IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH

ITA No. 180/Chd/2013 Assessment Year: 2008-09
ITO Ludhiana (Appellant) vs Ashok Kumar Jain (Respondent)
Date of Order : 03-11-2015

ORDER

PER H.L.KARWA, VP

 This appeal filed by the Revenue is directed against the order of CIT(A) - II, Ludhiana dated 10.12.2012 relating to assessment year 2008-09. In this appeal the Revenue has challenged the action of CIT(A) in deleting the addition of Rs. 19,60,000/-

2. Briefly stated, the facts of the case are that assessee is an individual and he submitted his return of income declaring a total income of Rs. 93,959/- which included salary income, rental income and interest on deposits. During the assessment year under consideration, the assessee deposited a sum of Rs. 19.60 lakhs on different dates in cash with ICICI bank, Ludhiana. The Assessing officer required the assessee to explain the source of deposits in the said bank. In response to the said query, the assessee submitted following documents:-
a) Copy of balance sheet alongwith assets and liabilities as on 31.3.2007
b) Copy of balance sheet alongwith assets and liabilities as on 31.3.2008
c) Copy of cash flow statement showing cash available as on 1.4.2007, deposits during the period 2.4.2007 to 31.3.2008, withdrawals made for the period 1.4.2007 to 31.3.2008 and cash available as on 31.3.2008.
d) Narration of all entries either on the credit side or on the debit side of the cash flow statement.
e) Narration of all entities with ICICI Bank, Ludhiana

The Assessing officer while framing the assessment, has nowhere discussed about the above documentary evidence furnished by the assessee and added a sum of Rs. 19.60 lakhs as income from undisclosed sources.

3. On appeal, the CIT(A) deleted the addition, observing as under:-

“As per the cash flow statement submitted by the appellant, the cash-in-hand available with the appellant as on 31.03.2007 was Rs. 13,48,638/-. In this regard the appellant had submitted that he had taken a loan of Rs.20.00 lacs from Centurion Bank of Punjab against mortgage of residential house owned by the appellant. Out of this loan of Rs.20.00 lacs the appellant had withdrawn Rs. 12,25,000/- on 05.02.2007. Further, as per the submissions of the appellant he had withdrawn an amount of Rs. 1,25,000/- on 13.12.2006. The total amount withdrawn on these two dates was Rs. l3,50,000/- out of which the appellant claimed that Rs. 13,48,638/-was lying with him as cash-in-hand on 31.03.2007. The AO in his report dated 23.07.2012, has not disputed this fact that the appellant had taken a loan of Rs.20.00 lacs. In these circumstances the source of cash available with the appellant on 01.04.2007 amounting to Rs.13,48,638/- stands fully explained. The Assessing officer’s contention that the appellant has shown cash-in-hand at almost 21 times is therefore, not correct. . The cash available on 01.04.2007 being out of cash withdrawals from the loan taken by the appellant have been duly explained by the appellant along with the evidences for the same.

4.7 As per the cash flow statement submitted by the appellant, the appellant had withdrawn "various amounts in the month of May and June, 2007 from his bank accounts and the total cash available with him as on 01.07.2007 was Rs.17,34 6387-. The AO in his report dated 23.07.2012, has not pointed out any discrepancy with regard to these claims of the appellant regarding the withdrawals from the bank accounts. As per the cash flow statement submitted by the appellant the cash deposits of Rs. 16.50 lacs was made out of aforesaid cash available during the months of July and August, 2007. A further deposit of Rs. 2.00 lacs made in the month of October, 2007 and after some minor adjustments the total cash available on 1M November, 2007 was Rs. 50,004/-. As per cash flow statement small amounts were withdrawn and deposited thereafter from the bank accounts of the appellant. The cash deposits in the bank accounts of the appellant therefore stand fully explained and the _AO was not justified in holding that the appellant had not discharged his onus to explain the source of these deposits. As discussed above the copy of bank accounts, cash flow statement and the Balance sheet as on 31.03.2007 and 31.03.2008 were duly filed before the AO. All the entries in the cash flow statement were duly recorded from the bank accounts and represented the various cash withdrawals and cash deposits made by the appellant after availing a bank loan of Rs.20.00 lacs.

4.8 The AO in his report dated 23.07.2012, has observed that the appellant had made need based cash withdrawals from his bank accounts and the subsequent withdrawals was made only after the withdrawal made earlier had been utilized by the appellant. This observation of the AO is without any basis. The appellant is at liberty to withdraw cash from his bank accounts as per his own plans and requirements. Merely because cash was withdrawn on a particular date also does not imply that the cash already withdrawn on earlier dates had been utilized. The AO has pointed out that in case the appellant was actually having cash-in-hand of Rs.13,48,638/- as on 01.04.2007, there was hardly any reason for making further cash withdrawals. This observation of the AO is based on conjectures and surmises and is without any basis. The appellant had explained during the course of assessment proceedings that cash was withdrawn with the intention to buy some property. The actual amount of cash required by the appellant in these circumstances would be known to the appellant only. There is no bar in keeping the cash at home according to requirements.

