Income Tax Appellate Tribunal - Hyderabad
Income Tax Officer (It)-I, Hyderabad, ... vs M Prabhakar, Hyderabad on 11 November, 2016
IN THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SMT P. MADHAVI DEVI, JUDICIAL MEMBER
AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER
ITA Nos. 1727/Hyd/2014
Assessment Year: 2010-11
Income-tax Officer, vs. Shri M. Prabhakar,
(International Taxation) - I, Hyderabad.
Hyderabad. PAN - AFRPM 5379Q
(Appellant) (Respondent)
Revenue by : Shri K.J. Rao
Assessee by : Shri A.V. Raghuram
Date of hearing 25-10-2016
Date of pronouncement 11-11-2016
O RDE R
PER S. RIFAUR RAHMAN, A.M.:
This appeal filed by the revenue is directed against the order of CIT(A)-V, Hyderabad, dated 14/07/2014 for AY 2010-11.
2. Briefly the facts of the case are that the assessee filed his return of income for the AY 2010-11 on 22/07/2010 declaring total income of Rs. 2,96,450/-. The assessment was completed determining the total income of the assessee at Rs. 37,73,303/- by making the following additions:
i) Income from undisclosed source Rs. 34,70,000
ii) Excess claim of mediclaim Rs. 6,857 2.1 The A.O. observed that the assessee had made cash deposits amounting to Rs.34.70 lakhs in his Savings Bank Account maintained with ICICI Bank, Khairtabad, Hyderabad. The source was claimed to be the cash balances were available with him. In support of his explanation, the assessee produced books of account and on verification, the AO found that the cash of Rs.32.20 lakhs was 2 ITA Nos. 1727/H/14 Sri M. Prabhakar withdrawn from A/c No.801086148 and Rs.13.80 lakhs from A/c No.801086149 on 27-9-2007 and Rs.7.25 lakhs was withdrawn on 10-3-2008 from A/c No.801086148. Finally, as on 31-1-2008, the assessee disclosed an amount of Rs.53,06,368 in his possession in the form of cash as per the cash book for the F.Y.2007-08 and as per the cash book for F.Y.2008-09, the assessee has brought forward the same cash balance of Rs.53,06,368 as opening balance. He observed that there was not even a single cash transaction during the entire year and the same amount of Rs.53,06,368 had become the closing cash balance as on 31-3-2009 and the same cash was re-deposited into the S.B.A/c during the F.Y .2009-10. The A.O. did not accept the explanation of the assessee for the following reasons:
(i) Further when the cash of Rs 53.06 lakhs is available with Assessee as on 31-03-2008 and as on 31-03-2009, he would have filed wealth tax Returns by disclosing the same because the cash available is taxable under the Wealth tax Act. The assessee has not filed any wealth tax returns within the stipulated period.
A notice u/s 142 (1) was issued to the assessee on 2-5-2012, to furnish his copies of wealth tax returns. In response, the assessee field wealth tax returns for the A.Ys 2008-09 & 2009-10 on 24-1-2013 and 22-1-2013 respectively.
(ii) When the assessee was intended to re deposit the cash, he could have deposited the entire cash at once. But the cash of Rs 34.70 lakhs is deposited in 12 parts on various dates from 27-05- 2009 to 26-03-2010, which indicates that the source for each cash deposit could be different.
(iii) The assessee has failed to establish the nexus between the Cash withdrawn during the Financial Year 2007-08 and the cash deposited during the Financial year 2009-10. The assessee has failed to produce any evidence in support of his argument to prove that the cash deposited in the bank is the same which is withdrawn from Bank account during the financial year 2007-08.
(iv) It is unusual that any person will keep amount of more than 50 lakhs ideally loosing significant interest for a period of more than one and a half year.
(v) Under the present condition of law and order, it is impossible to keep cash of more than Rs 50 Lakhs for a period of more than one and a half year in view of high risk of theft. "
3 ITA Nos. 1727/H/14Sri M. Prabhakar 2.2 In view of the above observations, the AO held that sources for cash deposits were not the cash withdrawals of the last before year as explained by the assessee, it was an afterthought to hide the original sources for the cash deposits and added Rs. 34.70 lakhs as unexplained cash credits u/s 68 of the Act.
3. Aggrieved by the order of the AO, the assessee preferred an appeal before the CIT(A) against the addition made u/s 68 of the Act.
