HC upheld additions as assessee failed to prove that sum deposited in bank was from unutilized cash withdrawal

HC upheld additions as assessee failed to prove that sum deposited in bank was from unutilized cash withdrawal

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IT: Where assessee claimed that he withdrew certain amount from his bank account for construction of a building and surplus money, when not required, was redeposited, in same bank account, since assessee failed to produce any bills/vouchers relating to construction, and justify substantial cash withdrawals for meeting construction cost and re-deposits when money was not required, additions under section 68 in respect of amount redeposited was justified

 [2018] 97 taxmann.com 113 (Delhi)

HIGH COURT OF DELHI

Dinesh Kumar Jain

vs.

Principal Commissioner of Income-tax, New Delhi*

SANJIV KHANNA AND CHANDER SHEKHAR, JJ.

IT APPEAL NO. 468 OF 2018
CM NO. 15412 OF 2018 †

AUGUST  8, 2018

Section 68 of the Income-tax Act, 1961 – Cash credit (Bank deposits) – Assessment year 2011-12 – During year, assessee deposited certain amount in his bank account – Assessee submitted that he had an overdraft facility and withdrew certain amount of cash from his bank account for construction of a building and surplus money, when not required, was redeposited in same bank account – Assessing Officer asked for details of construction project report – However, assessee failed to provide any details of cost of construction incurred by him – Even no bills of purchase of construction material or any payment to contractor was produced – Assessee had no evidence at all to explain as to how much amount was incurred in construction of property – Assessee failed to justify substantial cash withdrawals for meeting cost of construction and re-deposited when money was not required – Assessee had conveniently claimed that entire construction expenditure was incurred without bank transaction or bill, vouchers, etc. but this was not plausible – Whether, on facts, Assessing Officer was justified in treating sum redeposited as unexplained cash credit and making addition under section 68 – Held, yes [Paras 6, 7 and 9][In favour of revenue]

FACTS

  • During year, the assessee deposited Rs. 82 lakhs in his joint bank account along with two others. The assessee submitted that the assessee and other joint account holders had an over draft facility and the amounts withdrawn were for construction of a building belonging to the three joint account holders and the surplus money, when not required, was re-deposited.
  • The Assessing Officer rejected explanation of the assessee and made additions of amount of Rs. 82 lakhs to income of the assessee on account of unexplained cash deposits.
  • On appeal, the Commissioner (Appeals) and the Tribunal also upheld the order of the Assessing Officer. The Commissioner (Appeals) on proper appreciation of the facts and material on record, sustained the addition of 1/3rd amount in question under section 69A.
  • On further appeal, the Tribunal also upheld the order of the Assessing Officer and Commissioner (Appeals).
  • On appeal to the High Court:

HELD

 

