Addition under section 68 for cash deposit in bank account out of opening balance

Short Overview : As assessee had duly proved source of cash deposit in her bank account to be opening cash balance and gift from her parents, no addition could be made under section 68.

AO required assessee to explain cash deposits amounting to Rs. 13 lakhs in her bank account. Assessee filed cash book showing opening cash balance of Rs. 11 lakhs and gift of Rs. 2 lakhs received during the year from her parents. Also, assessee filed gift deeds and tax returns of donors. AO did not accept the same and made addition under section 68. \

it is held that  assessee had shown availability of cash of Rs. 11 lakhs in the books of account being opening cash balance as on 1-4-2010. The said cash was also closing cash balance as on 31-3-2010 in balance sheet. AO was very well aware of the fact that Rs. 11 lakhs was stated to have been introduced in books during the earlier assessment year and, therefore, if said claim of assessee was not acceptable then proper course of action was to make addition under section 68 in the relevant assessment year in which said cash was introduced in books and not in the year under consideration when it was shown as opening cash balance. Hence, to the extent of availability of cash of Rs. 11 lakhs being opening cash balance which was duly reflected in books of assessee for the year under consideration as well as in earlier year, addition under section 68 could not be sustained. Also, assessee had discharged onus of proving identity and creditworthiness of donors and genuineness of gift of Rs. 2 lakhs. Therefore, in the fact and circumstances of case, addition made by AO of Rs. 13 lakhs was deleted.

Decision: In assessee’s favour.

Referred: Smt. Manju Devi Nawal v. Asstt. CIT 34 TaxWorld 253 (Jp) and ITO v. Smt. Vimla Devi, 34 TaxWorld 151 (Jd).

IN THE ITAT, JAIPUR BENCH

VIJAY PAL RAO, J.M. & VIKRAM SINGH YADAV, A.M.

Pinki Devi Agarwal v. ITO

ITA No. 515/JP/2018

16 January, 2019

Assessee by: S.L. Poddar, Advocate

Revenue by: J.C. Kulhari, JCIT

ORDER

Vijay Pal Rao, J.M.

This appeal by the assessee is directed against the Order, dated 15-3-2018 of learned Commissioner (Appeals)-2, Jaipur for the assessment year 2011-12. The assessee has raised the following grounds :–

“1. Under the facts and circumstances of the case the learned Commissioner (Appeals) has erred in confirming the addition of Rs. 13,82,626 on account of cash deposited in bank.

2. Under the facts and circumstances of the case the learned Commissioner (Appeals) has erred in confirming the addition of Rs. 2,14,050 on account of disallowance of plot registration expenses incurred out of opening cash balance.
3. The assessee craves your indulgence to add amend or alter all or any grounds of appeal before or at the time of hearing.”

Ground No. 1 is regarding addition made on account of cash deposited in the bank account.

2. The assessee is an individual and earning income from business and other sources. The assessee filed her return of income on 12-1-2012 declaring total income of Rs. 2,54,887. In the scrutiny assessment, the assessing officer noted that there is a cash deposit of Rs. 16,81,000 in the two bank accounts of the assessee, the details of which are as under :–
3. AXIS bank account No. 910010013887284.

Date	Amount of cash deposit
23-4-2010	6000
30-4-2010	3,97,000
11-5-2010	2,000
21-7-2010	5,00,000
21-7-2010	1,000
4-9-2010	1,80,000
13-9-2010	15,000
9-11-2010	50,000
TOTAL	11,51,000

2. HDFC bank account No. 03482000005378.

Date	Amount of cash deposit
6-4-2010	95,000
12-4-2010	60,000
3-5-2010	2,00,000
10-5-2010	1,00,000
11-5-2010	75,000
TOTAL	5,30,000

The assessing officer asked the assessee to explain the source of cash deposit in the bank accounts. In response, the assessee produced the cash book showing opening cash balance of Rs. 11,32,626 and gifts received during the year of Rs. 2,50,000. The assessing officer did not accept the explanation of the assessee and after allowing the benefit of cash withdrawal from the bank account of Rs. 1,50,000, the assessing officer made the addition of Rs. 13,82,626 to the total income of the assessee as unexplained cash deposit in the bank accounts of the assessee. The assessee challenged the action of the assessing officer before the learned Commissioner (Appeals) and contended that when the assessee has shown the source of the cash deposit in the bank account as opening balance as well as gifts received from the family members, then the addition made by the assessing officer is not justified. The assessee has explained that the assessee deposited the cash in bank account for the purpose of purchasing a house property which was purchased by utilizing the said amount from the bank account. The learned Commissioner (Appeals) was not impressed with the explanation of the assessee and confirmed the disallowance/addition made by the assessing officer on this account.

