.2,20,000/- with the assessee to deposit it into bank during the demonetisation period. Therefore, deposit to the extent of Rs.2,20,000/- is considered as explained by the assessee. Sources of remaining cash deposits, which are stated to be his wife’s savings since 2012-13, it is noticed that assessee’s wife is also an income tax assessee and filing her return and in her own return she had reported cash deposits in different banks and she has not reported in her return about the cash deposited in her husband’s bank account or her joint account with her husband. Therefore, to protect the interest of revenue Rs. 16,09,500/- being the difference between Rs. 18,29,500 and Rs.2,20,000/- is treated as unexplained money u/s 69A being deposited in his bank account and accordingly the same is added to his total income.

4. Aggrieved from the order of the Assessing officer, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds of the appeal so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below:-

“I have perused the assessment order and the grounds of appeal and submissions filed by the Appellant I find from the assessment order that the appellant had deposited cash of Rs. 18,29,500/- during the demonetization period in 8 bank accounts maintained by the appellant. While explaining the source of cash deposited, the appellant had contended before the AO that the source of cash deposits was the cash balance with him and his wife from AY 2012-13. The AO noted that the appellant’s wife had also deposited cash of Rs.7,35,000/- during demonetization period in 3 bank accounts maintained by her. The AO noted that the opening cash balance as on 01/04/2016 with the appellant was Rs.1,42,100/-. Therefore considering the facts of the case and reply of the appellant, the AO had held that there may be availability of cash of Rs.2,20,000/- with the appellant for depositing the cash in bank accounts during the demonetization period. Therefore remaining difference amount of Rs. 16,09,500/- was treated as unexplained money u/s 69A of the Act and added the same to the total income.

Further I find from the letter dated 02/10/2018 filed before the AD that the source of cash deposits was explained by stating that the Rs 2,20,000/- was out of old savings/withdrawals from bank accounts of the appellant and the balance amount of Rs. 16,09,500/- was deposited out of cash received from his wife which was withdrawn by her from her bank accounts. Vide letter dated 08/12/2019, it was submitted by the appellant before AD that the total cash withdrawn from the bank accounts was Rs.4,58,400/- and opening cash balance as on 01/04/2018 was Rs.1,42,100/- and house hold expenses were Rs.58, 100/-. In this reply the appellant claimed that he has received cash of Rs. 15,59,000/- from his wife. In the letter 11/10/2019 submitted to the AO, the appellant has claimed that his wife had received Rs.3,61,000/- on family settlement due to death of her mother and the same was available with her as on 01/04/2012. However no supporting evidence has been filed in this regard by the appellant. From the above explanation submitted by the appellant before AO, I find that the source of cash deposits to the extent of Rs.5,42,400/- (Rs.1,42,100/- +Rs. 4,58,44/- (-) Rs.58, 100/-) gets explained.

Though the wife of the appellant has filed affidavit claiming that she deposited the cash in the bank accounts of the appellant but this claim is not supported by any corroborative evidence by explaining the creditworthiness with supporting evidences. I find that the AO has already given benefit of Rs.2,20,000/- for past savings though the basis of the same is not explained by the AO. However considering the facts of the case, I find that the source of cash deposits to the extent of Rs.5,42,400/- is found explained.

Regarding the contention of the appellant that the provisions of section 69A are not applicable to him since he is not required to maintain the books of accounts, I find that as per provisions of Section 69A of the I.T. Act, if the assesse is found to be owner of any money, bullion, jewellery or other valuable articles and the same is not recorded in the books, if any, maintained by him for any source of income and assesse offers no explanation about the nature and source of the same or the explanation offered by him is not in the opinion of the Assessing Officer satisfactory, the value of the same may be deemed to be the income of the assesse for the such financial year. For the sake of clarity, the relevant provisions of Section 69A are reproduced as under-

“Where in any financial year the assessee is found to be the owner of any money. bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income-tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

From the provisions of section 69A as reproduced above, it can be seen that the condition of not recording in the books of accounts is not mandatory if the assesse has not maintained books of accounts because the word used are ‘books of accounts, if any, maintained by him. Therefore I am of the opinion that even if the books of accounts are not maintained by the appellant, provisions of section 69A of the IT Act are applicable to his case.

In view of the above discussion, the addition made by the AO is restricted to Rs.12,87,100/- (Rs. 18,29,500/- (-) Rs.5,42,400/-) as against addition made by the AO of Rs. 16,09,500/-. Thus the relief of Rs.3,22,400/- is granted to the appellant. Thus the grounds raised by the appellant are partly allowed.