4.1 During the appeal proceedings, the assessee furnished his submissions on the observations of the A.O. vide Para.2 (i) to (v), inter alia, as under:
(1) The failure of the assessee in filing the Wealth tax returns in time cannot be the reason for rejecting the assessee's sources of Cash credits in the bank. In fact, the assessee has paid the wealth Tax together with interest for the delay in filing the wealth tax returns for the Relevant assessment Years 2008-09, 2009-10.
(2) The assessee has the right to deposit his cash as per his wish and needs and the learned Assessing officer's contention that the entire Cash should have been deposited at once cannot be the valid reason for rejecting the Assessee's source of Cash Credits in the bank.
3) The Assessee has submitted the Books of account and the bank Statements, explaining the Cash with drawls from his bank accounts and stated that the same cash in hand was redeposited in his bank accounts on various dates during the Assessment Year 2010-11. The assessee has also submitted the Statement of affairs for each year.
The assessee has drawn his own money from his bank accounts and kept as Cash in hand. The deposits made into the Bank accounts during the Assessment Year 2010-11 were out of Cash in hand and the same was explained before the assessing officer.
The genuineness of the cash withdrawn from the assessee's Bank accounts were proved by the assessee by submitting the bank statements and Books of account and the Statement of affairs"
4 ITA Nos. 1727/H/14Sri M. Prabhakar (4) The assessee has right to make his own decisions on investments and deposits in bank and to plan for his earnings.
The assessing officer has failed to give any legal restriction, if any, in respect of limits in maintaining cash balance in hand.
(5) The assessee has right to take his own risks in keeping his own cash in hand.
The assessing officer having accepted the books of account, has no reason to believe that the Cash deposits into bank, which are out of the assessee's own cash in hand, were not genuine.
The assessing officer, stating all his suspicions as facts. has made the addition under Sec 68 of the Act. Mere suspicion by the assessing officer can not be a valid reason for making addition under Section 68.
In the case of Umacharan Shaw & Bros V CIT (37 ITR 271 SC) it was held by the Hon Supreme Court that " Suspicion can not take the place of proof"
In the case of CIT V Anupam Kapoor (166 Taxmann 178 H C Pun. & Haryana), The Hon 'ble High Court took the same view as decided by Supreme Court in Umacharan Shaw Bros case and applied the same.
It was also held that the addition cannot be made merely on the basis of conjuncture and surmises.
In the case of Dhakeswari Cotton Mills Ltd V CIT 26 ITR 775(SC), The Hon'ble supreme Court made an observation that the Assessing officer is not entitled to make a pure Guess and make an assessment without reference to any evidence or any material at all.
The Delhi Bench of ITAT in Sanjeev Kapoor Case: ITA 2091/De1/2010 dated 29-10-2010 Held It is bit unusual that aperson withdraws cash from Bank in Installments and redeposit the same into Bank without using the cash but still in the absence of any evidence regarding any other use of cash by the assessee, it can not be alleged that such cash was used by the assessee for some other purposes and it was not available with the assessee on the date when the assessee deposited the cash into Bank. There is no evidence brought on record by Ld A 0 in this regard.
The facts in the case of Shrl Sanjeev Chadra ( Supra) were also similar.5 ITA Nos. 1727/H/14
Sri M. Prabhakar In the case of Asst CIT V Baldev Raj Charla & Ors ( 121 TTJ 0366) It was held that "simply because there was a time gap.
explanation of the assessee can not be rejected"
The assessee has deposited the cash in his bank accounts out of cash drawals made in the previous year and the evidence of such withdrawals were shown in his bank Statements which were submitted along with Books of account for the past three years and the assessee has also submitted his wealth tax returns , which includes the cash in hand as at the end of the each previous year.
And the assessee has no other source of Income in India other than the declared income.
The cash deposits are not Cash Credits received from some others and source of such deposits are from his own cash in hand, the order of the learned Assessing officer is contrary to law and facts of the case and may therefore, be set aside and the additions to the extent of Rs 34,70,000/- under Sec 68 deleted.
5. After considering the submissions of the assessee, the CIT(A) decided the issue in favour of the assessee, as under:
4.4 The assessee has deposited the cash in his bank accounts out of cash drawals made in the previous year and the evidence of such withdrawals were shown in his bank Statements which were submitted along with Books of account for the past three years and the assessee has also submitted his wealth tax returns, which includes the cash in hand as at the end of the each previous year. The cash deposits are not Cash Credits received from some others and source of such deposits are from his own cash in hand. The A.O. only on mere assumptions and suspicions had not considered the explanations of the assessee and made the addition ofRs.34.70 lakhs.
