Heavy Cash Deposits in the Bank:

Adition not sustainable if the taxpayers submits the plethora of evidences and AO failed to justify its non genuineness

ITAT Surat in the case of Ashish Natvarlal Vashi Vs ITO has held that Cash deposited as agent is not liable to be taxed as income of the assessee.

In this case, the assessee has deposited cash in the bank which was later transferred to the insurance company by way of insurance premium in the name of the respective insurer.

Assessee acted as facilitator and not the owner of the cash deposited in the bank account.

ITAT noted that the assessee has submitted for each person, the documents like confirmation letter, premium receipts, proposal form, PAN, Ration Card, Banker Cheque, surrender statements etc. The Assessing Officer has not refuted or discredited these documents. The Assessing Officer does not mention in his order why he is not accepting these plethora of documents and evidenceITAT concluded that addition is not possible under section 69A.

The copy of the order is as under:

 

ITAT Surat

Ashish Natvarlal Vashi

Vs

ITO

ITA Nos. 2744, Order No. 1403/AHD/2015

Dated- 11/05/2021

Captioned three appeals filed by the assessee pertaining to the Assessment Years (AY) 2009-10, 2010-11 and 2011-12 respectively, are directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals), Valsad, which in turn arise out of separate assessment orders passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).

2. Since, in these three appeals common and identicalissue are involved, therefore these appeals have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. For the sake of convenience, the grounds as well as the facts narrated in ITA No.2744/AHD/2015 for AY, 2009-10, have been taken into consideration for deciding the above appeals en masse.

3. The grounds of appeal raised by the assessee in ITA No.2744/AHD/2015, for A.Y. 2009-10 is as follows:

“1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.20,52,475/- u/s.69A of the Act on account of cash deposit in Bank Accounts.

2. It is therefore prayed that above addition made by Assessing Officer and confirmed by CIT(A) may please be

3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

4. The facts of the case which can be stated quite shortly are as follows: The assessee is a Senior Territory Manager who has worked for first ten months of the year with M/s Reliance Life Insurance Co. Ltd. and two months thereafter with M/s Bajaj Alliance Life Insurance Co. Ltd. As per AIR information available with the assessing officer, the assessee has two bank accounts with ICICI Bank, Navsari in which cash of Rs.26,77,200/- and Rs.21,71,644/- was deposited during the year. The necessary details of cash deposits in these accounts was called for by the assessing officer and confronted to the assessee so as to know the source of these cash deposits because as per claim of the assessee his main source of income was salary which was not sufficient enough to explain these deposits. The necessary details of deposits made into these two accounts by the assessee were given by the assessing officer in the assessment order under para 4.1. During the assessment proceedings, the assessee explained that he collected these amounts from the investors and provided facility to make investment in various investment plans of M/s Reliance Life Insurance Co. Ltd. As the investors were non-residents so their confirmation in regard to the deposits could not be collected and filed within the short time given by the assessing officer. Further it was also submitted that between him and the investors there were mediators i.e. sub agents who facilitated to fetch more business and collect the amount from investors for further investment. As the assessee could not produce the confirmation from the respective persons and also produce them in person, the assessing officer treated the amount of cash deposits made in to the bank as unexplained under section 69 of the Act. In respect of these deposits the assessing officer concluded that all the three necessary ingredients were not proved by the assessee, i.e. identity, creditworthiness and genuineness of the transaction. Therefore, the assessing officer held that assessee failed to explain the nature and source of cash amount of Rs.10,72,900/- and Rs.9,79,575/- respectively deposited to the savings Bank account held with ICICI Bank Limited as discussed above; with supporting documentary evidence. As such, the alleged amount of Rs.20,52,475/- [10,72,900 + 9,79,575] was treated as income of the assessee within the meaning of provisions of section 69A of the Income Tax Act and added to the total income of the assessee.

5. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has confirmed the addition made by the Assessing Officer. Aggrieved, the assessee is in appeal before us.

6. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. We note that during the appellate proceedings, the assessee made voluminous submissions before the ld CIT(A), which were sent to the assessing officer for comments in the form of remand report. The counter comments of the assessee were also obtained on the comments given by the assessing officer in the remand report. As the cash deposits were claimed to have been made by various investors by the assessee, the assessing officer dealt with each investor and the necessary counter comments were also given by the assessee. Learned Counsel for the assessee relied on the submissions made before the ld CIT(A), during the appellate proceedings. On the other hand, Learned Departmental Representative (in short “the ld. DR”) for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.

7. We note that person wise findings as given by the assessing officer as well as the counter comments on these findings by the assessee were discussed during the appellate proceedings and as well as during the assessment stage.The ld Counsel submits before us that assessee has acted as an insurance agent and provided additional services to accommodate the policy holder for making payment of premium and there is no responsibility of the Assessee to keep track of the investors’ latest address. It is not correct on the part of the assessing officer to state that no authentic evidence has been submitted, rather confirmation letter along with premium receipt, insurance proposal form and banker’s cheque, PANnumbers etc were submitted before the assessing officer.

8. The ld. Counsel submitted before the Bench the following details and documents:

(i) Acknowledgement of Return of income along with computation of income (vide PB.29-30),

(ii) Form No.16 with annexure issued by Reliance Life Insurance Company Limited (vide PB.31-35),

(iii) Bank Statement of ICICI Bank (A/c.020601506800) (vide PB.36-39),

(iv) Bank Book of ICICI Bank (A/c.020601506800) (vide PB.40-47),

(v) Bank Statement of ICICI Bank (A/c.020601000013) (vide PB.48-53),

(vi) Bank Book of ICICI Bank (A/c.020601000013) (vide PB.54-60),

(vii) Advisors Basis Date of Hemant Patel (vide PB.61-32),

(viii) Confirmation from Hemant Patel (vide PB.63),

(ix) Advisors basis Date of Ravindrakumar Patel (vide PB.64),

(x) Advisors Basis Data of Harshit Desai (vide Pb.65-66),

(xi) Confirmation from Harshit Desai (vide PB.67),

(xii) Advisors Basis Data of Keyur Patel (vide PB.68),

(xiii) Confirmation from Keyur Patel (vide PB.69),

(xiv) Advisors Basis Data of Jayesh Desai (vide PB.70),

(xv) Confirmation from Jayesh Desai (vide PB.71).

9. The ld Counsel submitted before the Bench details of various clients and insurers and their confirmation letters which were also submitted during the course of assessment proceedings. Person-wise details are as follows:

(1) In respect of Shri Anand S. Desai, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.72), (ii) Premium Collection receipt (vide Pb.73), (iii) Proposal form (vide Pb.74-80), (iv) PAN Card (vide Pb.81), (v) Telephone Bill (vide Pb.82), (vi) Term deposit Receipts (vide Pb.83-92), (vii) Bankers cheque (Pb.93), (viii) Letter filed before AO (vide Pb.94), (ix) Surrender Statement (vide Pb.95).

(2). In respect of Shri Mehul Patel, the assessee submitted following details: (i) Confirmation Letter (vide Pb.96).

(3). In respect of Shri Sarasvati D Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.97-98), (ii) Premium Collection receipt (Pb.99), (iii) Proposal form (vide Pb.100-104), (iv) Bankers cheque (vide Pb.105), (v) Letter filed before AO (vide Pb.106), (vi) Surrender Statement (vide Pb.107).

(4). In respect of Shri Vicky Poddar, the assessee submitted following details: (i) Confirmation Letter (vide Pb.108).

(5). In respect of Shri Vanita D Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.109), (ii) Premium Collection receipt (vide Pb.110), (iii) Proposal from (vide Pb.111-115), (iv) Election Commission Identity Card (vide Pb.116-117), (v) Bank Statement (vide Pb.118), (vi) Bankers cheque (vide Pb.119).