3. Before us, the learned A.R. of the assessee has submitted that once the assessee is regularly assessed to tax and filing the return of income and opening cash balance is duly reflected in the books of account as on 1-4-2010, then the source of cash deposit in the bank account cannot be rejected by the assessing officer without rejecting the books of accounts of the assessee. The learned A.R. has further contended that once the books of account of the assessee are not rejected by the assessing officer, then the cash which is shown in the books of accounts is an explained source for deposit made in the bank account. He has referred to the return of income filed for the assessment years 2009-10 and 2010-11 along with the computation of income, balance sheet and submitted that as per the balance sheets of assessment years 2009-10 and 2010-11, the assessee was having the cash balance as on 31-3-2010 of Rs. 11,32,626 which was shown as opening balance as on 1-4-2010. Therefore, the said amount of cash which is part of the books of account cannot be rejected. As regards the gift of Rs. 2,50,000, the learned A.R. has submitted that the said amount was received by the assessee as gifts from her mother Smt. Santosh Devi Agarwal (Rs. 1,50,000) and father Shri Mali Ram Agarwal (Rs. 1,00,000) vide gift deeds dated 10-5-2010 and 12-8-2010 respectively. The learned A.R. has also referred to the gift deed dated 10-5-2010 and submitted that the mother has also mentioned the PAN as well as she was also assessed to income tax. Therefore, when the mother of the assessee is donor of Rs. 1,50,000 and regularly assessed to tax, then the amount of Rs. 1,50,000 given as gift to the assessee cannot be denied. The learned A.R. has also referred to the Gift deed dated 12-8-2010 whereby the father of the assessee Shri Mali Ram Agarwal also stated to have gifted Rs. 1,00,000 to the assessee. Hence, the learned A.R. has submitted that the assessee had duly explained the source of deposit made in the bank account of the assessee being opening cash balance of Rs. 11,32,626 as on 01-4-2010 and gift of Rs. 2,50,000 out of which Rs. 1,50,000 from mother and Rs. 1,00,000 from father of the assessee. All these documents were filed before the assessing officer, however, the learned Commissioner (Appeals) has misunderstood the fact and referred that the gift deeds were not filed before the assessing officer while rejecting the claim of the assessee. He has also referred to the reply filed by the assessee before the assessing officer as well as learned Commissioner (Appeals) and submitted that the assessee has discharged her onus by producing the supporting evidence of source of the cash deposit in the bank account. Since the assessee had to purchase the house property, therefore, the assessee has deposited this amount in the bank account during the year under consideration. In support of his contention, he has relied upon the decision of Coordinate Bench of this Tribunal in the case ofSmt. Manju Devi Nawal v. ACIT, 34 TaxWorld 253 (Jp) as well as the decision of Jodhpur Bench of the Tribunal in the case of ITO v. Smt. Vimla Devi, 34 TaxWorld 151 (Jd). Thus the learned AR has submitted that without pointing out any defect or mistake in the books of accounts as well as the evidence filed by the assessee, the addition made by the assessing officer is not sustainable and the same may be deleted.
4. On the other hand, the learned D/R has submitted that the assessing officer as well as the learned Commissioner (Appeals) has analyzed all the facts as well as the evidence produced by the assessee and found that all these evidences produced by the assessee cannot be verified from the independent source and these are self-serving documents. All the sources of deposits have been shown in cash. Even the gifts are also claimed to have been received in cash. Hence none of the transactions of source of cash deposit made in the bank accounts is through banking channel but all are claimed to have been in cash. He has relied upon the orders of the authorities below.
5. We have considered the rival submissions as well as the relevant material on record. For explaining the cash deposit in the bank account of Rs. 13,82,626, the assessee has filed the cash book showing the opening cash balance of Rs. 11,32,626 and gift of Rs. 2,50,000 received during the year, out of which Rs. 1,50,000 received from mother Smt. Santosh Devi Agarwal and Rs. 1,00,000 from father Shri Mali Ram Agarwal. The assessee produced the gift deeds whereby the mother and father of the assessee have confirmed the gifts given of Rs. 1,50,000 and Rs. 1,00,000 respectively to the assessee. It is pertinent to note that the assessee has been filing her return of income regularly and also produced the return of income as well as balance sheets for the assessment years 2009-10 and 2010-11, and these facts and records are not in dispute. Since none of the returns of income in the preceding year were subjected to scrutiny assessment, therefore, the availability of cash with the assessee would not be proved by mere filing of return of income. However, the assessee has shown the availability of cash of Rs. 11,32,626 in the books of account being opening cash balance as on 1-4-2010. The said cash was also closing cash balance as on 31-3-2010 in the balance sheet as on 31-3-2010. The returns of income though were not subjected to scrutiny, however, once the cash was reflected in the books of account and part of the balance sheet of the assessee, then in the absence of said cash introduced in the books of account by the assessee during the year under consideration, the issue of making addition by disallowing the availability of cash in the hands of the assessee can be considered only in the preceding year in which the cash was introduced by the assessee in the books of account. The assessing officer during the assessment proceedings was very well aware of the fact that Rs. 11,32,626 was stated to have been introduced in the books during the earlier assessment year and, therefore, if the said claim of the assessee was not acceptable then the proper course of action was to make the addition of this cash introduced in the books of account under section 68 in the relevant assessment year in which the said cash was introduced in the books and not in the year under consideration when it is shown as opening cash balance. The assessing officer instead of taking up the assessment of the preceding year has made the addition of the said amount by rejecting the source of the amount as shown as opening cash balance. Further, the assessing officer has not rejected the books of accounts of the assessee and, therefore, once the assessee has established the availability of the cash in the books of account, then the proper course of action for rejecting the said claim and making the addition is to reopen the assessment of the earlier year. Hence, to the extent of availability of cash of Rs. 11,32,626 being opening cash balance which was duly reflected in the books of account of the assessee for the year under consideration as well as in the earlier year, the same cannot be rejected and the consequential addition is not sustainable.