4.9 The Assessing officer has also referred to the fact that the cash deposits in the bank accounts were mede on various dates from June to November, 2007. The AO has also held that cash amounting to Rs. 17,44,004/- was available on 11.07.2007 and if it was not required by the appellant the same should have been deposited in the bank in one go rather than in parts from 14.07.2007 to 15.11.2007. Perusal of the cash flow statement reveals that out of the cash available of Rs. 17,44,004/- on 11.07.2007 deposits of Rs.16.50 lacs were made on 13.07.2007, 31.07.2007 and 07.08.2007 i.e. within the period of 25 days. Thereafter the total amount of cash deposits and withdrawals are not very significant. This observation of the AO is also without any basis.

4.10 The AO also pointed out that the appellant gave interest free loans of Rs.10.00 lacs and Rs.5.00 lacs to Smt. Kamla Jain on 01.08.2007 and 09.08.2007. Smt. Kamla Jain is sister of the appellant and the appellant was free to give any amounts of loan to his sister with or without interest. This does not in any way make the source of cash deposits in. bank accounts unexplained.

4.11 From the facts discussed above, I am of the considered view that the cash deposits in the bank accounts by the appellant stand fully explained from the cash withdrawals made by the appellant out of the loan of Rs.20.00 lacs taken by him in February, 2007. The cash withdrawals and the subsequent cash deposits in the bank accounts pertained to the period February, 2007 to October, 2007 and' the appellant has duly discharged the onus lying on him to explain the source of cash deposits. The addition made by the AO is therefore deleted and these grounds of appellant are accordingly allowed”

4. We have heard the rival submissions and have perused also the materials assailable on record. Shri Sudhir Sehgal Ld. Counsel for the assessee submitted that Assessing officer while completing the assessment had totally overlooked the details of cash in hand available with the assessee as per balance sheet as on 31.3.2007. He further pointed out that regular books of accounts are being maintained by the assessee and all the entries of cash withdrawals and cash deposits are duly recorded in the cash ledger account. He further pointed out that the returns are being filed on the basis of books of account even in the earlier years. As per the balance sheet, the cash in hand available with the assessee on 31.3.2007 was Rs. 13,48,638/-. It is stated that the cash available on the aforesaid date was out of withdrawals made from ICICI bank wherein the deposits before withdrawals were made after taking loan of Rs. 20 lakhs from Centurion bank of Punjab against mortgage of residential house owned by the assessee. As regards the propose of withdrawals, it was explained that cash was withdrawn with the intention to buy some property and since the property was not purchased upto 31.3.2007, the cash was available with the assessee. Finally, the assessee deposited the same in the bank account during the year under consideration. It is relevant to observe here that Ld. CIT(A) has given the details of withdrawals and deposits in the impugned year. As per cash flow statement submitted by the assessee before the lower authorities, it is evident that assessee has withdrawn amounts on various dates in the month of May and June 2007 from his bank account and the total cash available with him as on 1.7.2007 was Rs. 17,34,638/-. It is also apparent from the records that the Ld. CIT(A) has called for a remand report from the Assessing officer and the Assessing officer in his report dated 23.7.2012 did not point out any discrepancy with regards to the assessee’s contention regarding the withdrawals from the bank account. The Ld. CIT(A) has categorically stated that the copy of the bank account, cash flow statement and the balance sheet as on 31.3.2007 and 31.3.2008 were submitted before the Assessing officer. All the entries in the cash flow statement were duly recorded from the bank accounts and represented the various cash withdrawals and cash deposits made by the assessee after availing the bank loan of Rs. 20 Lakhs. The Ld. CIT(A) has also rejected this contention of the Assessing officer that the assessee had made need based cash withdrawals from his bank account. Subsequent withdrawals were made only after the withdrawals made earlier had been utilized by the assessee. According to CIT(A), merely because cash was withdrawn on a particular date also does not imply that the cash already withdrawn on earlier dates had been utilized. We fully endorse the above view of the CIT(A). The Assessing officer has made the observation that in the case the assessee was actually having cash in hand of Rs. 13,48,638/- as on 1.4.2007, there was hardly any reason for making further cash withdrawals. The Ld. CIT(A) has correctly held that this observation of the Assessing officer is without any basis. The Ld. CIT(A) further observed that assessee had explained during the course of assessment proceedings that cash was withdrawn with the intention to buy some properly. The Ld. CIT(A) has categorically observed that actual amount of cash required in these circumstances would be known to the assessee only. He has also stated that there is no bar in keeping the cash at home according to requirements. Thus, observations of the Ld. CIT(A) are correct and, therefore, we do not see any infirmity in the order of the CIT(A). The question involved in this case is of facts and the Ld. CIT(A) has correctly appreciated the facts of the case and decided the issue correctly. In view of the above discussion, we do not find any merit in the appeal filed by the Revenue and accordingly we dismiss the same.

5. In the result, appeal of the Revenue is dismissed. Order pronounced in the Open Court on 03.11.2015.

Sd/-                                                               Sd/-
(RANO JAIN)                                        (H.L.KARWA)
ACCOUNTANT MEMBER                    VICE PRESIDENT