No Addition for Cash Deposits by second account holder in Joint bank account

Devender Vs ITO (ITAT Delhi)

This article discusses an ITAT appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals). The appeal challenges the addition of cash deposits in a joint bank account by a second account holder, treating it as unexplained money from undisclosed sources.

Analysis: The appeal revolves around a joint bank account held by the assessee and another individual. The primary account holder received cash deposits totaling Rs. 1,07,81,000 during the assessment year 2013-14. The tax authorities sought an explanation for the source of these deposits, and the assessee provided evidence showing that the deposits were proceeds from the sale of rural agricultural land by relatives of the assessee.

However, the Assessing Officer took an adverse view, questioning the connection between the cash deposits and the land sale, leading to the addition of Rs. 64,22,000 as income from undisclosed sources. The Commissioner of Income-tax (Appeals) upheld this addition, prompting the assessee to appeal before the Income Tax Appellate Tribunal (ITAT).

During the ITAT proceedings, the counsel for the assessee presented a strong case, highlighting that the deposits were made by the primary account holder, not the assessee. They provided documentary evidence supporting the claim that the cash deposits were related to the rural agricultural land sale and had nothing to do with the assessee’s income.

Conclusion: Considering the facts and evidence presented, the ITAT allowed the appeal in favor of the assessee. The tribunal found no grounds for making the addition in the hands of the assessee for the cash deposits in the joint bank account. They emphasized that any examination or inquiry should have been directed towards the primary account holder and other relatives involved in the land sale, not the assessee. Thus, the ITAT decision removes the addition of Rs. 64,22,000 and grants relief to the assessee in this case.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal filed by the assessee is against the order of learned Commissioner of Income-tax(Appeals), Rohtak vide Appeal No.321/2017-18 dated 06.02.2020 against the order under Sections 143(3)/147 of the Income-tax Act, 1961 (hereinafter referred to as the “Act”), dated 11.12.2017 passed by ITO, Ward-1, Rewari for the assessment year 2013-14.

2. There is a delay of 264 days in filing the present appeal. The impugned order by learned Commissioner of Income-tax(Appeals) is dated 06.02.2020 which is claimed to have been received on 18.02.2020. The said period for filing the present appeal falls during the pandemic of COVID-19 for which Hon’ble Supreme Court in the case of suo moto writ petition (C) No.3 of 2020 dated 10.01.2022 has excluded the period from 15.03.2020 to 28.02.2022 for the purpose of taking into account limitation. Vide this order, a further period of 90 days has been granted for providing the limitation from 01.03.2022. Accordingly considering the said decision and fact of the case, the delay is condoned and the appeal is admitted for adjudication.

3. The sole issue raised by the assessee in the present appeal is in respect of addition of Rs.64,22,000 for deposit of cash in the joint bank account by treating it as unexplained money of the assessee from undisclosed sources.

4. Brief facts of the case are that assessee is a farmer and he is not earning any income except income from saving bank account and agricultural income. The saving bank account maintained by the assessee is a joint account wherein Shri Heera Singh S/o Shri Ram Narain is the primary holder and assessee is the other joint holder. The details of this joint saving bank account are as under:

Name of the bank                           : OBC Bank Ltd.
Account No.                                    : 14152191020701
Mode of operation                           : Joint

4.1. In the said joint saving bank account, permanent account number (PAN) of the assessee is updated. During the year under consideration amount of Rs.1,07,81,000 was deposited in cash in the said joint saving bank account, details of which are tabulated as under:

4.2 In the course of assessment, assessee was required to explain the source of deposit of cash in the said joint saving bank account. In this respect, assessee submitted that rural agricultural land was sold by his relatives. The primary holder of the said joint bank account i.e. Shri Heera Singh is one of the co-owners of the rural agricultural land sold during the year. The deposit of cash pertained to the sale transaction of rural agricultural land and was not related to the assessee. The details of rural agricultural land sold by the relatives of the assessee which include the primary holder of joint saving bank account are as under:

4.3. Case of the assessee was reopened by issuing notice under Section 148 of the Act by recording the reason that assessee had deposited cash of Rs.1,10,94,000 in his saving bank account for which source of the same remained unexplained. In the course of assessment, all the relevant documentary evidences explaining the cash of the assessee were furnished. It was stated that relatives of the assessee had sold rural agricultural land (details tabulated above) and the sale consideration was deposited in the joint saving bank account where the primary holder was one of the co-owners of the rural agricultural land sold.

4.4 After considering the submissions made by the assessee, learned Assessing Officer had specifically raised the query by stating that “cash has been deposited by you in your account whereas the land has not been sold by you. You have contended that your relatives i.e. your grand­mother, your father and his brothers and sisters sold the lands and amount was deposited in your account. Please prove the version. In case of non-proving, please show-cause as to why all the cash deposits be treated as your income from undisclosed sources.” In this respect, since, the assessee could not produce purchasers of the rural agricultural land, learned Assessing Officer took an adverse view and held that explanations offered by the assessee are not found to be plausible and acceptable. He, therefore, treated the amount of cash deposit as unexplained money and added it as income of the assessee from undisclosed sources, amounting to Rs.64,22,000. Aggrieved, assessee went in appeal before the learned Commissioner of Income-Tax(Appeals) who confirmed the said addition. Aggrieved, assessee is in appeal before the Tribunal.

5. Before us, learned counsel has placed on record a paper book containing 67 pages which includes copy of the bank statement in which Davender, Rohtak- AY: 2013-14 the cash was deposited as well as all the other related documents pertaining to sales transaction of rural agricultural land by the relatives of the assessee. Before us, the sole issue is in respect of explaining the source of deposit of cash in the saving bank account of the assessee for which the reassessment proceedings were initiated by issuing notice under Section 148 of the Act. It is a fact on record that the impugned saving bank account is a joint account wherein the primary holder is Shri Heera Singh S/o Shri Ram Narayan. Further, it is also a fact that rural agricultural land was sold by the relative of the assessee to which assessee is not a party. However, the primary holder of the saving bank account in which the cash was deposited is one of the co-owners in the sale transaction of rural agricultural land. The deposits of cash pertained to sales transaction of rural agricultural land, deposited in the joint saving bank account at the behest of the primary holder i.e. Shri Heera Singh and not the assessee. Learned counsel has evidently demonstrated from the material placed on record that assessee is not a party to the sale transaction and at the same time, the primary holder of the joint saving account Shri Heera Singh is one of the owners, fact of which has been candidly accepted by the learned Sr. DR.

6. From the facts of the case and the explanation furnished duly corroborated by the documentary evidence, we find that no addition is called in the hands of the assessee in respect of cash deposited in the Davender, Rohtak- AY: 2013-14 joint saving bank account where assessee is the other holder along with primary holder Shri Heera Singh. If at all, any inquiry/examination had to be done, it ought to have been in the case of Shri Heera Singh and other relatives of the assessee and not the assessee. Even in the case of Shri Heera Singh, on a specific query raised by the bench to the learned counsel of the assessee, it was stated that the transaction of sales of rural agricultural land does not attract taxability on the capital gain arising on it, it being exempted under the Act, therefore, there was no occasion even for Shri Heera Singh to file his return in this respect. Considering the factual matrix and the details furnished before us, we delete the addition made in the hands of the assessee. Accordingly, ground taken by the assessee in this respect is allowed.

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

Order is pronounced in the open court on 07.07.2023.