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Smart Summary

Concise Analytical Summary of the Tribunal's Opinion

Case: ITA No. 306/Ahd/2021 (Assessment Year 2017-18)
Parties: Kavitaben Chintanbhai Patel (Appellant) vs. The Income-tax Officer, Ward-5(2)(3), Ahmedabad (Respondent)
Bench: Ms. Annapurna Gupta, Accountant Member; Shri T.R. Senthil Kumar, Judicial Member (Order per T.R. Senthil Kumar, Judicial Member)
Dates: Hearing 08-07-2022; Pronouncement 03-08-2022

Factual and Procedural Background

The assessee, an individual, filed her return of income for AY 2017-18 declaring a gross total income of Rs. 4,07,922 (salary Rs. 3,60,000 and other sources Rs. 47,922). The return was selected for scrutiny on account of cash deposits made during the demonetization period. The assessee deposited old currency notes — Rs. 10,00,000 on 11.11.2016 and Rs. 2,75,000 on 15.11.2016 — totaling Rs. 12,75,000.

The Assessing Officer issued notice under section 142(1) requesting explanation for these cash deposits. The assessee produced a cash book and balance sheet showing an opening cash balance (variously recorded in the record as Rs. 12,98,000) and explained that the cash had originated from a loan of Rs. 50,00,000 received from her employer M/s. Ramesh Corporation by RTGS in December 2013, withdrawn on 02.01.2014; Rs. 37,00,000 of that was alleged to have been redeposited between November 2015 and March 2016, leaving cash in hand which was later deposited during demonetization.

The AO issued a show cause notice dated 01.12.2019; after a limited response and adjournment requests, the AO held that the assessee had no further explanation and added Rs. 12,75,000 as unexplained money under section 69A, assessing total income at Rs. 15,26,590. The assessee appealed to the Commissioner of Income Tax (Appeals); the appeal migrated to the National Faceless Appellate Centre (NFAC), which confirmed the addition. The assessee then appealed to the Income Tax Appellate Tribunal (ITAT), Ahmedabad "SMC" Bench.

Legal Issues Presented

  1. Whether the cash deposits of Rs. 12,75,000 made during the demonetization period, claimed to be demonetized currency previously withdrawn from the bank, constitute unexplained cash credits liable to be added to the assessee's income under section 69A of the Income Tax Act, 1961?

Arguments of the Parties

Appellant's Arguments

  • The assessee produced ledger accounts, bank passbook entries and written submissions showing receipt of a Rs. 50,00,000 loan from M/s. Ramesh Corporation (RTGS credit), withdrawal of that loan on 02.01.2014, and redeposit of Rs. 37,00,000 between November 2015 and March 2016 into the Bank of Baroda account.
  • The remaining cash (reflected as an opening cash balance) was in the assessee's possession and the demonetized currency notes (Rs. 500 and Rs. 2000 denominations) were deposited into the bank during the demonetization period.
  • Documentary evidence (bank statement, ledger, confirmations) was produced to explain the source of the deposited cash; thus the sum cannot be treated as unexplained money under section 69A and the addition should be deleted.
  • The assessee relied on Jurisdictional High Court rulings (CIT vs. Shaileshkumar Rasiklal Mehta and CIT vs. Manoj Indravadan Chokshi) to support the proposition that where cash withdrawals from bank accounts are shown and not shown to have been used for other purposes, subsequent deposits of that cash need not be treated as unexplained.

Respondent's Arguments

  • The Departmental Representative supported the orders of the lower authorities (AO and NFAC) and requested that the addition of Rs. 12,75,000 be sustained as unexplained cash credits under section 69A.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
CIT vs. Shaileshkumar Rasiklal Mehta (Jurisdictional High Court judgment dated 25.11.2013) Where additions routed through the bank are explained by the assessee and the source is proved and routed through the bank, the Assessing Officer is not justified in treating the amount as undisclosed income; deletion of additions under Section 68 was upheld in that case. The Tribunal followed the High Court's reasoning that explanation supported by bank routing and documentary evidence negates the basis for additions; accordingly, the Tribunal relied on this precedent to support deletion of the addition under section 69A in the present case.
CIT vs. Manoj Indravadan Chokshi [2014] 50 taxmann.com 419 (Hon'ble Gujarat High Court) Where an assessee withdraws cash from bank and later deposits it, and there is no finding that the withdrawn cash was used for other purposes, an addition on the basis that the deposits were unexplained is not justified. The Tribunal cited and followed this principle to conclude that, since the assessee showed bank withdrawals and there was no finding that the withdrawn cash was otherwise utilized, the deposits during demonetization could not be treated as unexplained; this supported deletion of the addition.