The Tribunal noted that as regards addition on merit, the Assessing Officer has specifically noted that assessee could not proved at the assessment stage that out of cash withdrawn, some payments have been made to the contractors/suppliers and balance cash in hand has been deposited subsequently. The assessee did not make any cheque payment for construction. The Assessing Officer asked for the details of project report and details furnished to the bank for utilizing the bank loan. However, no details have been filed before Assessing Officer as to how the cash amount have been used in phased manner for construction in the property. The assessee also failed to provide any details of cost of construction incurred by the assessee and others in the property. Even no bills of purchase of material or any payment to contractor have been produced before Assessing Officer. It, therefore, clearly proved that assessee has no evidence at all to explain as to how much amount has been incurred in construction of the property. These facts prove that assessee has no evidence of any amount invested in construction of property in assessment year under appeal because no bills of material purchased have been filed before the authorities below. The assessee did not incur any construction expenditure through banking channel. No details of construction expenses were prepared or filed before Assessing Officer. No details of expenses shown in cash supported by any evidence were filed before the authorities. The assessee later on prepared a cash flow statement and filed before the Commissioner (Appeals) to show the amount of withdrawal, re-deposited and amount used for construction. It would show that from 5-5-2010 to 20-5-2010 assessee has withdrawn Rs.46 lakhs in cash and on 24-5-2010 assessee made re-deposited to Rs. 1 lakh only and used Rs.5 lakhs for construction only. Similarly, on 11-6-2010 assessee has withdrawn Rs. 10 lakhs from the bank but it was not used either for redeposit or for construction purpose up to 30-6-2010 because on 30-6-2010 assessee claimed deposit of Rs.1 lakh only. Similarly, on 29-7-2010 and 30-7-2010, no amount have been withdrawn from the bank but assessee claimed redeposit of Rs.5 lakhs and Rs..2.50 lakhs on both the days as well as claimed Rs.5 lakhs spent for construction. Similarly, from 2-8-2010 to 5-8-2010 assessee has withdrawn Rs.30 lakhs from the bank but claimed construction expenses of Rs.5 lakhs only on 5-8-2010. Thereafter, from 7-8-2010 to 18-8-2010,there is no withdrawal from the bank but assessee made deposits of Rs.34.50 lakh in cash in the bank account. This position is going on for the entire year. The assessee has not filed any explanation about the discrepancy in the cash flow statement. It is not explained when huge cash amount have been withdrawn, why only part amount have been used for construction and if sufficient cash was available to assessee on prior dates, why there is again huge cash withdrawal on subsequent dates without incurring any expenditure on construction. Therefore, cash flow statement is wholly unreliable and full of doubts. The cash flow statement would not prove any nexus between the withdrawals of the cash account from the bank and redeposit as claimed by the assessee. The totality of the facts and circumstances clearly prove that assessee failed to explain deposit of huge cash in the joint bank account to the satisfaction of the authorities below. Therefore, the Tribunal held that the authorities below rightly rejected the contention of the assessee that amount is redeposited after making withdrawal from the same bank account. The Commissioner (Appeals) on proper appreciation of the facts and material on record, correctly sustained the addition of 1/3rd amount in question under section 69A. [Para 6]
The cash flow statement provided by the assessee reveals that huge amounts were withdrawn in cash on different dates. Rs.36 lakh was withdrawn by way of three bearer cheques of Rs.12 lakh each on 5-5-2010 and Rs.25 lakh was withdrawn in cash by way of three bearer cheques on 5-8-2010. On 16-11-2010, Rs.10 lakhs was deposited in cash and on the same day Rs.10 lakhs was withdrawn by way of two bearer cheques of Rs.5 lakh each. Rs.10 lakh was withdrawn in cash on 20-5-2010, 11-6-2010 and 16-11-2010. Withdrawals were substantial and on many occasions there were three withdrawals, i.e., as many as or equal to number of account holders. [Para 7]
On being questioned, the appellant assessee had stated that the overdraft account was separate and different from the joint account from which withdrawal and deposits were made. It is strange that deposits were not made in the overdraft account so as to reduce liability to pay interest. However, one need not base decision on the said reason. [Para 8]
Incongruities in the cash flow statement with reference to the quantum and dates of withdrawal and deposit and failure to produce any bills/vouchers and the accounts relating to construction, to verify and justify substantial cash withdrawals of Rs.1.82 crores during the entire year for meeting cost of construction and re-deposits of Rs.82 lakh when money was not required, it is apparent dig holes and exposes the concocted explanation. The assessee had conveniently claimed that entire construction was without any bank transaction or bill, vouchers, etc. This is not plausible. Facts on record are glaring and one-sided. It is obvious that the bills of purchases, payments made to contractor etc. and the accounts relating to construction were held back, as they would have revealed the truth and would not have supported the already weak and tenuous explanation of the appellant-assessee. The reasoning given by the Tribunal is not perverse. It is based and founded on the evidence and material on record. [Para 9]

CASES REFERRED TO

Uganda Industries Co. v. CIT [1986] 29 Taxman 226/158 ITR 567 (Guj.) (para 5) and Sona Electric Co. v. CIT [1984] 19 Taxman 160/[1985] 152 ITR 507 (Delhi) (para 5).