(6). In respect of Shri Anila Ajitrai Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.120), (ii) Premium Collection Receipt (vide Pb.121), (iii) Proposal form (vide Pb.122-125), (iv) Bankers cheque (vide Pb.126), (v) Surrender Statement (vide Pb.127).

(7). In respect of Ms Savita M Patel, the assessee submitted following details: (i) Confirmation Letter (vide Pb.128), (ii) Premium Collection receipt (vide Pb.129), (iii) Proposal form (vide Pb.130-136), (iv) Passbook of co-operative society (vide Pb.137-138), (v) Bankers cheque (vide Pb.139), (vi) Letter filed before AO (vide Pb.140), (vii) Surrender Statement (vide Pb.141).

(8). In respect of Ajitbhai B Patel, the assessee submitted following details: (i) Confirmation Letter (vide Pb.142), (ii) Premium collection receipt (vide Pb.143), (iii) Proposal form (vide Pb.144-147), (iv)Bankers cheque (vide Pb.148), (v) Letter filed before AO (vide Pb.149), (vi) Surrender Statement (vide Pb.150).

(9). In respect of Ramesh Bhikhabhai Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.151), (ii) Premium collection receipt (vide Pb.152), (iii) Proposal form (vide Pb.153-158), (iv) PAN Card (vide Pb.159), (v) Ration Card by Mamlatdar Surat (vide Pb.160-162), (vi) Banker cheque (vide Pb.163), (vii) Letter filed before AO (vide Pb.164), (viii) Surrender Statement (vide Pb.165).

(10). In respect of Sumitra B Patel, the assessee submitted following details: (i) Confirmation Letter (vide Pb.166), (ii) Premium collection receipt (vide Pb.167), (iii) Proposal form (vide Pb.168-174), (iv)Bank Statement (vide Pb.175), (v) Banker cheque (vide Pb.176), (vi) Letter filed before AO (vide Pb.177).

(11). In respect of Tejas J Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.178), (ii) Premium collection receipt (vide

Pb.179), (iii) Proposal form (vide Pb.180-183), (iv) Banker cheque (vide Pb.184).

(12). In respect of Jayaben Vinodbhai Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.185), (ii) Premium collection receipt (vide Pb.186), (iii) Proposal form (vide Pb.187-192), (iv) Passport (vide Pb.193-94), (v) Ration Card by Mamlatdar Surat (vide Pb.195-196), (vi) Bankers cheque (vide Pb.197), (vii) Surrender Statement (vide Pb.198).

(13). In respect of Mahesh Vinodbhai Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.199), (ii) Premium collection receipt (vide Pb.200), (iii) Proposal form (vide Pb.201-206), (iv) PAN Card (vide Pb.207), (v) Ration Card by Mamlatdar Surat (vide Pb.208-209), (vi) Banker cheque (vide Pb.210), (vii) Surrender Statement (vide Pb.211).

(14). In respect of Kiran Rameshbhai Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.212), (ii) Premium collection receipt (vide Pb.213), (iii) Proposal form (vide Pb.214-219), (iv) PAN Card (vide Pb.220), (v) Ration Card by Mamlatdar Surat (vide Pb.221-222), (vi) Banker cheque (vide Pb.223), (vii) Letter filed before AO (vide Pb.224), (viii) Surrender Statement (vide Pb.225).

(15). In respect of Kalaben Rameshbhai Patel, the assessee submitted following details:

(i) Confirmation Letter (vide Pb.226), (ii) Premium collection receipt (vide Pb.227), (iii) Proposal form (vide Pb.228-233), (iv) PAN Card (vide Pb.234), (v) Ration Card by Mamlatdar Surat (vide Pb.235-237), (vi) Banker cheque (vide Pb.238), (vii) Letter filed before AO (vide Pb.239), (viii) Surrender Statement (vide Pb.240).