5.1. As regards the gift of Rs. 2,50,000, though the assessee has also shown the gifts from her mother and father in the earlier years, however, that is not an issue before us as the source of cash for the year under consideration is only to the extent of the gift received during the year under consideration. The assessing officer has rejected the claim of gifts received from the mother and father of Rs. 1,50,000 and Rs. 1,00,000 respectively on the ground that the assessee has failed to produce her mother and father for examination. The learned Commissioner (Appeals) has confirmed the said rejection of the claim of gifts with the observation that gift deeds were not filed before the assessing officer. However, we find that the assessing officer has duly acknowledged the filing of the gift deeds in para 3 of the assessment order wherein the documents filed by the assessee comprising of the gift deeds of Smt. Santosh Devi Agarwal and Shri Mali Ram Agarwal. Hence the observation of the learned Commissioner (Appeals) is contrary to the facts when these documents were duly filed before the assessing officer. However, the mother as well as the father of the assessee are regularly assessed to income tax and filing their income tax returns. Therefore, such a meager amount of Rs. 1,50,000 and Rs. 1,00,000 which is within the range of their income declared during the year under consideration cannot be denied. Once the assessee has produced the gift deeds and the donors are regularly assessed to tax, then the identity and creditworthiness of the donors cannot be doubted without proper verification of all sources of their income. The income declared during the year under consideration by the mother and father of the assessee are Rs. 1,77,250 and Rs. 1,50,460 respectively. Hence in the facts and circumstances when both the donors are assessed to tax and filing their returns of income, then the assessee has discharged her onus of proving the identity, creditworthiness and genuineness of the transaction. In case the assessing officer was not satisfied with the evidence produced by the assessee, the assessing officer was very well empowered to summon the donors for their examination. Though there may be an issue of creditworthiness of the donors for giving the gifts for the earlier year as well as for the year under consideration, however, the issue of gifts given in the earlier year cannot be examined for the year under consideration as it was part of the cash introduced by the assessee in the earlier year. Further, there is no dispute that the reason and occasion of the deposit made in the bank account is to purchase a house which was purchased by the assessee. Therefore, in the facts and circumstances of the case, the addition made by the assessing officer of Rs. 13,82,626 is deleted.

Ground No. 2 is regarding an addition of Rs. 2,14,050 on account of unexplained expenditure for registration of plot of land.

6. This issue is consequential as the assessee has explained the source of this expenditure by opening cash balance as well as the gift of Rs. 2,50,000. Since we have decided the issue of availability of opening cash balance as well as genuineness of the gift in favour of the assessee, the said addition made by the assessing officer is liable to be deleted.
7. In the result, appeal of the assessee is allowed.