Court's Reasoning and Analysis

The Tribunal reviewed the record, including the Paper Book, bank statements, ledger accounts, and the case law submitted by the assessee. Its analysis proceeded along the following steps, strictly as set out in the opinion:

  1. Verification of documentary trail: The Tribunal observed that the alleged loan of Rs. 50,00,000 from Ramesh Corporation was reflected in the assessee's bank account and that a withdrawal of Rs. 50,00,000 on 02.01.2014 was shown in the bank records.
  2. Confirmation of redeposits: The Tribunal noted the assessee's claim and the bank statement evidence that Rs. 37,00,000 was redeposited into the Bank of Baroda account between November 2015 and March 2016.
  3. Reconstruction of cash-in-hand: On the basis of these entries, the Tribunal accepted that a remaining cash balance (referred to in the record as approximately Rs. 12.98 lakhs / Rs. 12.78 lakhs in different paragraphs of the order) was available with the assessee prior to the demonetization-period deposits, and that deposits of Rs. 10,00,000 and Rs. 2,75,000 during November 2016 were consistent with the asserted cash-in-hand.
  4. Assessment of sufficiency of explanation: The Tribunal held that the assessee's explanation — that demonetized currency notes in her possession were deposited during the demonetization period and that the source of these notes was the earlier bank withdrawal of the loan amount — was supported by the bank statements and ledger entries presented to the authorities. The Tribunal found no evidence that the withdrawn cash had been used for other purposes in the intervening period.
  5. Application of judicial precedents: Relying on the cited decisions of the Jurisdictional High Court (Shaileshkumar Rasiklal Mehta and Manoj Indravadan Chokshi), the Tribunal reasoned that where the source of the cash is shown through banking records and there is no finding that the cash was utilized elsewhere, it is not permissible to treat the later deposits as unexplained and make additions under the relevant provisions.
  6. Conclusion drawn from facts and law: Because the source (bank withdrawal of loan) and the chain (redeposits and deposits during demonetization) were substantiated in the record and because controlling precedents support deletion where evidence shows withdrawal and no intervening use, the Tribunal concluded that the addition under section 69A was not justified on the facts of this case.

Holding and Implications

Core Ruling: The appeal is allowed and the addition of Rs. 12,75,000 made under section 69A is deleted.

Consequences of the decision:

  • The specific addition of Rs. 12,75,000 treated as unexplained cash credit under section 69A by the Assessing Officer and confirmed by NFAC is set aside and deleted by the Tribunal.
  • The appeal is allowed in favour of the assessee; the assessed income and resultant tax demand based on that addition are thereby affected (i.e., the addition is removed from the assessment). The order was pronounced on 03-08-2022.
  • The Tribunal expressly followed existing Jurisdictional High Court precedents in reaching its conclusion; the opinion does not purport to lay down any new legal principle beyond applying those precedents to the facts of this case.

This summary is prepared exclusively from the content of the provided Tribunal opinion and does not add or infer facts beyond what is recorded in that text.

Show full summary ...

    Kavitaben Chintanbhai Patel, Ahmedabad v. The ITO, Ward-5(2)(3), Ahmedabad

    IN THE INCOME TAX APPELLATE TRIBUNAL

    AHMEDABAD "SMC" BENCH

    Before: Ms. Annapurna Gupta, Accountant Member And Shri T.R. Senthil Kumar, Judicial Member

    ITA No. 306/Ahd/2021 Assessment Year 2017-18
    Kavitaben Chintanbhai Patel ‘Saviram’-4, Gandhikunj Society, Ellisbridge, Ahmedabad-380006 PAN No: APVPP1490F (Appellant) Vs The Income-tax Officer, Ward-5(2)(3), Ahmedabad (Respondent)

    Appellant by : Ms. Arti N Shah, A.R.