10. As noted above, assessee has submitted a plethora of documents to prove the genuineness of the transactions. The assessee is a salaried employee and it is not possible for him to maintain full accounts department for his small business and clients. The assessee was working as a Senior Territory Manager in Reliance Life Insurance Co. Ltd. during the first 10 months of the previous year under appeal. Thereafter, in last two months, he had joined Bajaj Alllianz Life Insurance Co. Ltd. It was the duty of the assessee to contact various groups of clients along with his sub -agents and to convince them to buy insurance policies and to provide them pre-insurance stage services and post-insurance stage services like collecting information, filling the forms, getting documentary evidences and forwarding the same to the company, getting medical clearance certificate, collecting premium from them and making payments thereof and to supply them their policies along with premium receipts after the insurance is taken and transaction is completed. It will be appreciated that the assessee had not deposited his own fund in the impugned bank accounts but he had deposited the amount received from his clients to facilitate payment of premiums to the insurance company. The insurance premium paid from the said bank accounts was not unaccounted receipt or income of the assessee but the said deposits were clearly identifiable amount attributable to the premium of his clients. The assessee had given detailed explanation of each deposits and provided sufficient details and evidences to suggest that the impugned deposits were not in the nature of income of the assessee. During the course of assessment proceedings, the assessee had clearly identified the premium amount of his respective clients and also submitted their premium receipts issued in the names of respective insurers (not the assessee) wherein the details of banks drafts were also mentioned which were issued from the impugned bank account. The evidences like insurance premium receipts of different persons along with corresponding deposited amount in the bank account clearly established the nexus of source of deposits and their subsequent outflow in form of insurance premium. When all the corroborative evidence were clearly suggestive of the fact that the assessee had simply acted as a facilitator to make payment on behalf of the policy holders and where each entries were traceable and identifiable the addition should not be made in the hands of assessee. This way, the assessee had fully discharged his onus of explaining the source of deposits in the bank account particularly with evidences, hence there was no reason for the assessing officer to make addition under section 69A of the Act. The assessee was never found to be the owner of the impugned deposits in the said bank accounts particularly in view of the fact that all the said deposits were immediately transferred to the insurance company by wav of insurance premium in the names of the respective insurers and hence there was no question of not recording such investment in the books of accounts of the assessee in as much as there was no investment of the assessee himself. It can be seen from the copies of premium receipts that the mode of payment i.e. demand draft numbers and bank details were mentioned in the premium receipts which showed that the premiums in the names of insurers were paid through the assessee’s impugned bank accounts. Therefore, the assessee was only facilitator and was not the owner of the money deposited in his bank accounts.

Thus, we note that assessee has submitted for each person, the documents like confirmation letter, premium receipts, proposal form, PAN, Ration Card, Banker Cheque, surrender statements etc. The Assessing Officer has not refuted or discredited these documents. The Assessing Officer does not mention in his order that why he is not accepting these plethora documents and evidences.

Hence, the assessing officer has failed to bring any evidence on record to demonstrate that evidences and documents submitted by the assessee, which are mentioned in para Nos.8 and 9 of this order, are false and untrue. Thus, it is quite clear that the learned assessing officer wrongly invoked the provisions of section 69A of the Act. Hence, we delete the addition of Rs.20,52,47 5/-. The instant adjudication is done taking into account the peculiar facts of the assessee, as narrated above, therefore, the instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.

11. Similar issues have been raised in other appeal in ITA No. 1403/Ahd/2015 for AY.2010-11 and ITA No.2219/Ahd/2016 for A.Y. 2011-12. Our observations and decision made in ITA No.2744 /Ahd/2015 shall apply mutatis mutandis to the appeals in ITA No. 1403/Ahd/2015 for AY.2010-11 and ITA No.2219/Ahd/2016 for A.Y. 2011-12.

12. In the result, the appeals filed by the assessee (in ITA No.2744 /Ahd/2015, ITA No. 1403/Ahd/2015 and ITA No.2219/Ahd/2016) are allowed.

Order is pronounced on 11/05/2021 by placing the result on Notice Board.