Case Law Details
Madhavan Suram Vs DCIT (ITAT Hyderabad)
Introduction: The Income Tax Appellate Tribunal (ITAT) Hyderabad recently delivered an important verdict in the case of Madhavan Suram vs. DCIT (Deputy Commissioner of Income Tax). The case revolves around the quashing of an addition under Section 115BBE of the Income Tax Act, 1961, due to the inability of the elderly assessee to recall income details within the specified time frame.
Background of the Case: Madhavan Suram, the assessee in this case, is approximately 73 years old and retired as a Cashier from the State Bank of India (SBI) in 2001. In the assessment year 2017-18, the Income Tax Department initiated proceedings concerning cash deposits of Rs. 18,00,000 in a savings account held at the Nellore Co-operative Urban Bank Ltd.
The learned Assessing Officer recorded the assessee’s statement on two occasions: first on 27/06/2019 and then on 17/07/2019. The delay between these two statements was attributed to the advanced age of the assessee, who found it challenging to collect details about the cash deposits. During these statements, the assessee explained the sources of most of the deposits, except for a sum of Rs. 4,00,000. The Assessing Officer accepted the explanations for deposits totaling Rs. 14,00,000 but added Rs. 4,00,000 as “income from other sources” under Section 115BBE of the Income Tax Act due to the inability of the assessee to provide details or documentary evidence.
Subsequently, the assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who rejected the claim that the elderly assessee had difficulty recalling the source of the remaining Rs. 4,00,000 deposit. The CIT(A) also refused to accept the confirmation affidavit of the debtor because it was submitted at a later stage, deeming it an “afterthought.”
Assessee’s Appeal to ITAT Hyderabad: Dissatisfied with the decisions of the lower authorities, the assessee filed an appeal with the ITAT Hyderabad. The assessee’s representative argued that the rejection of the confirmation affidavit and the assessment of Rs. 4,00,000 as income from other sources were unjust. The representative highlighted that the assessee, in his sworn statement, had not categorically stated that this amount was income from other sources but mentioned the inability to recall details due to age and lack of documentary evidence.
The representative presented evidence, including a bank account statement showing a withdrawal of Rs. 5,00,000 on 15/02/2014, supporting the assessee’s claim that he had lent this amount to a friend named Mr. Varanasi Naga Raju, who repaid it on 15/04/2016. The representative argued that the claim of the inability to recall was reasonable given the advanced age of the assessee, and that the Assessing Officer should have considered the evidence produced by the assessee.
ITAT Hyderabad’s Decision: The ITAT Hyderabad carefully examined the case and noted that there was no dispute regarding four of the five deposits made in the joint account of the assessee and his wife. The dispute centered around the deposit of Rs. 4,00,000 made on 16/04/2016.
The ITAT reviewed the sworn statement given by the assessee during which he had explained that the Rs. 4,00,000 deposit was from his personal savings but was unable to recall specific details. While the CIT(A) had labeled the submission as unreliable, the ITAT held that this was an unfair characterization. The ITAT considered the age of the assessee, who was about 73 years old at the time, and reasoned that it was not unusual for someone of that age to have difficulty recalling specific details, especially for events that occurred some time ago.
Moreover, the ITAT emphasized that the deposit of Rs. 4,00,000 predated the demonetization of Specified Bank Notes, which made it less likely that the assessee was depositing someone else’s money. The Tribunal also noted that the bank passbook entry of a Rs. 5,00,000 withdrawal on 15/02/2014, coupled with the affidavit from the debtor, supported the assessee’s claim that he had lent this amount and subsequently received it back.
In conclusion, the ITAT Hyderabad found that the Assessing Officer had acted unfairly by refusing to consider the evidence produced by the assessee. The Tribunal directed the Assessing Officer to delete the addition of Rs. 4,00,000, as the assessee’s total income was below the threshold limit.
Conclusion: The ITAT Hyderabad’s verdict in the case of Madhavan Suram vs. DCIT highlights the importance of taking age-related factors into account during income tax assessments. The Tribunal emphasized that elderly individuals may have difficulty recalling specific details due to memory issues associated with old age. Additionally, the decision underscores the need for Assessing Officers to consider evidence presented by taxpayers, especially when it supports their claims. This case serves as a reminder of the importance of fairness and reasonableness in income tax assessments, especially when dealing with senior citizens.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
Aggrieved by the order dated 08/06/2023 passed by the learned Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), in the case of Madhavan Suram (“the assessee”) for the assessment year 2017-18, assessee preferred this appeal.
