2016 (11) TMI 1300 - AT - Income Tax

Addition on account of credits in the saving bank accounts - difference in denomination of notes - Held that - In the present case, it is not in dispute that the assessee had withdrawn cash from the bank account and also re-deposited the similar amount in her bank account and since there was a gap in the withdrawal and the deposit in the bank account and even denominations of the notes were also different, however, nothing was brought on record to substantiate that the cash withdrawn by the assessee from her bank account was utilized elsewhere. Therefore, only on this basis that the denomination of notes was different the addition cannot be made particularly when the assessee proved the source of the deposit which was the withdrawal from her bank account. Thus the addition for the reason that the denomination of notes withdrawn and re-deposited was different, it cannot be a ground to make the impugned addition particularly when nothing is brought on record that the amount withdrawn by the assessee was utilized elsewhere and not redeposited in the bank account. - Decided in favour of assessee

Summary

Issues Involved:
1. Sustenance of addition of ?16,00,000/- made by the Assessing Officer on account of credits in the saving bank accounts.
2. Validity of the Assessing Officer's reliance on the difference in the denomination of currency notes for making the addition.
3. Adequacy of the assessee's explanation regarding the source of cash deposits.

Issue-wise Detailed Analysis:

1. Sustenance of Addition of ?16,00,000/-:
The primary grievance of the assessee was the sustenance of the addition of ?16,00,000/- made by the Assessing Officer (AO) due to credits in the saving bank accounts. The AO questioned the cash deposits of ?8,00,000/- each on 09.02.2010 and 26.02.2010 in ICICI Bank accounts. The assessee claimed that these deposits were made out of cash withdrawals during the year. However, the AO was not satisfied with this explanation and added ?16,00,000/- to the income of the assessee under Section 68 of the Income-tax Act, 1961, concluding that the deposits were from undisclosed sources.

2. Validity of Reliance on Denomination of Currency Notes:
The AO's decision was influenced by the difference in the denomination of currency notes withdrawn and those deposited. The AO noted that the cash deposits were made almost nine months after the withdrawals and argued that it was improbable for the assessee to keep such a large amount of cash at home for that long. The AO further contended that the difference in denominations indicated that the deposited cash was not the same as the withdrawn cash.

3. Adequacy of Assessee's Explanation:
The assessee explained that the cash withdrawals were intended for a property purchase, which eventually was paid by cheque, leading to the re-deposit of the withdrawn cash. The assessee maintained a daily cash book to track these transactions. However, the AO and the Commissioner of Income Tax (Appeals) (CIT(A)) rejected this explanation, citing the improbability of keeping large sums of cash at home and the difference in the denomination of notes.

Tribunal's Findings:
The ITAT considered the submissions and noted that the AO had not substantiated that the withdrawn cash was utilized elsewhere. The tribunal emphasized that the difference in the denomination of notes alone could not justify the addition, especially when the source of the deposit was adequately explained by the assessee. The ITAT referred to a similar case (Deputy Commissioner of Income Tax Vs. Sh. Ganga Singh) where it was held that the revenue should focus on the source of deposit rather than the denomination of notes.

Conclusion:
The ITAT concluded that the addition made by the AO and sustained by the CIT(A) was not justified. The tribunal deleted the addition of ?16,00,000/- and allowed the appeal of the assessee, emphasizing that the difference in the denomination of currency notes could not be a valid ground for the addition, particularly when the source of the deposit was explained and no evidence suggested otherwise. The decision was pronounced in the open court on 12th September 2016.