C.S. Aggarwal, Sr. Adv. and Prakash Kumar, Adv. for the Appellant. Raghvendra Singh, Adv. for the Respondent.

JUDGMENT

 

Sanjiv Khanna, J. – The present appeal under Section 260A of the Income Tax Act, 1961 has been filed by the legal heirs of Late Dinesh Kumar Jain.

  1. The appeal impugns the order dated 16.10.2017 passed by the Income Tax Appellate Tribunal in ITA No.3612/Del/2016 and relates to Assessment Year 2011-2012.
  2. The impugned order upholds addition of Rs.27,33,333/- made by the Assessing Officer and affirmed by the Commissioner of Income Tax (Appeals) on account of unexplained cash deposits of Rs.82,00,000/- made on different dates in the joint bank account of the appellant-assessee along with two others.
  3. Factum that Rs.82,00,000/- was deposited in cash in the joint bank account on different dates is not disputed and under challenge.
  4. Appellant has drawn our attention to the cash flow chart, enclosed as annexure-4 to the appeal, and submits that Rs.1,52,00,000/- was withdrawn in cash from the joint bank account on different dates between 3.5.2010 till 4.1.2011. Rs.82,00,000/- was deposited in cash on different dates between 24.5.2010 till 31.1.2011.. Revenue, it is argued, accepts that the appellant and other joint account holders had an over draft facility and the amounts withdrawn were for construction of a building belonging to the three joint account holders and the surplus money, when not required, was re-deposited. Findings of the Income Tax Appellate Tribunal in not accepting the explanation of the appellant are perverse. Our attention is drawn to the judgment of the Gujarat High Court in Uganda Industries Co.v. CIT [1986] 29 Taxman 226/158 ITR 567 and decision of this Court in Sona Electric Co. v. CIT [1984] 19 Taxman 160/[1985] 152 ITR 507(Delhi).
  5. The Income Tax Appellate Tribunal, in the impugned order, has rejected the aforesaid explanation, recording as under:—

“6. We have considered the rival contentions and do not find any merit in this ground of appeal of assessee. It is well settled law that Ld. CIT(A) being the First Appellate Authority has co-terminus powers to that of A.O. Merely because wrong section is mentioned in the assessment order, is no ground to delete the addition. There is a cash deposit in the joint bank account maintained by assessee and others, the source of which is not explained. Therefore, provisions of Section 69/69A are clearly attracted in this case. The Ld. CIT(A) has already taken care of this issue and applied Section 69A of the I.T.Act while confirming the addition on merit. The Hon’ble Allahabad High Court in the case of Jauhari Mal Goel 201 CTR 54 (.All.) held that deposit in the bank account would amount to investment under section 69 of the I. T. Act. Therefore, there is no merit in the contention of the Learned Counsel for the Assessee that no addition could be made on account of cash deposited in the bank account of assessee and others. The contention of the Learned Counsel for the Assessee is, therefore, rejected.

