Case Law Details
Sudhir Kumar Tiwari Vs ITO (ITAT Allahabad)
It is apparent that the Assessing Officer initially initiated the scrutiny proceedings to examine the cash deposit of Rs. 18,00,000/- during the demonetization period. However, on verification of the bank account as well as the reply of the assessee as well as bank, the Assessing Officer found that there was deposit of Rs. 1,00,000/- only in the bank account of the assessee during the demonetization period. Thus, prima facie the basis of limited scrutiny itself was no more in existence when it was taken up for verification of deposit of Rs. 18,00,000/- during the demonetization period and not Rs. 1,00,000/-.
ITAT held that Once, the assessee has explained before the CIT(A) that the cash was deposited in the bank account after the demonetization as it was required to deposit in the bank otherwise the value of the currency would be zero and keeping the same with the assessee would be illegal. The assessee has declared this deposit in the return of income and therefore, the explanation of the source as past saving of the assessee HUF and its members cannot be doubted having regard to the fact that in the past there are the entries of withdrawal of more than 1,00,000/- from the bank account of the assessee. Though, these withdrawals were in the long past and there is a big gap between the withdrawals and deposits but once the assessee has declared this amount of Rs. 1,00,000/- and by considering this amount as well as the total income declared by the assessee at Rs. 1,39,090/- which is below a minimum amount of taxable income the assessment of the income of the assessee under the provisions of section 11 5BBE is not justified. Accordingly, in the facts and circumstances of the case when the assessee has explained the source of Rs. 1,00,000/- as past savings of the assessee HUF and its members and there is no other deposits during the demonetization the addition made by the Assessing Officer is deleted. The appeal of the assessee is allowed.
FULL TEXT OF THE ORDER OF ITAT ALLAHABAD
This appeal by the assessee is directed against the order dated 20.05.2022 of CIT(A)(National Faceless Appeal Centre, Delhi) for the assessment years 2017-18. The assessee has raised the following grounds:-
“1. Because the Ld. CIT(A) erred in fact and law in confirming the addition of Rs.1,00,000 as unexplained money u/s 69Ato the income of the assessee by taking the plea one or other whereas the fact is that above cash deposits was out of cash in hand with the members of HUF and due to demonetization Rs. 500 and Rs.1 000 notes, the same was deposited in the bank account and nothing was from undisclosed sources and the same was properly disclosed in the income tax return for the AY 201 7-18and as such confirming the addition made by Ld. AO is bad in law, and against the principle of natural justice and the same deserves to be quashed.
Full relief is sought for.
2. Because the deposit of Rs. 1,00,000 was made on 21.11.2016 through old currency (Rs. 500 and Rs.1 000 denomination notes) hence in view of the circular of the RBI/IT Department, the same cannot be treated as unexplained income u/s 69A as the same was properly disclosed in the return of income.
3. Because all the additions and disallowances are specifically challenged in the present appeal.
4. Because the appellant reserve the right to alter, modify or take any additional ground of appeal during the course of hearing of appeal.
5. Because the order appealed against is contrary to facts, law and principles of natural justice.”
2. The assessee is HUF and filed its return of income for the year under consideration on 1 9th March, 2018 declaring total income of Rs. 40,743/-. The case was selected for limited scrutiny through CASS on the issue of cash deposit in the bank account during the demonetization period. The Assessing Officer issued notice under section 143(2) on 09.20 18 and also issued notices under section 142(1) asking the assessee to submit the source of cash deposit during the demonetization period. Finally, the Assessing Officer after considering the actual amount of deposit in the bank account has made an addition of Rs. 1,00,000/- as unexplained money and assessed the same to tax under the provisions of section 115BBE of the Act @ 60% plus surcharge @25% and a cess @ 3%. The assessee challenged the action of the Assessing Officer before the CIT(A) and submitted that the source of deposit of Rs. 1,00,000/- in the bank account on 21.11.2016 in the demonetized notes of Rs. 500-1000/- is from the past savings of the HUF consisting of its Karta and coparceners. The assessee has further submitted that the assessee declared the said deposit in the return of income and it was due to the fact that these currency notes of Rs. 500- 1000/- were declared as not a legal tender after demonetization and accordingly, the same were required to be deposited in the bank account before the date prescribed. Hence, the assessee contended before the CIT(A) that the assessment of the said income of the assessee under the provisions of section 11 5BBE is unjustified and arbitrary. The CIT(A) was not impressed with the explanation of the assessee and confirmed the addition made by the Assessing Officer.