    Respondent by : Ms. Sudhiksha Rani, Sr.D.R.

    Date of hearing : 08-07-2022

    Date of pronouncement : 03-08-2022

    आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-

    The present appeal has been filed by the Assessee against the order dated 01.11.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, (in short referred to as "NFAC"), against the order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') relating to the Assessment Year (A.Y) 2017-18.

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    I.T.A No. 306/Ahd/2021 A.Y. 2017-18 Page No2 Kavitaben Chintanbhai Patel vs. ITO

    2. The brief facts of the case is that the assessee is an individual and filed her Return of Income for the Assessment Year 2017-18 admitting a gross total income of Rs. 4,07,922/- which comprises of salary income of Rs. 3,60,000/-, the income from other sources of Rs. 47,922/-. The return of income was selected for scrutiny assessment for cash deposit during the demonetization period.

    2.1. The assessee deposited in Old currency notes of Rs. 2000 and Rs. 500/- on a sum of Rs. 10,00,000/- on 11.11.2016 and on 15.11.2016 cash of Rs. 2,75,000/-. The assessee was served with a notice u/s. 142(1) asking for the above cash deposits, the assessee furnished copy of cash book and Balance sheet as on 31.03.2017 wherein the opening balance of Rs. 12,98,000/- in the balance sheet. The assessee shown Rs. 50,00,000/- as opening balance from the Financial Year 2015-16 and the same was carried forward. The assessee submitted that the cash deposited during the demonetization period was from the cash withdrawn on 2.01.2014. Since the cash deposited is not explained properly one more show cause notice was issued on 01.12.2019 requesting the assessee to explain the above cash deposits.

    2 .2 . In response to the show cause notice, the assessee filed an adjournment letter for one week. As there was no response from the assessee, the assessing officer held that the assessee has no further explanation to offer, regarding the sources of cash deposit amounting to Rs. 12,75,000/- and the same was added as

    2

    I.T.A No. 306/Ahd/2021 A.Y. 2017-18 Page No3 Kavitaben Chintanbhai Patel vs. ITO unexplained money u/s. 69A of the Act and the assessed income as Rs. 15,26,590/- and demanded tax thereon.

    3.Aggrieved against the same, the assesee filed an appeal before the Ld. CIT(A). The appeal was subsequently migrated to National Faceless Appellate Centre.

    3.1. In response to the various hearing notices, the assessee filed her written submissions. The assessee claimed that she obtained loan of Rs. 50,00,000/- from her employer M/s. Ramesh Corporation (PAN AACFR1745B) in December, 2013 by RTGS and credited in the bank account. That loan amount of Rs. 50,00,000/- was withdrawn on 02.01.2014 to meet some anticipated family exigencies. Quite a long time, no such exigency materialized or arose and the cash withdrawn remained in the hands of the assessee. Thereafter the assessee deposited cash amounting to Rs. 37,00,000/- in the bank account with Bank of Baroda, Gandhinagar Branch on various dates from November, 2015 to March, 2016. Accordingly, there was a cash balance of Rs. 12,98,000/- available as cash in hand in the cash book as on 31.03.2016 which is the opening cash balance. This cash balance is said to be deposited a sum of Rs. 10,00,000/- on 11.11.2016 and Rs. 2,75,000/- was deposited on 15.11.2016 in Old currency denomination of Rs. 2000/- and Rs. 500/-.

    3 .2. After considering the above written submissions, the NFAC held that the issue of huge cash withdrawal in the year 2014 and

    3

    I.T.A No. 306/Ahd/2021 A.Y. 2017-18 Page No4 Kavitaben Chintanbhai Patel vs. ITO subsequent deposits in the bank made the whole transactions suspicious in nature. The assessee has neither provided sufficient evidence for justification before the A.O. during the appellate proceeding. In-spite of opportunity given to the assessee, the assessee has failed to discharge the onus of providing justifications in the books of accounts. The assessee being an individual having income from salary and other sources. The nature of activities of the assessee it is hard to understand, need for moving cash from one hand to other hand and movements of the cash from bank to book and vice-versa. Therefore the addition made by the Assessing Officer has been confirmed and dismissed the assessee's appeal.