6. Ground No.3:-

In the ground the Appellant reserved the right to add to above grounds of appeal and/or to amend, modify and to delete any of then on or before the hearing of appeal.

However during the course of appellate proceedings, the appellant has not exercised this option. Therefore the ground raised by the appellant is dismissed.

7. In the result, the appeal is partly allowed.”

5. As the assessee did not receive any favour from the appeal filed before ld. NFAC/ CIT(A). The present appeal filed against the said order of the ld. NFAC before this tribunal on the grounds as reiterated in para 2 above.

6. To support the various grounds so raised by the ld. AR of the assessee and has relied upon the following index in support of the contentions so raised:-

7. On the other hand, Id. DR relied upon on the order of the lower authority.

8. We have heard the rival contention and perused the material placed on record. We observed that the assessee and his wife namely Smt. Kanak Lat Chajed both are Senior Citizen, Retired Govt. Employee and pensioner. The assessee has filed the cash flow statements of last five years available at page 16 of the CIT(A) order and at page 18 of the paper book alongwith cash flow statements. The assessee has also filed the day wise cash withdrawals and deposit which are available at Page 19 to 30 of paper book. The lower authorities have only doubted the cash flow statements but could not disproved with any contrary evidences about the withdrawal of cash and its source. The assessee has also filed a family settlement of her wife family vide PB31-32, where she got Rs.3,61,000/- which is also available with the assessee and the lower authorities has discarded or disbelieved without examining and without bringing any adverse evidence. The assessee has also filed the affidavit of his wife namely Smt. Kanak Lata Chhajed before CIT(A), which is produced before us at page 16-17of paper book. We note in the affidavit she clearly stated that the bank accounts were jointly owned and she had deposited the cash of Rs.15,59,000/- in these bank accounts, this affidavit has also been remained uncontroverted. It is settled law that the contents of an affidavit should be read correct and full unless not controverted.

8.1 To support his arguments the Ld. AR for the assessee has also drawn our attention to the judgments of Hon’ble Supreme Court in the case of Mehta Parikh & Co. v. Commissioner of Income-tax, [1956] 30 ITR 181 (SC) wherein Court has held as that:-

“It has to be noted, however, that beyond these calculations of figures, no further scrutiny was made by the Income-tax Officer or the Appellate Assistant Commissioner of the entries in the cash book of the appellants. The cash book of the appellants was accepted and the entries therein were not challenged. No further documents or vouchers in relation to those entries were called for, nor was the presence of the deponents of the three affidavits considered necessary by either party. The appellants took it that the affidavits of these parties were enough and neither the Appellate Assistant Commissioner, nor the Income-tax Officer, who was present at the hearing of the appeal before the Appellate Assistant Commissioner, considered it necessary to call for them in order to cross-examine them with reference to the statements made by them in their affidavits. Under these circumstances it was not open to the Revenue to challenge the correctness of the cash book entries or the statements made by those deponents in their affidavits.

This being the position, the state of affairs, as it obtained on 12th January, 1946, had got to be appreciated, having regard to those entries in the cash books and the affidavits filed before the Appellate Assistant Commissioner, taking them at their face value. The entries in the cash books disclosed that, taking the number of high denomination notes at 18 on 2nd January, 1946, there came in the custody or possession of the appellants after 2nd January, 1946, and up to 12th January, 1946, 49 further notes of that high denomination, making 67 such notes in the aggregate, out of which 61 such notes could be encashed by the appellants on 18th January, 1946, through the Eastern Bank. A mere calculation of the nature indulged in by the Income-tax Officer or the Appellate Assistant Commissioner was not enough, without any further scrutiny, to dislodge the position taken up by the appellants, supported as it was, by the entries in the cash book and the affidavits put in by the appellants before the Appellate Assistant Commissioner.”

Considering the reconciliation and cash flow statement filed by the assessee along with family settlement deed and affidavit of assessee’s wife, wherein she owned responded of having deposited of cash out of her owned source and saving., Therefore, without controverting the fact stated of affidavit by the wife of the assessee, the addition made by the lower authorities even for an amount of Rs. 12,87,100/-is also not sustainable in the hands of the assessee and therefore, the same is directed to be deleted. In terms of these observation ground No. 2 raised by the assessee is allowed.

8.2 In Ground No. 3 and 4 raised by the assessee are consequential in nature and therefore, the same is not required to be adjudicated. Ground No. 1 and 5 are general and there is no grievance raised by the assessee before us on these grounds and therefore, the same is also not required to be adjudicated.

In the result, the appeal of the assessee is allowed.

Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.