  1. As regards addition on merit, the A.O. has specifically noted that assessee could not proved at the assessment stage that out of cash withdrawn, some payments have been made to the contractors/suppliers and balance cash in hand has been deposited subsequently. The assessee did not make any cheque payment for construction. The A.O. asked for the details of project report and details furnished to the bank for utilizing the bank loan. However, no details have been filed before A.O. as to how the cash amount have been used in phased manner for construction in the property.. The assessee also failed to provide any details of cost of construction incurred by the assessee and others in the property. Even no bills of purchase of material or any payment to contractor have been produced before A.O. It, therefore, clearly proved that assessee has no evidence at all to explain as to how much amount has been incurred in construction of the property. These facts prove that assessee has no evidence of any amount invested in construction of property in assessment year under appeal because no bills of material purchased have been filed before the authorities below. The assessee did not incur any construction expenditure through banking channel. No details of construction expenses were prepared or filed before A.O. No details of expenses shown in cash supported by any evidence were filed before the authorities below. Assessee later on prepared a cash flow statement and filed (copy of which is filed at page-10 of the paper book) before the Ld. CIT(A) to show the amount of withdrawal, re-deposited and amount used for construction. It would show that from 5th May, 2010 to 20th May, 2010 assessee has withdrawn Rs.46 lakhs in cash and on 24th May, 2010 assessee made re-deposited to Rs. 1 lakh only and used Rs.5 lakhs for construction only. Similarly, on 11th June, 2010 assessee has withdrawn Rs. 10 lakhs from the bank but it was not used either for redeposit or for construction purpose up to 30th June, 2010 because on 30th June, 2010 assessee claimed deposit of Rs.1 lakh only. Similarly, on 29th July, 2010 and 30th July, 2010, no amount have been withdrawn from the bank but assessee claimed redeposit of Rs.5 lakhs and Rs.2,50,000 on both the days as well as claimed Rs.5 lakhs spent for construction. Similarly, from 2nd August, 2010 to 5th August, 2010 assessee has withdrawn Rs.30 lakhs from the bank but claimed construction expenses of Rs.5 lakhs only on 5th August, 2010. Thereafter, from 7th August, 2010 to 1 8 t h August, 2010,there is no withdrawal from the bank but assessee made deposits of Rs.34,50,000 in cash in the bank account. This position is going on for the entire year. The assessee has not filed any explanation about the discrepancy in the cash flow statement. It is not explained when huge cash amount have been withdrawn, why only part amount have been used for construction and if sufficient cash was available to assessee on prior dates, why there is again huge cash withdrawal on subsequent dates without incurring any expenditure on construction. Ld. D.R. therefore, rightly contended that cash flow statement is wholly unreliable and full of doubts. The cash flow statement would not prove any nexus between the withdrawals of the cash account from the bank and redeposit as claimed by the assessee. The totality of the facts and circumstances clearly prove that assessee failed to explain deposit of huge cash in the joint bank account to the satisfaction of the authorities below. The authorities below therefore, rightly rejected the contention of the assessee that amount is redeposited after making withdrawal from the same bank account. The Ld. CIT(A) on proper appreciation of the facts and material on record, correctly sustained the addition of 1/3rd amount in question under section 69A of the I.T. Act. Considering the findings of the authorities below in the light of above discussion, the decisions of various Benches of the Tribunal relied upon by the Learned Counsel for the Assessee, would not support the case of the assessee. This ground of appeal is accordingly dismissed.”
  2. Cash flow statement filed before us as annexure-4 and relied upon by the appellant-assessee is reproduced hereunder:—
S. No. Date Amount Withdrawn (Rs.) Utilisation of cash withdrawn Balance (Rs.)
Re-deposit Used for Total
1. 3.5.2010 5,00,000 5,00,000 5,00,000
2. 4.5.2010 8,00,000 8,00,000 8,00,000
3. 5.5.2010 12,00,000 12,00,000
4. 5.5.2010 12,00,000 24,00,000
5. 5.5.2010 12,00,000 36,00,000
6. 20.5.2010 10,00,000 46,00,000
7. 24.5.2010 1,00,000 5,00,000 6,00,000 40,00,000
8. 11.6.2010 10,00,000 50,00,000
9. 30.6.2010 1,00,000 1,00,000 49,00,000
10. 30.6.2010 5,00,000 5,00,000 5,00,000 49,00,000
11. 29.7.2010 5,00,000 5,00,000 10,00,000 39,00,000
12. 30.7.2010 2,50,000 2,50,000 36,50,000
13. 2.8.2010 5,00,000 41,50,000
14. 5.8.2010 9,00,000 50,50,000
15. 5.8.2010 8,00,000 58,50,000
16. 5.8.2010 8,00,000 5,00,000 5,00,000 61,50,000
17. 7.8.2010 6,50,000 6,50,000 55,00,000
18. 7.8.2010 8,00,000 8,00,000 47,00,000
19. 10.8.2010 5,00,000 5,00,000 42,00,000
20. 17.8.2010 9,00,000 9,00,000 33,00,000
21. 18.8.2010 9,00,000 9,00,000 24,00,000
22. 18.8.2010 6,00,000 30,00,000
23. 20.8.2010 6,00,000 6,00,000 24,00,000
24. 1.9.2010 9,00,000 5,00,000 14,00,000 10,00,000
25. 16.11.2010 10,00,000 10,00,000
26. 16.11.2010 5,00,000 5,00,000 5,00,000
27. 16.11.2010 5,00,000 5,00,000 5,00,000
28. 18.11.2010 5,00,000 5,00,000 5,00,000
29. 18.11.2010 5,00,000 5,00,000 5,00,000
30. 18.11.2010 5,00,000 5,00,000 5,00,000
31. 3.1.2011 7,00,000 7,00,000 7,00,000
32. 4.1.2011 5,00,000 5,00,000
33. 4.1.2011 5,00,000 10,00,000
34. 31.1.2011 5,00,000 5,00,000 5,00,000
35. 31.1.2011 5,00,000 5,00,000
36. 9.2.2011 5,00,000 5,00,000 5,00,000
37. 23.2.2011 5,00,000 5,00,000 5,00,000
38. 1.3..2011 5,00,000 5,00,000 5,00,000
39. 2.3.2011 5,00,000 5,00,000 5,00,000
40. 7.3.2011 5,00,000 5,00,000 5,00,000
41. 11.3.2011 5,00,000 5,00,000 5,00,000
182,00,000 82,00,000 1,00,00,000 182,00,000