    4. Aggrieved against the same, the assessee is in appeal before us raising the following Grounds of Appeal:

    1. The Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts of the case of the Appellant by confirming the addition made by the Ld. Assessing Officer on the ground that amount of cash of Rs. 12,75,000/- deposited in bank account of the Appellant during the demonetization period is unexplained cash credits U/S.69A of the I.T. Act, 1961, made by the Appellant and requires to be added in the income of the Appellant.

    2. Your Appellant, therefore, prays that the addition of Rs. 12,75,000/- made by the Ld. Assessing Officer and confirmed by the Ld. Commissioner of Income Tax (Appeals), may kindly be deleted fully.

    4 .1. The Ld. Counsel for the assessee Ms. Arti N. Shah submitted a Paper Book and Compilation of case laws before us. Ld. Counsel also taken us through ledger account of the assessee and bank passbook of the assessee with Bank of Baroda and reply filed by the assessee before the Assessing Officer on 11.11.2019 that the loan of Rs. 50,00,000/- received from M/s. Ramesh Corporation

    4

    I.T.A No. 306/Ahd/2021 A.Y. 2017-18 Page No5 Kavitaben Chintanbhai Patel vs. ITO which is engaged in Automobile business. The loan amount of Rs. 50,00,000/- withdrawn on 02.01.2014 and redeposited a sum of Rs. 37,00,000/- in Bank of Baroda from November 2015 to March, 2016. Thus there was an opening balance of cash of Rs. 12,98,000/-, was available with the assessee and the same has been deposited during the demonetization period. A sum of Rs. 10,00,000/- on 11.11.2016 and Rs. 2,75,000/- on 15.11.2016 deposited in Bank being the demonetized currency notes of Rs. 500/- and Rs. 1000/- in denomination. The assessee also produced the salary income received through bank transactions from M/s. Ramesh Corporation. Thus the Ld. A.R. pleaded that the cash in hand was Old demonetized currency of Rs. 500/- and Rs. 1000/- in denomination have been remitted in the bank account during the Financial Year, for which the source is being properly explained by the assessee with ledger accounts, bank passbook and confirmations etc, therefore the same cannot be added as unexplained money u/s. 69A of the Act and the addition is liable to be deleted.

    5 . In support of the same, the assessee relied upon the Jurisdictional High Court judgment dated 25.11.2013 in the case of CIT vs. Shaileshkumar Rasiklal Mehta in Tax Appeal Nos. 977 to 980 of 2013. The assessee also relied upon another judgment of Hon'ble Gujarat High Court in the case of CIT vs. Manoj Indravadan Chokshi reported in [2014] 50 taxmann.com 419 wherein the Hon'ble High Court held that one source of cash

    5

    I.T.A No. 306/Ahd/2021 A.Y. 2017-18 Page No6 Kavitaben Chintanbhai Patel vs. ITO deposit in bank account is explained, subsequent withdrawn is not required to be explained. Therefore no addition can be made.

    6 . Per contra the ld. D.R. appearing for the Revenue supported the order passed by the lower authorities and requested to sustain the addition made by the Assessing Officer. 7. We have given our thoughtful consideration and perused the materials available on record including Paper Book and the Case Laws filed by the assessee. The cash loan of Rs. 50,00,000/- said to be received by the assessee from Ramesh Corporation is being clearly reflecting in the bank account of the assessee and the assessee had withdrawn Rs. 50,00,000/- on 02.01.2014. The assessee submission of redeposit of a sum of Rs. 37,00,000/- in her bank account of Bank of Baroda is also reflecting in the bank statement. So, the remaining cash in hand of Rs. 12,78,000/- in which the assessee made deposit of Rs. 12,75,000/- during the demonetization period. The assessee's explanation that the demonetized currency notes of Rs. 500/- and Rs. 2000/- available with the assessee as cash in hand were being deposited during the demonetization period. Thus the same cannot be treated as not properly explained by the assessee. As it can be seen from the bank statement, the source of withdrawal of the money is being clearly demonstrated and their deposit of money on various occasions is also established by the assessee through her bank account. The same cannot be doubted by the Assessing Officer as unexplained money.

