No addition for cash deposited during demonetization out of earlier cash withdrawals

Om Parkash Nahar Vs. ITO ( ITAT-Delhi)

The amount deposited during demonetization period was relate to out of withdrawals from the same account from 2014,2015 & 2016 is not treated as income from undisclosed source

The assessee’s explanation is that looking to his old age and suffering from various ailments as he had suffered a heart attack and had juvenile diabetes, therefore, for his mental security he was in the habit of keeping huge cash with him. This is also evident from the fact as brought out on record by the ld. Counsel that since beginning, assessee has been withdrawing cash and keeping it with him after withdrawing from his bank account. It has also been submitted by him that the assessee had under-went bypass surgery and operation in the past and looking to his ailment and staying alone with his wife, therefore, he has been withdrawing and keeping cash for his personal and psychological security. In support of this explanation, he has shown the bank accounts of the assessee and pattern of his cash withdrawals and filed a chart depicting cash in hand after withdrawing from bank starting from 1.11.2012.

Thus, Ld. Counsel submitted that looking to the peculiar facts of the assessee’s case and in the habit of withdrawing the money and keeping in the form of cash at home cannot be doubted. When the Govt. announced the demonetisation, the cash kept by him over a period of time has been deposited in the bank account and the entire source is from the money withdrawn by him from his own bank account from time to time.

After considering the facts and material on record and on perusal of the bank statement, ITAT find that the assessee had been making huge withdrawals from time to time. The assessee is having huge income from rent which is Rs.2,58,750/- per month which the assessee has been receiving through cheque in his bank account and such rental income has been disclosed in the return of income of Om Prakash Nahar, HUF. Apart from that, assessee is also getting pension from Government of India. Besides this, the assessee has no source of income or is involved in any business or profession. From the perusal of the history of cash withdrawals starting from the financial year 2014-15, we find that assessee has been regularly withdrawing huge cash amount on various dates and there was hardly any credit balance left in his bank account. The funds flow statement as incorporated above clearly shows that each and every withdrawal has been mentioned and utilization thereof and the money being withdrawn from the bank account. Even after house-hold withdrawal, there was a huge amount available with the assessee in the form of cash. Under these facts and circumstances stated by the assessee, it cannot be held to be improbability that assessee did not have any availability of cash at the time of demonetisation. It has not been brought on record whether assessee was carrying out any business or profession or was having income from undisclosed sources of income which can be said to be available with the assessee in the form of cash. If the assessee had no source of income apart from rental or pension income and some interest amount and same income earned regularly has been withdrawn regularly leaving very less cash in the bank account, that shows the pattern that the assessee was indeed in the habit of keeping the money in the form of cash probably looking the old age and various ailments as explained by him. Under these circumstances, we find that the explanation of the assessee to be reasonable and plausible and preponderance of probability is in the favour of the assessee and without any adverse material it cannot be presumed that the cash deposited by the assessee is out of some his undisclosed source.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal has been filed by the assessee against the order dated 20.12.2019passed by the National Faceless Appeal Centre (NFAC) for the assessment year 2017-18.

2. The grounds of appeal raised by the assessee are as under:-

“1. That the Ld. Commissioner of Income-tax (Appeals) has grossly erred in law as well as on facts in confirming the addition made by the AO to the tune of Rs.44,13,000/- without appreciating:

i) That the amounts withdrawn by assessee who is juvenile diabetic on insulin for the last 50 years with high blood pressure and heart bypass surgery whose hands tremble leading to non-tallying of signature on cheque, hence, consequential withdrawal of cash in person were kept for emergencies pertaining to medical attention for himself and his aged and ailing wife.

ii) That it was never stated that the amount was kept for normal distribution (except few hours before death of assessee) to family members as all the children of the assessee are well settled in public service with gazetted posts and have their own sufficient source of income.

iii) That assessee had to deposit the cash due to demonetisation that too partially i.e. notes of Rs.500 and Rs. 1,000 as they were no longer considered as legal tender.

iv) That the amount withdrawn from 2014 to 2016 far exceeds the amount re-deposited by nearly 50% and sufficient to fulfill household and other expenses.

v)  That the said beneficial addition but restricting it to Rs. 19,50,000/- i.e. withdrawal of 3 months from August to October 2016 only is confirmed on the basis of vague assumptions against factual scenario is not maintainable in the eyes of the law which is not fair, just and equitable but confiscatory and expropriatory.