The aforesaid statement reveals that huge amounts were withdrawn in cash on different dates. Rs.36,00,000/- was withdrawn by way of three bearer cheques of Rs.12,00,000/- each on 05.05.2010 and Rs.25,00,000/- was withdrawn in cash by way of three bearer cheques on 05.08.2010. On 16.11.2010, Rs.10,00,000/-was deposited in cash and on the same day Rs.10,00,000/- was withdrawn by way of two bearer cheques of Rs.5,00,000/- each. Rs.10,00,000/- was withdrawn in cash on 20.5.2010, 11.06.2010 and 16.11.2010. Withdrawals were substantial and on many occasions there were three withdrawals, i.e., as many as or equal to number of account holders.

  1. On being questioned, learned Senior Advocate for the appellant-assessee had stated that the overdraft account was separate and a different from the joint account from which withdrawal and deposits were made. We find it strange that deposits were not made in the overdraft account so as to reduce liability to pay interest. However, we need not base our decision on the said reason.
  2. Incongruities in the cash flow statement with reference to the quantum and dates of withdrawal and deposit and failure to produce any bills/vouchers and the accounts relating to construction, to verify and justify substantial cash withdrawals of Rs..1,82,00,000/- during the entire year for meeting cost of construction and re-deposits of Rs.82,00,000/- when money was not required, it is apparent dig holes and exposes the concocted explanation. The appellant-assessee had conveniently claimed that entire construction was without any bank transaction or bill, vouchers, etc. This is not plausible. Facts on record are glaring and one-sided. It is obvious that the bills of purchases, payments made to contractor etc. and the accounts relating to construction were held back, as they would have revealed the truth and would not have supported the already weak and tenuous explanation of the appellant-assessee. The reasoning given by the Income Tax Appellate Tribunal is not perverse. It is based and founded on the evidence and material on record.
  3. The decisions relied upon by the learned Senior Counsel for the appellant-assessee, pertain to factual matrix in the two cases. Aforesaid decisions do not lay down an affirmative legal ratio which would be of assistance and help to the appellant-assessee in the facts of the present case.
  4. The appeal has no merit and the same is dismissed, as raising no substantial question of law. Pending application is also dismissed.

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