4.4.1 I find force in the various contentions of the assessee (vide Point Nos.(l) to (5) in reply to the observations of the A.O. in the assessment order (vide Para.2 (i) to (v), as mentioned above, and fully concur with the assessee's submissions.
4.5 The assessee also relied on the following case-law in support of his contention that mere suspicion by the AO cannot be a valid reason for making addition u/s 68 of the Act.
(i) Umacharan Shaw & Bros vs CIT (37 ITR 271) (SC)
(ii) CIT Vs Anupam Kapoor (166 Taxman l78)(P&H)
(iii) Dhakeswari Cotton Mills Ltd Vs. CIT (26 ITR 775) (SC) 6 ITA Nos. 1727/H/14 Sri M. Prabhakar
(iv) Delhi Bench of ITAT in Sanjeev Kapoor Case: ITA No.209l/Del/20l0 dated 29-10-2010
(v) Asst. CIT Vs Baldev Raj Charla & Others (121 TTJ, 0366) 4.6 I have carefully considered the case-laws cited by the assessee and hold that the same are squarely applicable to the facts of the case. All the above Hon'ble Courts have held that the addition u/s 68 cannot be made merely on suspicion. In the case of the assessee, the A.O. neither brought on record any evidence to establish that the cash withdrawals were spent for some other purpose and that such cash was not available with the assessee as on the date of depositing the same into his Savings Bank Accounts.
The AO has also failed to bring on record any evidence to show that the explanations of the assessee were incorrect. Hence, the observations of the A.O. in the assessment order in Para (2) (i) to (v) were devoid of any merit, reasoning and cannot be accepted.
4.7 In view of my above observations, both on facts and in law, I hold that the addition of Rs.34,70,000 made on mere suspicion cannot be sustained, and hence, delete the addition."
6. Aggrieved by the order of the CIT(A), the revenue is in appeal before us raising the following grounds of appeal:
"(i) The order of the Ld. CIT(A) is erroneous on facts and in law.
(ii) The Ld. CIT(A) erred in deleting the addition of Rs.34.70 lakhs made in the assessment order u/s.68 of the I.T. Act by treating the cash deposits made in the same bank accounts as unexplained cash credits.
(iii) The Ld. CIT(A) erred in stating that the addition made by the assessing officer is merely on suspicion though the Assessing Officer placed reliance on the cumulative effect of the surrounding circumstances stated in the assessment order which clearly establish that the assessee failed to satisfactorily explain the source for the cash deposits made in the bank accounts.
(iv) The Ld. CIT(A) erred in placing reliance on the decisions of the Hon'ble Supreme Court in the cases of Umacharan Shaw & Bros. and Dhakeswari Cotton Mills Ltd. that suspicion cannot take the place of proof though the facts of assessee's case are distinguishable. The Learned CIT(A) ought to have seen that the conclusion reached by the assessing officer regarding the 7 ITA Nos. 1727/H/14 Sri M. Prabhakar assessee's failure to prove the source of the cash deposits in the bank accounts is on the basis of the application of the test of preponderance of probabilities on a proper and cumulative appreciation of the surrounding circumstances.
(v) The Learned CIT(A) ought to have appreciated that the assessee being a non resident in India and resident of Oman could not have held cash of more than Rs.50 lakhs in hand in India from the time cash was withdrawn from the bank accounts during the F.Y. 2007-08 and cash was deposited in bank accounts during the F.Y. 2009-10.
(Vi) The Ld. CIT(A) ought not to have placed any reliance on the books of account showing cash on hand furnished by the assessee in the absence of carrying on any activity of business /profession by the assessee in India requiring such maintenance of books and absence of any evidence that such books were maintained prior to the relevant period also.
(Vii) The Ld CIT(A) ought to have appreciated that the provisions of sec.68 place the onus of proof on the assessee regarding the source of cash credits and that such onus has not been discharged satisfactorily by the assessee. The Ld. CIT(A), consequently, ought not to have held that the assessing officer has not brought any evidence on record that the cash withdrawn from the bank was not available to make deposits in the bank accounts.
(Viii) Any other ground that may be urged at the time of hearing."