2. That Ld. CIT (Appeals) has erred in law as well as on facts in not appreciating the additional evidence placed on record which clearly establishes the existence of HUF and funds withdrawn from 2014 to 2016 from the income earned by HUF whose appropriate tax paid on time .

3. That Ld.CIT(Appeals) has erred in law as well as on facts by restricting the addition to Rs.44,13,000/-due to accepting withdrawals made only in August and Oct. 2016 only and failed to understand that funds withdrawn in 2015 -16 were Rs.38,70,000/-while in 2014-15 it was Rs.30,25,000/- remained with the assessee as no deposit was made by the assessee during this period except Rs. 1,00,000/- and so there was sufficient cash available with the assessee even if period of 2013-14 is excluded withdrawing Rs.7 lac.

4. That Ld.CIT(A) has erred in law as well as on facts in passing order u/s 250 of the IT Act, without affording adequate opportunity to represent the assessee and passing the said order in haste which is bad in law and against the principles of natural justice.

5. That Ld.CIT(A) has erred in law as well as on facts in confirming the addition despite unequivocal evidences and documents furnished by the assessee as and when sought by the Ld. AO at the time of assessment. “

3. The facts in brief are that the assessee is an Individual and senior citizen aged about 79 years old who has retired as Senior Government servant, Addl. Secretary Department of Legal Affairs, Ministry of law, Government of India. The assessee had shown income from Pension, earning of bank interest in his Individual capacity and has declared income at Rs.19,06,400/-. The assessee is also Karta of HUF, ‘Om Prakash Nahar HUF’ which was earning rent from property deposited in Bank of Baroda and has been shown separately in HUF’s Income Tax return. The ld. Assessing Officer noted that there was cash deposit during demonetization period and accordingly a notice under Section 143(2) of the Act was issued on 24.09.2018 as the case was selected under CASS for limited scrutiny to verify the cash deposit. The Assessing Officer noted that the assessee had deposited cash of Rs.63,63,000/- in his bank account maintained by the Bank of Baroda during demonetization period. In reply the assessee submitted that, he is retired Govt. servant receiving pension in UCO Bank, Patiala House and he is also having huge rental income as Karta. The saving bank account of HUF was opened in individual name of Om Parkash Nahar, but the rental income was deposited in the Bank of Baroda which stands in his Individual name, but right from beginning, the income of the HUF was being deposited in the said account and shown in HUF’s return. The amount of Rs.63,63,000/- was deposited out of withdrawals from the same account from time to time made during the years 2014, 2015 and 2016, because of his serious illness and old age. The assessee was in the habit of withdrawing the money and keeping in the form of cash at home. The ld. Assessing Officer rejected the assessee’s explanation and held that there is no substantial justification given by the assessee as to, firstly, why the PAN of the Individual was used in opening the bank account as the income was from property held by the HUF. Secondly, assessee has not declared cash deposit during demonetisation period in the column in the return for Assessment Year 2017-18; and lastly, the assessee’s reply that he has withdrawn money being old and suffering from disabling ailment, and allegedly withdrew to be distributed to his family members, which cannot be believed and accordingly he added the entire amount of Rs.63,63,000/- under Section 69A / 115BB of the Act.

4. The ld. CIT (Appeals) has given part relief and restricted the addition to Rs.44,13,000/- after holding that cash withdrawn from account from 1.04.2016 to 9.11.2016 for sums aggregating to Rs.19,50,000/- can be held to be out of money withdrawn from the bank account, which was deposited after demonetization. The relevant finding of the ld. CIT (Appeals) reads as under:-

4.3.6 The assessee could have been given the benefit of doubt if the cash withdrawn in immediate preceding couple of months or so was by and large matching the figure of deposit after demonetization. In F.Y. 2016-17, before demonetization, cash withdrawn are shown below:

Total : Rs.19,50,000/-

From 01.04.2016 to 9.11.2016, cash withdrawn from the account was Rs.19,50,000/-. In my consideration view, it will be in the fitness of things if it is held that cash of Rs.19,50,000/- was still available for re-deposit in the bank account. Therefore, the addition is restricted to Rs. (63,63,000 – 19,50,000) i.e. Rs.44,13,000/-. “