3. Before the Tribunal, the learned AR of the assessee has submitted that during the demonetization period, the assessee has deposited the cash of Rs. 1,00,000/- on 21.11.2016 the demonetized notes of Rs. 500-1000/- and the same was properly disclosed in the return of income. The learned AR has submitted that this is from past savings and withdrawal from the bank as there are withdrawals of Rs. 1,65,000/- on 13.9.200 1 from the Canara After the demonetization, these notes were not in circulation from 8.11.2016 and the same were deposited in the bank to avoid the further legal action of keeping invalid currency. He has further submitted that the limited scrutiny was taken up by the Assessing Officer to examine the cash deposit of Rs. 9,00,000/- during the demonetization period however, there was a wrong credit of Rs. 8,00,000/- which was clarified by the bank and therefore, only Rs. 1,00,000/- was deposited by the assessee during the said demonetization period. Thus, the very basis of the limited scrutiny was not found to be correct when the bank clarified that the entry of Rs. 8,00,000/- was wrongly made which was reversed on the same date by the bank. He has further submitted that the source of deposit of Rs. 1,00,000/- out of the past savings of the assessee and its members and therefore, it was required to be deposited in the bank account. This is very small amount having regard to the three coparceners of the HUF and HUF itself and the total income including Rs. 1,00,000/- remains less than the threshold limit of minimum taxable income.
4. On the other hand, the learned DR has submitted that the assessee has not shown the proof of past income and savings. Therefore, in the absence of any documentary evidence of past savings and source of the cash of Rs. 1,00,000/- this explanation of the assessee cannot be accepted. The assessee has not explained the source of the deposit either before the Assessing Officer or before the CIT(A). He has relied upon the orders of the authorities below.
5. I have considered the rival submissions as well as relevant material on record. The case of the assessee was taken up for scrutiny to examine the cash deposit of Rs. 18,00,000/- during the demonetization period. The Assessing Officer issued a notice under section 143(2) and in response to the said notice, the assessee submitted that the cash deposit in the Canara Bank of Rs. 8,00,000/- on 21.11.2016 is due to the bank error for which a letter dated 9.2.2019 issued by the bank accepting the mistake which was produced before the Assessing Officer. The Assessing Officer also issued a notice under section 133(6) dated 7.5.2019 to the Branch Manager of Canara Bank seeking a copy of the bank account statement of the assessee. In response to the said notice, the bank accepted the mistake of wrong entry in the bank account of the assessee of Rs. 8,00,000/- dated 21.11.2016 and thereafter the Assessing Officer has issued a fresh notice under section 142(1) on 8.12.2019 on the email ID provided by the assessee. Since there was no response to the said notice, the Assessing Officer made the addition of Rs. 1,00,000/- and assessed to tax under section 115BBE of the Act which provides special rate of tax of 60% plus surcharge of 25% and cess of 3%. It is apparent that the Assessing Officer initially initiated the scrutiny proceedings to examine the cash deposit of Rs. 18,00,000/- during the demonetization period. However, on verification of the bank account as well as the reply of the assessee as well as bank, the Assessing Officer found that there was deposit of Rs. 1,00,000/- only in the bank account of the assessee during the demonetization period. Thus, prima facie the basis of limited scrutiny itself was no more in existence when it was taken up for verification of deposit of Rs. 18,00,000/- during the demonetization period and not Rs. 1,00,000/-. The last notice issued by the Assessing Officer under section 142(1) on the email was not responded by the assessee and the learned AR of the assessee has explained the reason that the assessee could not notice the said show cause notice as it was the first year of faceless assessment and notice was sent electronically by the Assessing Officer. Once, the assessee has explained before the CIT(A) that the cash was deposited in the bank account after the demonetization as it was required to deposit in the bank otherwise the value of the currency would be zero and keeping the same with the assessee would be illegal. The assessee has declared this deposit in the return of income and therefore, the explanation of the source as past saving of the assessee HUF and its members cannot be doubted having regard to the fact that in the past there are the entries of withdrawal of more than 1,00,000/- from the bank account of the assessee. Though, these withdrawals were in the long past and there is a big gap between the withdrawals and deposits but once the assessee has declared this amount of Rs. 1,00,000/- and by considering this amount as well as the total income declared by the assessee at Rs. 1,39,090/- which is below a minimum amount of taxable income the assessment of the income of the assessee under the provisions of section 11 5BBE is not justified. Accordingly, in the facts and circumstances of the case when the assessee has explained the source of Rs. 1,00,000/- as past savings of the assessee HUF and its members and there is no other deposits during the demonetization the addition made by the Assessing Officer is deleted. The appeal of the assessee is allowed.
6. In the result, the appeal of the assessee is allowed.
Order pronounced on 12.09.2022 at Allahabad, U.P.
