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Income Tax Officer Ward 1 (2), 339 Meerut Bagpat Vs. Mrs. Deepali Sehgal, Dashmesh Nagar Road, Meerut.
September, 06th 2014
                 DELHI BENCH: `B' NEW DELHI


                             I.T.A .No.-5660/Del/2012
                            (Assessment Year-2009-10)

Income Tax Officer                     Vs.                 Mrs. Deepali Sehgal,
Ward 1 (2),                                                339 Dashmesh Nagar
Meerut                                                     Bagpat Road, Meerut.

(APPELLANT)                                                (RESPONDENT)

                    Revenue by:-Smt. Ashima Neb, Sr. DR
                    Assessee by:-Sh. Rama Kant Jain, CA.



1.     This appeal has been preferred by the assessee against the order of the

CIT(A) dated 31.08.2012 in appeal No. 321 of 2011-12 for A.Y. 2009-10.

       The Revenue has raised following grounds in this appeal:-

       1. Whether in the facts and circumstances of the case, the Ld.
            CIT(A) has erred in law in deleting the addition of Rs.
            2438000/- being unexplained cash deposits in the Saving
            Bank Ale with HDFC Bank U/S 69A of the I.T.Act, 1961,
            ignoring the fact that the cash was allegedly withdrawn
            form partnership firm which itself withdrew the cash
            from its bank ale out of business OD account with
            Corporation Bank where debit balance remained in the
            range of 57 lac to 64 lac on whch heavy interest was
            paid by the firm and thus the alleged withdrawals by the
            partner did not relate to firm's business in any way.
                                       2                      I.T.A .No.-5660/Del/2012

      2. Whether in the facts and circumstances of the case the Ld.
           CIT(A) has erred in law in holding hat there was no
           negative cash balance and that there is no law of land
           mandating assessee to keep her balance in bank only but
           ignoring that the capital ale of assessee in the firm
           always remained in negative i.e. before alleged
           withdrawals as well as during and after such
           withdrawals that too out of withdrawals by firm made
           from OD Bank ale showing heavy debit balance, which
           was in stark contradiction of principle of test of the
           human probabilities as laid down by the Hon'ble Apex
           Court. Reliance is placed on following case laws:-
      i)    Sumati Dayal Vs. CIT 214 ITR 801 (SC)
      ii)   Durga Prasad Morya Vs CIT 82 ITR 540 (1971)

      3.    That the appellant craves leave to add, modify and / or
            delete any ground(s) of appeal. .
      4.    In the facts and circumstances of the case, the order of the
            Commissioner of Income-tax(Appeals) may be set aside and
            that of the A.O restored."

2.    Briefly stated the facts giving rise to this appeal are that the Assessing

Officer (AO) noted that the assessee has withdrawn huge cash from bank

account and the same amount has been deposited to the same account after

lapse of substantial time. On query from the AO the assessee replied that the

cash was deposited out of cash withdrawn. The AO rejected the explanation

and held that the assessee has cash deposit of Rs.24,38,000/- as unexplained

money and he assessee found to be the owner of the money and the assessee

has not offered any acceptable and cogent explanation therefore, the AO

concluded that the entire cash deposit of Rs.24,38,000/- was deemed to the

income of the assessee from undisclosed sources and the AO made an
                                      3                     I.T.A .No.-5660/Del/2012

addition of Rs.24,38,000/- u/s 69 of the Income Tax Act, 1961 (for short the

Act) for A.Y. 2009-10.

3.    The aggrieved assessee preferred an appeal before CIT(A) which was

allowed by passing the impugned order. Now the aggrieved Revenue is

before this Tribunal with the grounds as reproduced herein above.

Ground No. 1 & 2 of the Revenue

4     Apropos these grounds we have heard arguments of both the sides

and carefully perused the relevant material placed on record. The ld.

Departmental Representative (DR) placed his reliance on the decision of the

Hon'ble Supreme Court in the case of Sumati Dayal Vs. CIT 214 ITR

801(SC) and Durga Prasad Mourya Vs. CIT 82 ITR 540 (SC) and submitted

that the cash was withdrawn from partnership firm bank account out of

business overdraft account with corporation Bank where debit balance

remained between 57 lac to 64 lac on which heavy interest was paid by the

firm and thus alleged withdrawals by partner assessee did not relate to firms'

business in any manner. The D.R. further contended that the CIT(A) also

ignored the fact that the Capital account of the assessee in the firm always

remained in negative before impugned withdrawals as well as during and

after such withdrawals and also the withdrawals made by the firm from

overdraft was increasing heavy debit balance resulting into heavy interest
                                       4                      I.T.A .No.-5660/Del/2012

liability on the firm which is not in accordance with behavior of a man of

ordinary prudence rather the above conduct of the assessee was in

contradiction of principles test of human probabilities. The D.R. also

contended that the AO made addition on justified reasoning which was

deleted by CIT(A) without and basis. Therefore, impugned order may be set

aside by restoring that of the AO.