2. Brief facts of the case are that assessee is aged about 73 years and he retired as Cashier from State Bank of India (SBI) on 31/03/2001. At the time of retirement, assessee got retirement benefit of Rs. 18,00,000/-. He accumulated his savings by giving as hand loans to his friends and relatives. Besides pension from SBI and rents from house property, he is getting interest on his savings from banks and from his friends. During the previous year 2016-17 on receipt of the information with respect to cash deposits of Rs.18,00,000/- in SB account of Nellore Co-operative Urban Bank Ltd, learned Assessing Officer took up the proceedings. Learned Assessing Officer recorded the statement of the assessee on 27/06/2019 and a sworn statement was recorded. The assessee being retired employee and senior citizen of 73 years, he took time to collect the details of cash deposits. Subsequently, the assessee appeared on 17/07/2019 and final sworn statement was recorded.
3. The assessee had explained the sources of cash deposits for Rs. 18,00,000/-, in the sworn statement. Assessee explained that he has accumulated savings of earlier years and is not able to recollect the correct person to whom he has given and recovered in the past. Learned Assessing Officer accepted the explanation of the assessee for the deposit of Rs. 14.00 lakhs, but added a sum of Rs. 4 lakhs as ‘income from other source’, by stating that the assessee could not explain the sources for cash deposits Rs. 4,00,000/- and also not produced any documentary evidence for the same. Learned Assessing Officer, however, applied the provisions of sec 115BBE of the Act.
4. Aggrieved by such an action of the learned Assessing Officer, assessee preferred appeal before the learned CIT(A). Learned CIT(A) did not believe the version of the assessee that since the assessee happens to be a senior citizen of 73 years of age as on the date of his examination by the learned Assessing Officer, he could not recollect readily the person from whom he received the amount of Rs. 4 lakhs, but subsequently, having recollected the same, he obtained the confirmation letter from the borrower. Learned CIT(A) observed that except this particular transaction, the assessee remembered every other thing and, therefore, it is unlikely that the assessee could have forgotten this. Further, for want of a formal application under Rule 46A of the Income Tax Rules, 1962 (Rules), learned CIT(A) refused to receive the affidavit of the debtor. According to the learned CIT(A), this version of the assessee cannot be believed. He accordingly confirmed the addition and application of section 115BBE of the Act.
5. Assessee therefore, filed this appeal contending that the findings of the authorities below are contrary to the material available on record and without apprising the submissions made by the assessee in their proper perspective. Learned AR adverted to the bank account statement of the assessee to submit that the entry dated 15/02/2014, evidencing withdrawal of Rs. 5 lakhs support the contention of the assessee that such withdrawal was lent to one of his friends by name Mr. Varanasi Naga Raju, who paid it back to the assessee on 15/04/2016 and reflected in the bank statement. Nextly, he submitted that in the sworn statement the assessee did not state that Rs. 4 lakhs was his unaccounted money, but he does not remember the details of the deposit because of his advance age and lapse of time between the deposit and this examination. He drew my attention to question Nos. 7, 8 and 9 of the sworn statement and submitted that the assessee never stated that the amount was his other income, but he only stated that since they were not maintaining documentary evidence for their personal savings, he was unable to recollect from whom such amount was collected and, therefore, to buy peace, he was ready to surrender Rs. 4 lakhs. Since subsequently, he could trace out the person, who paid him back the money, obtained confirmation from him and now prays that the addition may be deleted. Learned AR submits that the sworn statement may be taken or rejected in its entirety, but cannot be relied upon partly to suit the case of the Revenue. He, therefore, prays that the assessee cannot be penalised for his poor memory in not recollecting the details relating to Rs. 4 lakhs at his advanced age 73 years, and since he produced the evidence explaining the balance amount of Rs. 4 lakhs also, the same may be deleted.