5. We have heard both the parties and perused the material and finding given by the impugned order as well as various documents filed in the paper book on record including several bank statements for the impugned assessment year. The additions made on account of deposit made by the assessee in the bank account from the period 10.11.2015 to 13.12.2016 for sums aggregating Rs.63,63,000/- in the following manner:-

6. The assessee who is a senior citizen and a retired Govt. servant is deriving income from pension, bank interest and is also earning rent from property as a Karta of HUF. It is also an accepted fact that the rental income has been shown in the return of income for HUF, which has been deposited in the Individual bank account of the assessee, which he has opened in his Individual name. The returned income from Assessment Years 2014-15 to 2018-19 shows that the assessee had declared quantum of income in the following manner:-

7. The assessee’s explanation is that looking to his old age and suffering from various ailments as he had suffered a heart attack and had juvenile diabetes, therefore, for his mental security he was in the habit of keeping huge cash with him. This is also evident from the fact as brought out on record by the ld. Counsel that since beginning, assessee has been withdrawing cash and keeping it with him after withdrawing from his bank account. It has also been submitted by him that the assessee had under-went bypass surgery and operation in the past and looking to his ailment and staying alone with his wife, therefore, he has been withdrawing and keeping cash for his personal and psychological security. In support of this explanation, he has shown the bank accounts of the assessee and pattern of his cash withdrawals and filed a chart depicting cash in hand after withdrawing from bank starting from 1.11.2012, which for the sake of ready reference is reproduced as under:-

8. Thus, Ld. Counsel submitted that looking to the peculiar facts of the assessee’s case and in the habit of withdrawing the money and keeping in the form of cash at home cannot be doubted. When the Govt. announced the demonetisation, the cash kept by him over a period of time has been deposited in the bank account and the entire source is from the money withdrawn by him from his own bank account from time to time.

9. The ld. DR strongly relied upon the order of the Assessing Officer and the ld. CIT (Appeals) and submitted that the amount which assessee had withdrawn before the demonetisation, i.e. from 1.04.2016 to 9.11.2016 already the ld. CIT (Appeals) has given benefit. It is improbable that money withdrawn years ago has been kept in the form of cash and suddenly on the day of demonetisation assessee had to deposit the said amount. Such explanation without any proper material to support cannot be accepted.

10. We have heard the rival submissions. After considering the facts and material on record and on perusal of the bank statement, we find that the assessee had been making huge withdrawals from time to time. The assessee is having huge income from rent which is Rs.2,58,750/- per month which the assessee has been receiving through cheque in his bank account and such rental income has been disclosed in the return of income of Om Prakash Nahar, HUF. Apart from that, assessee is also getting pension from Government of India. Besides this, the assessee has no source of income or is involved in any business or profession. From the perusal of the history of cash withdrawals starting from the financial year 2014-15, we find that assessee has been regularly withdrawing huge cash amount on various dates and there was hardly any credit balance left in his bank account. The funds flow statement as incorporated above clearly shows that each and every withdrawal has been mentioned and utilization thereof and the money being withdrawn from the bank account. Even after house-hold withdrawal, there was a huge amount available with the assessee in the form of cash. Under these facts and circumstances stated by the assessee, it cannot be held to be improbability that assessee did not have any availability of cash at the time of demonetisation. It has not been brought on record whether assessee was carrying out any business or profession or was having income from undisclosed sources of income which can be said to be available with the assessee in the form of cash. If the assessee had no source of income apart from rental or pension income and some interest amount and same income earned regularly has been withdrawn regularly leaving very less cash in the bank account, that shows the pattern that the assessee was indeed in the habit of keeping the money in the form of cash probably looking the old age and various ailments as explained by him. Under these circumstances, we find that the explanation of the assessee to be reasonable and plausible and preponderance of probability is in the favour of the assessee and without any adverse material it cannot be presumed that the cash deposited by the assessee is out of some his undisclosed source. Accordingly, the addition of Rs.44,13,000/- as sustained by the CIT (Appeals) is deleted.

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

Order pronounced in the open court on : 27/01/2022.