    6

    I.T.A No. 306/Ahd/2021 A.Y. 2017-18 Page No7 Kavitaben Chintanbhai Patel vs. ITO

    8. Further the Jurisdictional High Court in the case of Shaileshkumar Rasiklal Mehta cited above held as follows:

    "The CIT(A) while deleting the additions made by the Assessing Officer, it appears that on appreciation of evidence and considering the fact that the additions made by the Assessing Officer routed through the Bank and the assessee explained the source of income and considering the same the CIT(A) has deleted the additions made by the Assessing Officer, which was made by the Assessing Officer treating the same as undisclosed income. The assessee successfully proved the source of income and the same was routed through the Bank. Thus, the Assessing Officer was not justified in treating the same as undisclosed income and in making the additions under Section 68 of the Income Tax Act.

    4. We are in complete agreement with the reasoning and the views taken by the CIT(A) as well as the ITAT in deleting the additions made by the Assessing Officer under Section 68 of the Income Tax Act. As such, no question of law, much less substantial question of law arises in the present appeals as the findings given by the CIT(A) confirmed by the ITAT are on appreciation of evidence. Under the circumstances, all the appeals deserve to be dismissed and are accordingly dismissed.

    8.1. Similarly in the case of Manoj Indravadan Chokshi the jurisdictional High Court of Gujarat held as follows:

    "… The contention of the assessee is that the amount was kept as cash in hand. The authorities have doubted about the explanation furnished by the assessee. The authorities below have doubted the source of the cash deposits, however, the contention of the Id. counsel for the assessee is that he had withdrawn the amount from his bank account and there is no finding by the authorities below that the cash withdrawn by the assessee was utilized for any other purpose. In the absence of such finding, addition is not justified. We find merit into the contention of the Id. counsel for the assessee that there is no dispute that the amount which was withdrawn by the assessee on various dates during the year 2006 was available with him for making deposits. In the absence of finding that the amount which was previously withdrawn by the assessee had been utilized for any other purpose merely on the basis of conjecture that the amount might

    have been utilized for any other-purpose and was not available with the assessee for making the deposits, we are unable to accept the reasoning of the authorities below. In our considered view, when the assessee has demonstrated that he had withdrawn cash from the bank and there is ho finding by the authorities below that this cash available with the assessee was invested or utilized for any other

    7

    I.T.A No. 306/Ahd/2021 A.Y. 2017-18 Page No8 Kavitaben Chintanbhai Patel vs. ITO purpose, in that event, it is not open to the authority to make the addition on the basis that the assessee failed to explain the source of deposits. Moreover, the authorities below have not disputed the fact that the assessee had withdrawn amount of Rs.9,10,000/- before the deposits made on various dates during the FY 2007-08. Therefore, the orders of the authorities below are set aside and the AO is directed to delete the addition. Thus, ground raised in the asseessee's appeal is allowed.

    9. Respectfully following the above judicial precedents, we have no hesitation in allowing the grounds raised by the assessee and the impugned addition made by the Assessing Officer of Rs. 12,75,000/- u/s. 69A is hereby deleted.

    10. In the result, appeal filed by the assessee is hereby allowed. Order pronounced in the open court on 03-08-2022 Sd/- Sd/-

    (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR)

    ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 03/08/2022

    आदेश क त ल प अ े षत / Copy of Order Forwarded to:-

    1. Assessee

    2. Revenue

    3. Concerned CIT

    4. CIT (A)

    5. DR, ITAT, Ahmedabad

    6. Guard file. By order/आदेश से, उप/सहायक पजं ीकार आयकर अपील य अ धकरण, अहमदाबाद

    8

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    Comments

    Kavitaben Chintanbhai Patel, Ahmedabad v. The ITO, Ward-5(2)(3), Ahmedabad
    (Aug 3, 2022)