6. Learned DR submitted that the learned CIT(A) is justified in rejecting the confirmation affidavit of the person who paid the assessee Rs. 4 lakhs on 15/04/2016 filed by the assessee at a belated stage since it is only an afterthought. Learned DR submitted that when the assessee remembered every other detail, it is difficult to believe that he could not recollect the details of only this Rs. 4 lakhs. He, therefore, prayed to dismiss the appeal.
7. I have gone through the record in the light of the submissions made on either side. Facts not in dispute are that the authorities below found five deposits in the joint account of the assessee and his wife on 11/04/2016, 16/04/2016, 22/04/2016, 03/06/2016 and 05/10/2016 of sums of Rs. 3 lakhs, Rs. 4 lakhs, Rs. 3 lakhs, Rs. 3 lakhs and Rs. 5 lakhs respectively. Out of these five sums, after examination of the assessee and considering his explanation, learned Assessing Officer satisfied in respect of four amounts and he entertained a doubt only in respect of Rs. 4 lakhs deposited on 16/04/2016. Precisely, this amount is the subject matter of the present appeal.
8. A perusal of this sworn statement of the assessee vide answers to questions 7, 8 and 9 clearly show that while explaining the deposits, assessee stated that the deposit of Rs. 4 lakhs on 16/04/2016 was out of personal savings of the last one year of the assessee. Assessee nowhere stated in his statement that such an amount was income from other source, but since he was unable to recollect the details, he would offer it as income from other source.
9. Subsequently, the assessee who traced out the details of the person from whom he received such amount and he also filed the affidavit of such person swearing to such a fact. He also filed the supporting evidence in the form of the bank withdrawal entry dated 15/02/2014 and explains that he lent this amount to one of his friends and received it in the relevant year. As a matter of fact, I do not find it to be something unusual. Answer to question No. 7 of his statement clearly shows that on the plea of inability to recollect the details relating to all the deposits, the assessee sought some time. In his statement, he stated that he is aged 73 years and his wife 68 years and both have pension apart from receiving house property income in cash and some money from their daughter residing in USA. He explained all the deposits to the tune of Rs. 14 lakhs, out of Rs. 18 lakhs and in respect of such Rs. 4 lakhs, he stated that it is out of his personal income, but details could not recollect.
10. In all fairness, at that stage, he offered the same to tax since he was not recollecting the details. I doubt very much whether such an offer would be irrevocable even after the assessee traces out the source of such deposit and the evidence supporting the same. The act of refusing to look into the evidence produced by the assessee, who has never been found to be a tax evader, on the ground that it is an afterthought is nothing but an act of prejudice. Such evidence should have been examined and if any doubt arises on such examination, then the alternative view could have been taken by the authorities below.
11. It is pertinent to note that the assessee was aged about 73 years and his wife was 68 years of age. It would be difficult to believe that at such age, the pensioners will have another source of income. Moreover, this deposit of Rs. 4 Lakhs is long prior to the demonetization of Specified Bank Notes. It rules out the possibility of assessee depositing some other’s money in his account. Human memory at that age is not infallible, and while appreciating the facts and circumstances, regard must be had to this fact. Lest, it would amount to penalizing the fading of memory at old age. This is not the purpose of law.
12. Entry dated 15/02/2014 in the bank passbook, evidencing withdrawal of Rs. 5 lakhs coupled with the plea of the assessee that such an amount was lent to earn interest, and well corroborated by the affidavit of the debtor does not look like a concocted story. Having regard to the common course of natural events, human conduct and public and private business, in their relation to the facts of this case, I do not find anything unusual in the plea taken by the assessee.
13. Learned DR pleaded that verification of this bank passbook entry and the affidavit may be restored to the file of the learned Assessing Officer. Such an opportunity was available to the authorities below when the assessee came forward with the documents, but now if I restore it to the file of the learned Assessing Officer, I am afraid it will cause hardship to a senior citizen of about 80 years of age by now. It does not look reasonable to me, keeping in view the smallness of the amount. Hence, I examine these entries and am satisfied with the genuineness of the plea taken by the assessee. Hence, I direct the learned Assessing Officer to delete this addition, in view of the plea that the total income of the assessee is less than the threshold limit. Grounds are accordingly allowed.
14. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on this the 8th day of September, 2023.
