Case Law Details
Ramesh Rani Chatwal Vs ITO (ITAT Delhi)
Introduction: The Ramesh Rani Chatwal vs ITO case ruled by ITAT Delhi is a significant judgment dealing with additions to income from unexplained investments. In this case, the ITAT upheld the right of an individual to use personal savings, including those from a late spouse, for the repayment of a bank loan, and dismissed the claim that such actions constitute unexplained investment.
Analysis: Ramesh Rani Chatwal, an elderly woman, was subjected to an adhoc addition of Rs. 1188000 by the AO and the CIT (A) to her income as unexplained investment, following her deposit of this amount into her bank account. The cash deposit was made to cover her loan repayment and associated interest charges.
The AO issued a notice asking Chatwal to explain the source of the cash deposit, and due to the lack of response, added the entire amount to her assessable income. After losing her appeal at the CIT (A), Chatwal approached the ITAT.
Chatwal argued that the money was the result of her and her late husband’s lifelong savings, and was being used to avoid late payment charges on her loan. She cited the case of Leela Devi VS ITO where the court recognized a housewife’s contribution to a family’s savings and allowed her to deposit saved cash without it being taxed.
In considering the case, the ITAT observed that the lower authorities failed to verify the facts when the return of income was filed by the assessee. It agreed with the appellant’s assertion that the authorities were not justified in treating the entire amount as unexplained income, thus ruling in favour of Chatwal.
Conclusion: The judgment of the ITAT Delhi in the Ramesh Rani Chatwal vs ITO case sets a pivotal precedent, shedding light on the issue of cash deposits into bank accounts for loan repayments. It emphasises that personal savings, even those accumulated by a deceased spouse, can be legitimately used for loan repayments without constituting an unexplained investment.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal filed by the assessee for the assessment year 2017-18 is directed against the order of Ld. CIT(A), National faceless Appeal Centre (“NFAC”), Delhi dated 13.06.2022. The assessee has raised following grounds of appeal:-
1. “Adhoc additions of Rs. 1188000/-.
2. The CIT(A) erred in law, in facts and circumstances of the case and made an adhoc additions of Rs. 1188000 as income from unexplained investment.
3. The Id. CIT(A) erred in law, in facts and circumstances of case and unjustified, injudicious and wrong in making the addition of rs 1188000 as income without providing proper sufficient opportunity to the assessee.
4. The appellant craves leave to add, alter, amend or delete any of the above grounds of appeal.”
2. No one attended the proceedings on behalf of the assessee. It is notied from the records that the Ld.AR for the assessee sought adjournment on 17.11.2022. Thereafter, there is no one attended the proceedings despite various opportunities. Today also, neither anyone is present on behalf of the assessee nor any request for seeking adjournment is made. Therefore, the appeal is taken up for hearing in the absence of the assessee and is being disposed off on the basis of material available on record.
3. Facts giving rise to the present appeal are that in this case, an information was received by AO regarding cash deposits of Rs.11,88,000/-by the assessee. The Assessing Officer (“AO”) issued notice to the assessee to explain the source of cash deposits. As per AO, the statutory notices issued by him remained uncomplied. Therefore, he made addition of Rs.11,88,000/- and assessed the income of the assessee at Rs.11,88,000/- u/s 144 of the Income Tax Act, 1961 (“the Act”).
4. Aggrieved against this, the assessee preferred appeal before Ld. CIT(A), who after considering the submissions, dismissed the appeal of the assessee and sustained the addition.
5. Aggrieved against the order of Ld. CIT(A), the assessee preferred appeal before this Tribunal.
6. I find that the assessee has filed statement of facts. For the sake of clarity, facts narrated by the assessee are reproduced as under:-
1. “The appellant (Mrs Ramesh Rani Chatwal) is an old age lady aged above 70 years. She has a pan no ABBPC6571G and her residential address is KH 144, Kavi nagar. Ghaziabad, U.P. 201002. Appellant has electronically filled its ITR dated 07.11.2019 declaring income of Rs.555980 the acknowledgment numbers of ITR is 251815200071119.
II. The assessment was completed by the assessing officer ward 2(2)(2) Ghaziabad, UP on 15.12.2019 [DIN no. ITBA/AST/S/213/2019-20/1022361467(1)] and adhoc addition of Ts 1188000/- and raise a demand of Rs. 1124822/-.
III. The adhoc addition of Rs. 1188000/-made by the CIT (A) is not justified in law and in facts, injudicious and wrong in making the addition of the amount as income from unexplained investment in the facts of the case.
This ground pertains to wrongful addition of cash in the income assessable to tax. The cash was deposited in lieu of payment of interest against loan taken from bank. The assessee is a beneficiary of a Loan Against Property from bank for which stipulated interest gets due on monthly basis. The balance in the abovementioned bank account was insufficient for the assessee to be able to pay the interest timely. To avoid late payment charges and an adverse impact on credit ratings of the assessee, cash deposit was made urgently out of the savings made by the old age lady over the years in the household.
IV. The amount of cash being discussed in the present case does not only belong to the old housewife, namely Smt. Ramesh Rani Chhatwal but also to her late husband who passed away only a reasonable time before the cash deposit was actually made. The entire cash is the savings of the old couple saved during their entire life journey and when needed for loan, was deposited duly with the bank in lieu of repayment of loan amount and interest accumulated.
In the landmark judgement pronounced by the Hon’ble ITAT Delhi in the case of Leela Devi VS ITO (ITAT Delhi), it was held that housewife’s contribution in the family is “immeasurable” and thus money saved over the years by a Housewife, if deposited during the demonitisation period, cannot be deemed to be income assessable under Income Tax. In our case, similar facts are presented and a similar relief is sought by the assessee who has given her life and soul to the family and household only to be able to save a small amount and then later be assessed by the Income Tax Department at this fragile age.
Women all over the country, had been accumulating cash that they had saved for themselves from household budgets, by haggling with vegetable sellers, tailors, grocers and assorted traders Years of stashing in whatever little cash gifts they received from relatives during festival times and years of tucking away the change they found in the pants that they washed every day, however, suddenly they were left with no option but to deposit the amount in the denomination of Rs 500 and Rs 1000 notes in the banks on account of Demonetisation Scheme 2016, (as) these notes were no more legal tenders. The assessee was left with no other choice but to deposit the cash saved over years against the repayment of loan she had taken from the bank.
In view of the above legal and factual position, it is prayed that direction be given for deletion of the all the additions made by LD. Assessing Officer.”
7. On the other hand, Ld. Sr. DR opposed these submissions and supported the orders of the authorities below.
8. I have heard Ld. Sr. DR for the Revenue and perused the material available on record. I find that the contention of the assessee is that the assessee was not given sufficient opportunity. It was stated that the amount was out of savings by the husband of assessee and was also deposited for payment of loan amount. Considering the submissions of the assessee and the statement of facts available on record, I am of the considered view that the lower authorities were not justified in making the entire amount deposited in bank as an unexplained income. It is also recorded by Ld. CIT(A) that the assessee had intimated that she had filed return of income u/s 139 of the Act on 07.11.2019 declaring income of Rs. 5,55,980/-. Hence, factum of past savings cannot be ruled out and Ld. CIT(A) ought to have verified the facts when it was brought to notice that the return of income was filed by the assessee. Therefore, looking to the totality of the facts, I am of view that the authorities below were not justified in making the addition without proper verification of the facts. I therefore, direct the AO to delete the addition. Thus, grounds raised by the assessee are allowed.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 15th June, 2023.
