Nobody would withdraw cash and keep it idle for a long period – ITAT uphold addition for cash deposit
In a recent judgment, the ITAT Surat has rejected the cash withdrawal made one year prior as source of cash deposit in bank holding that it cannot be accepted because nobody would withdraw the amount and keep it idle for such a long period.
ABCAUS Case Law Citation:
4268 (2024) (10) abcaus.in ITAT
Important Case Laws relied upon:
CIT vs. Rohini Builders (2002) 256 ITR 360 (Guj)
In the instant case, the assessee had challenged the order passed by the DRP directing Assessing Officer to treat the cash deposit in bank account as unexplained income u/s 69A of the Income Tax Act, 1961 (the Act).
The appellant assessee was a non resident and had not filed original return of income for the Assessment Year in question. As per information in the INSIGHT Portal, the assessee had entered into the high value transactions in her NRO account.
The case was reopened u/s 148 of the Act after recording the reasons and notice u/s 148 of the Act was issued. The AO inquired into the total credit in the ICICI NRO bank account and issued the draft assessment order u/s 144C of the Act by making an addition on account of unexplained income u/s 69A of the Act.
Aggrieved with the proposed addition, the assessee filed objection before the Dispute Resolution Panel (DRP). The DRP passed order u/s 144C(5) of the Act after hearing the assessee. The DRP held that there had been failure to explain
the source of deposit (so-called unsecured loan from relative). It was observed that the said relative lacked in creditworthiness and had not filed any ITR for the relevant assessment year. The DRP also agreed with the findings of the AO that the source of cash deposit was unexplained.
The contention of the assessee that the past cash withdrawals are source of the cash deposits was held to be an explanation of convenience.
Before the Tribunal the assessee contended that the AO had wrongly stated that the relative/lender was not assessed to tax although the DRP in their direction had referred to the ITR acknowledgement of the relative. It was stated that the lender being non-resident was not liable to file ROI as the entire income was exempt u/s 10(38) of the Act. The assessee relied on the decision of Hon’ble jurisdictional High Court wherein it was held that no substantial question of law arises where assessee established identity of creditors by giving their complete address, GIR numbers/PAN as well as confirmation along with copies of assessment orders wherever available. The SLP filed by revenue against this decision had also been rejected.
It was also contended that the assessee was a non-resident and in case of non-resident the taxability is only on income accrued or arise in India or deemed to accrue or arising in India. The Courts have held that the provisions of Section 68, 69 or 69A have limited application in case of non-resident unless the Revenue proves that the income falls within the ambit of Section 5(2). The AO had not pinpointed any business activity or other source from which assessee could have earned income in India. For this, reliance was placed on the judgement wherein it was held that the income of the non-resident is chargeable under Section 5(2) and the provisions of Section 68 cannot override the provisions of Section 5(2). Taxability of non-resident can be seen only under Section 5(2) and the provision of Section 69 could not be pressed into service since such provisions do not override the provisions of Section 5(2).
The Tribunal noted that undisputedly the assessee had received amount in her NRO Bank Account from the said relative and the said relative had received the amount from share broker. The assessee had also submitted the broker transactions statement along with contract notes for the credit entries in the hands of the relative. The assessee also furnished Demat Id of the relative and STT was paid on the transaction entered, copy of PAN, confirmation of loan account, bank statement, acknowledgment of return of income and form 26AS was also furnished. Thus, assessee proved the identity, genuineness and creditworthiness of the lender for the loan from relative. Following the decision of the Gujarat High Court the Tribunal deleted the addition made in this respect.
The next addition pertained to addition u/s 69A of the Act being cash deposit in the bank account of assessee. The DRP observed that during the year the assessee had not done any business. Since cash on hand earns no income, a reasonable person would deposit the cash in the bank account and earn interest. The DRP also observed that the issue of credit has to be considered in the light of human probabilities. It held that the claimed cash book of assessee was bogus. The cash withdrawals used in the past was for specific purposes for which the withdrawals were made. The present explanation of assessee was just an explanation of convenience. In view of the above, direction of the DRP, the AO added the cash deposit u/s 69A of the Act.
The assessee submitted that the cash deposited in bank account of the assessee was out of cash on hand available with the assessee. This was supported by cash summary on which the AO could not find any defect. It was also submitted that the cash balance was built by withdrawal of cash from bank account of the assessee and the said cash was re-deposited in bank account.
It was contended that the AO had not brought any material on record that assesses had spent/incurred such amount withdrawn from bank elsewhere. Hence, the cash re-deposited out of cash in hand due to cash withdrawal from bank gets explained. For such contention, the assessee placed reliance on the decision of Co-ordinate Bench.
The Tribunal observed that there were two occasions of cash withdrawals which was only two months prior to the cash deposit. Since the assessee had withdrawn cash within a short period of two months before the deposit, the explanation of the assessee regarding cash deposit of to that extent was accepted.
However, the Tribunal opined that the cash withdrawals of the earlier period which were more than one year prior to deposit cannot be accepted because nobody would withdraw the amount and keep it idle for such a long period.
Accordingly, the addition was partly deleted and partly upheld.
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