5.    Replying to the above the Ld. assessee's Representative (AR)

submitted that the AO merely acted on the basis that it was hard to believe

that huge cash was kept by the assessee for deposit back in the bank account

creating interest liability against the partnership firm and the AO rejected the

explanation of the assessee deeming the same to be impractical and illogical

but the cash flow statement clearly show that the assessee withdrew cash of

Rs.19 lacs and 13 lacs from her saving bank account with HDFC Bank and

from capital account of partnership firm M/s Shakti Traders, Meerut,

respectively but this fact was not appreciated by the AO and the CIT(A) was

quite justified in accepting the explanation of the assessee. The AR drawn

our attention towards audited accounts of the partnership firm and submitted

that no adverse inference can be drawn against the assessee about the

impugned cash deposits as this is not the case of the AO that the amounts

withdrawn from bank were utilized somewhere else for some irrelevant
                                     5                      I.T.A .No.-5660/Del/2012

purpose. The AR supported the impugned order and submitted that the

appeal is devoid of merits and case laws relied by the Revenue are


6.    On a careful consideration of above submissions and contention we

observe that the AO made addition u/s 69A of the Act with following


             "From the perusal of return and the various documents
      submitted by the assessee during the course of assessment
      proceedings, it is gathered the assessee has made huge cash
      deposits in saving bank a/c bearing no.0285130002853 at
      HDFC Bank, W.K. Road, Meerut. The cash flow statement
      submitted by the assessee has many lacunae. From the said
      cash flow statement, it is gathered that:
      1.    cash withdrawal of Rs.3,00,000/- made on 08/04/2008
      was deposited on 13/5/2008 and the explanation offered by the
      assessee is `cash deposited out of cash'. This explanation of the
      assessee is illogical as it is impossible to believe that such a
      huge amount of cash will be kept by the assessee for so long as
      to deposit the same amount in the bank after unnecessarily
      waiting for such a long duration. Similar explanation has been
      offered by the assessee for cash of Rs.5,00,000/- withdrawn on
      3/10/2008 and deposited on 4/3/09.
      2.    no reason has been offered by the assessee in respect of
      cash deposits of Rs.5,00,000/- made on 16/3/2009;
      Rs.8,00,000/- made on 25/3/2009 and Rs.3,38,000/- made on
      I, therefore, treat this above-mentioned cash deposit of
      Rs.24,38,000/- as Unexplained money u/s 69A of the I.T. Act,
      1961, since the assessee has been found to be the owner of this
      money and has not offered any explanation about the nature
      and source of acquisition of this money and therefore, this
                                       6                    I.T.A .No.-5660/Del/2012

      entire cash deposit of Rs.24,38,000/- is deemed to be the
      income of the assessee for the F.Y. 2008-09."
7.    During first appellate proceeding the CIT(A) called remand report

from the AO on the submissions of the assessee and after considering the

submissions of the assessee, remand report of the AO, assessee's rejoinder

and assesee's additional submissions the CIT(A) deleted the addition with

following observations and findings:

           I have considered the facts of the case, AR's submissions,
      AO's remand report, AR's rejoinder and further submissions of
      the AR carefully. The only reason harped on the AO for the
      addition is that it was hard to believe by her that cash was kept
      by the assessee for deposit back in the bank. She has noted that
      the explanation offered by the assessee appeared to be
      impractical and illogical. The AR has placed on record the cash
      flow statement both during the assessment proceedings as well
      as the appellate proceedings. The cash flow statement duly
      shows that the appellant withdrew cash from her SB A/c in the
      HDFC bank and also withdrew capital balance from her
      capital account her partnership firm. M/s. Shakti Traders,
      Meerut. A copy of bank account also has been placed on
      record. The cash flow statement shows that there are cash
      withdrawal of .Rs.19 lakh from HDFC bank on different dates
      and withdrawal of Rs.13 lakh from her capital account in her
      partnership firm M/s. Shakti Traders on different dates. There is
      no negative cash balance at any point of time. It is not the case
      of the AO that the amounts withdrawn were utilized anywhere
      else. The AR has also placed on record the audit report of M/s.
      Shakti Traders along with the ledger account of the appellant.
      In view of material placed on record, no adverse inference can
      be drawn against the appellant for explanation
      withdrawn from the bank and the capital account of her
      partnership firm was deposited in bank. It is not mandatory
      under any law of the land that n individual has to keep his/her
      savings in the bank account only and not as cash in hand. The
      AR's reliance on the following case laws also support his case:
                                       7                     I.T.A .No.-5660/Del/2012

     i. ACIT vs. Baldev Raj Chalra, 121 (TTJ) 366 (Delhi) 2009;
     ii. R. K. Dave vs. Income Tax Officer reported in 94 ITJ Jodhpur 19
     iii. Hemant Prabhakar vs. Dy. CIT 31 Tax World 198 (JP)

     In the light of the totality of the facts, the addition made by the AO is

8.      In view of above we noted that the AO, in his remand report could not

bring out any fact that the cash withdrawn from Saving Bank Account and

partnership overdraft account was used for other purpose anywhere else

then, merely because there was a time gap between withdrawal of cash and

its further deposit to the bank account, the amount can not be treated as

income from undisclosed sources u/s 69 of the Act in the hands of the

assessee. The AO rejected the explanation of the assessee on hyper technical

basis which is not acceptable. On careful perusal of the decisions relied by

the Ld. D.R. we are of the view that the facts of the present case are clearly

distinguishable as in the present case the explanation offered by the assessee

is reliable and acceptable on the touchstone of the prudence of an ordinary

man but merely on the ground that the act of assessee created huge interest

liability on partnership firm does not enable revenue authorities to consider

the cash withdrawn and it deposit to same bank account after a substantial

gap of time, as unexplained income u/s 69 A of the Act. Hence, we reach to
                                        8                    I.T.A .No.-5660/Del/2012

a conclusion that the AO made addition without any legal and justified

reason which was rightly deleted by the CIT(A). Hence, both the grounds of

the assessee are being devoid of merits and dismissed.

9.      In the result, appeal of the Revenue is dismissed.

Order pronounced in the open Court on 05/09/2014.

              Sd/-                                                Sd/-

     (G. D. AGRAWAL)                                      (C. M. GARG)
     VICE-PRESIDENT                                   JUDICIAL MEMBER

Dated: 05/09/2014

Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)

                                                      ASSISTANT REGISTRAR
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