The issue under consideration is whether the addition made by the A.O. for cash deposited into saving bank account by the assessee is justified in law?
The assessee is engaged in medical profession as well as a partner in Priyadarshi Hospital. The assessing officer initiated re-assessment proceedings against the assessee by observing that the assessee was found to have deposited cash in her saving bank account, the source of which has not been revealed in the income tax return.
ITAT states that assessee is carrying on his professional practice wherefrom he has shown the net professional income and remuneration from Priyadarshi Hospital. The opening balance shown by the assessee is also deposited in the savings bank account. The gross receipt shown in his profit and loss account from professional fees which was deposited in the bank account in cash. In view of this, ITAT direct the ld AO to delete the addition to that extent since the source has been explained by the assessee.
FULL TEXT OF THE ITAT JUDGEMENT
1. These are the two appeals involving similar issues, therefore both these appeals were argued together, hence, disposed off by this common order
2. Appeal in case of Mrs. Sarita Tyagi is filed by the assessee against the order of the ld CIT(A), Ghaziabad dated 31.03.2019 raising following grounds of appeal:-
“1. That the A. O. has not provide proper and reasonable opportunity being heard even he has not considered submission filed by the assessee and passed by Order U/s 144/147 bad in law and against the principle of natural justice.
2. That the A.O. as well as CIT(A) has not considered source of cash deposit by the professional cash withdrawal from Partnership Firm, cash redeposit and opening cash in hand duly full explained the A.O. as well as CIT(A). Therefore, the A.O. made addition U/s 69 of I.T. Act 1961, which is bad in law because the bank passbook is not books of accounts of the assessee.
3. That the Written Submission filed by the assessee is not considered CIT(A) even the assessee furnishing also all the evidence all the availability of cash. Therefore, CIT(A) confirm the addition is in error because no remand report obtain from CIT(A) by the A.O.”
3. Brief fact of the case shows that the assessee is an individual. She is engaged in medical profession as well as a partner in the firm. The assessee filed her return of income for Assessment Year 2010-11 on 01.04.2011 at 661270/-.
4. AIR information was received that the assessee has deposited cash of Rs. 13,22,005/- in her savings bank account with Oriental Bank of Commerce. The ld AO issued three letters to the assessee for verification of above information but no reply was filed. Therefore, the ld AO issued notice u/s 148 of the Act on 27.03.2017. The ld AO also issued notice u/s 142(1) of the Act on 09.05.20 17. The AO did not comply with several query letters and therefore the ld AO passed an order making addition of the above sum treating it as income from other sources and as unexplained cash credit u/s 68 of the Act. The order was passed u/s 143(3) read with section 147 of the Act on 26.12.20 17 determining total income of the assessee on 19,83,275/-.
5. Assessee aggrieved with the order preferred an appeal before the ld CIT (A). Before the ld CIT(A) the assessee submitted that cash has been deposited out of professional service fees , out of opening cash balance available and sums received from a partnership firm where she is a partner i.e. Priyadarshi Hospital. The assessee also supported that with computation of income and statement of affairs as on 31.03.2010. The LD CIT (A) dismissed the appeal of the assessee as the ledger account submitted of Priyadarshini Hospital (Firm) were unauthenticated and on the ledger account PAN was not mentioned. The cash deposited therefore, were held to be not correlated hence, and confirmed the addition. The assessee aggrieved with the above order has preferred this appeal before us.
6. The ld AR submitted that the assessee is a Doctor and carrying on private practice as well as partner in M/s. Priyadarshi Hospital. The assessee submitted that assessee has deposited total cash of Rs. 15,11,182/-. The source of deposit was opening cash balance of Rs. 325492/-, out of individual professional fee received of Rs. 885690/- and receipt from Priyadarshi Hospital of Rs. 3 lakhs. The assessee also explained the withdrawal of Rs. 125000/- from the bank. In view of this it was submitted that the addition made is already accounted for as income of the assessee. He also supported the details with balance sheet, copy of the bank statement. He also submitted that the issue is squarely covered in favour of the assessee by the decision of ITAT in case of Shri Vipin Sirohi dated 12.02.2015.
7. The ld DR vehemently supported the orders of the lower authorities.
8. We have carefully considered the rival contentions and find that undoubtedly assessee has deposited cash in the bank account amounting to 1322005/- in her savings bank account with Oriental Bank of Commerce.
9. With respect to reopening of the assessment, we do not find any fault with the action of the ld AO, as the information was received from AIR and the return of income of the assessee did not show the complete details about the above deposit. Further, in response to the query letters of the AO, assessee did not reply. Therefore, AO has reason to believe about escapement of Thus ground no 1 is dismissed.