7. Ld. DR submitted that the assessee is a NRI deposited cash in ICICI Bank to the extent of Rs. 34.70 lakhs on various dates during the current AY. The contention of the assessee cannot be accepted as the assessee could not have kept so much of cash in hand for the last two years. He has shown proof of withdrawal during the AY 2008- 09 but being a NRI, it is not possible for him to carry so much of cash for last two years in India. He submitted that CIT(A) has wrongly deleted the addition citing this as the addition was made on suspicion whereas the AO has clearly brought on record the circumstances which led to such addition. He relied on the order of AO.
8., Ld. AR agreed that the assessee is a NRI from AY 2008-09 onwards. He brought to our knowledge that in the earlier hearing of this case, the bench has a query that being a NRI, how the assessee 8 ITA Nos. 1727/H/14 Sri M. Prabhakar operated the bank and details of stay in India during this 3 years under consideration. Subsequent to this query, AO has asked information u/s 133(6) for which the assessee has explained that the assessee was in station for 12 days in FY 2007-08, 72 days in FY 2008-09 and 27 days in FY 2009-10. With regard to bank account operation, the assessee submitted that Mr. P. Satyanarayana Reddy has operated the bank in his absence. The AO's letter and Assessee's reply are placed in pages 76 & 77 of paper book. He further submitted that the cash withdrawn earlier was available with the assessee which was utilized to deposit the same in the bank account during the current AY. He submitted the wealth tax return to substantiate this claim.
9. Considered the rival submissions and perused the material facts on record. The assessee has deposited Rs. 34.70 lakhs during this AY and there is sufficient cash available in his possession as per the cash book and Wealth Tax return submitted by the assessee. The mute question before us is whether the cash deposited was coming out of the cash available with the assessee, which was kept by him for last two years. It was not brought on record why he has withdrawn so much of money and what made the assessee to keep such huge money in hand. But, on record, submitted by the assessee, we find that he had sufficient money. Even the AO could not bring any proof that the assessee has in fact utilized or applied the cash withdrawn two years back, except making a remark that there is no possibility of keeping such amount by the assessee being a NRI. He has not brought on record, why he cannot keep so much of cash in hand and no contrary findings were given by him against the submissions of assessee. AO has made the addition merely on conjectures/surmises/suspicion and no proper reasons were given why he cannot keep the cash in hand except the remark of being an NRI. In our view, the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. (supra) has held that the AO cannot complete the assessment purely on guess and without any reference 9 ITA Nos. 1727/H/14 Sri M. Prabhakar to evidence or any material at all. Also in the case of Umacharan Shaw & Brothers (supra), the Apex Court has held that AO cannot complete the assessment merely on suspicion which cannot take the place of proof in these matters. Respectfully following the ratio laid down by the Hon'ble Supreme Court in the said cases, we hold that the AO made the assessment merely on suspicion and without bringing any cogent material on record to establish that assessee cannot keep the cash in his hand being a NRI. Accordingly, we uphold the order of the CIT(A) in deleting the addition of Rs. 34,70,000/- made by the AO and dismiss the grounds raised by the revenue in this regard.
10. In the result, appeal of the revenue is dismissed.
Pronounced in the open court on 11 th November, 2016 Sd/- Sd/-
(P. MADHAVI DEVI) (S. RIFAUR RAHMAN)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Hyderabad, Dated: 11 th November, 2016
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Copy to:-
1) ITO (International Taxation)-1 ,Room No. 347, 3 rd Floor, D Block, Incometax towers, Masab Tank, Hyderabad - 500 004
2) Sri M. Prabhakar, Flat No. 402, Naimisam, Ratnadeep Super Market Road, Srinagar Colony, ,Hyd.
3) CIT(A) - V, Hyderabad 4 DIT (IT & TP), Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File 10 ITA Nos. 1727/H/14 Sri M. Prabhakar D es c ri p t i o n Date Intls S . N o. ds 1. D r af t di c t at ed on S r. P . S . / P . S 2. D r af t pl ac e d be f or e a ut h or S r. P . S / P S D r af t p ro p os ed & pl ac e d b ef o re t h e s e c on d J M/ A M Mem b er 3 4 D r af t di s c us s e d/ a pp r ov e d b y s e c o n d Mem b er J M/ A M 5 A p pr ov e d D r af t c om es t o t he S r . P . S . / P S S r. P . S . / P . S 6. K e pt f or p r o no u nc em e nt on S r. P . S . / P . S . 7. Fi l e s en t t o t h e B e nc h C l erk S r. P . S . / P . S 8 D a t e o n w hi c h f i l e g o es t o t h e H e ad C l e rk 9 D a t e o f D i s p at c h o f o rd e r .