10. Though the assessee has supported the same with the cash flow statement as well as the sum received from her professional practice and from partnership firm. The LD CIT (A) disregarded all these facts as the ledger account was unauthenticated and PAN of the partnership firm was not mentioned in the account. We find that when the assessee filed her return of income she included the professional income of Rs. 518831/- as well as remuneration and interest from partnership firm of Priyadarshi Hospital Rs. 219415/-. Her individual gross receipt from private practice shows Gross professional income of Rs. 885690/- which was deposited in that bank While explaining the source the assessee has categorically stated that, the above professional receipt was deposited in the bank account of the assessee. Therefore, addition to that extent naturally amounts to double addition. Further, it was also stated that she was having opening cash balance in hand of Rs. 325492/- which was also deposited. Therefore, the addition on that account also deserves to be deleted in absence of any other finding contrary by the revenue. This left us the sum of Rs. 3 lakh received by the assessee from Priyadarshi Hospital. The assessee was a partner in that firm. Undoubtedly, the account submitted by the assessee was not authenticated by stating the PAN. We also do not find information about return of income etc of that firm in the paper book submitted by the assessee. In view of this, we direct the ld AO to delete the addition to the extent of Rs. 325492/- and Rs. 885690/-. However, with respect to the receipt of Rs. 3 lakhs from Priyadarshi Hospital requires proper verification. Accordingly, to that extent only, we set aside the issue of verification of cash receipt of only Rs. 3 lakh from Priyadarshi Hospital by the assessee back to the file of the ld AO with a direction to the assessee to submit the authentic ledger stating PAN of that partnership firm. The LD AO may examine the same and decide the issue to that extent afresh. Thus, Ground no 2 is allowed with above directions.
11. Accordingly, appeal of the assessee is partly allowed deleting the addition to the extent of Rs. 325492/- and Rs. 885690/-.
ITA No. 3985/Del/2019
(Assessment Year: 2010-11)
12. The appeal of Mr. Satish Chandra Tyagi in ITA No. 3985/Del/2019 for Assessment Year 2010-11 having identical facts. In that case the assessee filed his return of income on 29.03.2011 of Rs. 725200/-. The assessee was found to have deposited cash of Rs. 1358570/- in his saving bank account maintained with Oriental Bank of commerce. The assessment u/s 147 read with section 144 of the Act was passed on 05.12.20 17 at Rs. 2083770/-. The assessee challenged the same before the ld CIT (A). The LD CIT (A) dismissed the appeal of the assessee for the similar reason of unauthentic
13. The LD AR submitted that assessee is a partner in Priyadarshi Hospital as well as carrying on his professional practice. The assessee also submitted that he has opening cash in hand of Rs. 343 108/- and professional fees receipt of Rs. 685010/-. He received Rs. 3 lakhs from Priyadarshi Hospital as remuneration and further Rs. 48000/- as gift from relatives therefore, the total deposit of Rs. 1376118/- deposit in the bank account are fully explained. He reiterated his submission made in case of Ms. Sarita Tyagi. Accordingly, he submitted that there is no unaccounted income. Therefore, reopening and assessment are bad.
14. The ld DR supported the order of the lower authorities.
15. On carefully consideration of the orders of the lower authorities.
16. For the reason given by us in appeal of Mrs. Sarita Tyagi, as similar facts prevail we do not find any infirmity in the action of the ld AO in reopening of the assessment. Thus Ground no 1 of the appeal is dismissed.
17. With respect to cash deposit in savings bank accounts, we find that assessee is carrying on his professional practice wherefrom he has shown the net professional income of Rs. 345590/- and remuneration of Rs. 247065/- from Priyadarshi Hospital. The opening balance shown by the assessee is also deposited in the savings bank account. The gross receipt shown in his profit and loss account from professional fees was Rs. 6850 10/- which was deposited in the bank account in cash. In view of this, we direct the ld AO to delete the addition to that extent. Further opening balance of cash in hand deposited in the bank account can also not be added as income of the assessee. Therefore, ld AO is directed to delete the Further, with respect to cash receipt of Rs. 3 lakh from M/s. Priyadarshi Hospital the assessee is directed to show by submitting the authentic account of that firm wherefrom the assessee received Rs. 3 lakhs in cash. Further with respect to the gift from relatives shown by the assessee of Rs. 48000/- no information is available. Hence, with a similar direction, we set aside the issue to the extent of Rs. 348000/- to the file of the LD AO with a direction to the assessee to submit authentic copy from the partnership firm wherefrom he received Rs. 3 lakh in cash, which was deposited in the bank. Further, the assessee is also directed to explain the gift from relative of Rs. 48000/-. The above cash being less than Rs. 50000/- is otherwise, exempt u/s 56. However, the assessee must show the nature and source of such gift. If the assessee satisfies the ld AO about the nature and source of such gift, no addition is required to be made. In view of this, out of Rs. 135870/- cash deposited in bank account , only the addition of Rs. 348000/- is set aside to the file of the ld AO. The LD AO may examine the details and decide the issue accordingly. Thus Ground no 2 is allowed with above directions.
18. Accordingly, appeal of the assessee is partly allowed with above directions.
19. In the result, both the appeals are partly allowed.
Order pronounced in the open court on 19/05/2020.