Court/Forum: ITAT
Bench: Delhi Bench 'B': New Delhi, Shri M. Balaganesh, Accountant Member and Ms Madhumita Roy, Judicial Member
Order Date: 2025-03-07
Outcome: Assessee
Sections: Section 68, Section 143(3), Rule 46A
The assessee successfully explained the source of cash deposits as proceeds from the sale of inherited land, supported by credible evidence.
The appeal of the assessee was allowed, and the addition of Rs. 20,02,801/- as unexplained cash deposits was deleted.
Assessee
The central legal question was whether the cash deposits made by the assessee could be explained as proceeds from the sale of inherited agricultural land, thus not warranting addition under Section 68.
The assessee, a retired IAS officer, deposited Rs. 20,02,801/- in cash, which the AO added as unexplained under Section 68. The assessee claimed the deposits were from the sale of inherited land.
The assessee argued that the cash deposits were proceeds from the sale of inherited agricultural land, supported by a will and confirmations from the person who managed the sale.
The Revenue contended that the cash deposits were unexplained, questioning the validity of the wills and the retention of sale proceeds by the assessee's relative.
Section 68 - Unexplained cash credits; Section 143(3) - Assessment; Rule 46A - Admission of additional evidence.
The Tribunal held that the assessee had provided sufficient evidence to explain the source of cash deposits, including confirmations from the person who sold the land on her behalf and documentation of the inheritance and sale process.
No issues were left open or remanded.
Practitioners should ensure that all relevant evidence is presented to explain cash deposits, especially in cases involving inheritance and sale of property.
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ITA No. 3510/Del/2019 (Assessment Year: 2007-08) Smt Gloria Eugenia Rynjah Banerji, Beth-Eli Bungalow, B-16, Sector-30, Noida-201303 Vs. Income Tax Officer, Ward-40(2), New Delhi (Appellant) (Respondent)
Assessee by : Shri S. Krishnan, Adv Shri Harshit Chauhan, Adv
Revenue by: Shri Rajesh Kumar Dhanesta, Sr. DR
Date of Hearing 20/02/2025 Date of pronouncement 07/03/2025
1. The appeal in ITA No.3510/Del/2019 for AY 2007-08, arises out of the order of the Commissioner of Income Tax (Appeals)-34, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No. 140/186/2015-16/157/2014-15 dated 26.03.2019 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 20.03.2014 by the Assessing Officer, ITO, Ward-40(2), New Delhi (hereinafter referred to as ‘ld. AO’).
2. The only issue to be decided in this appeal is as to whether the ld CIT(A) was justified in confirming the addition made by the ld AO in the sum of Rs. 20,02,801/- on account of cash deposit made u/s 68 of the Act in the facts and circumstances of the instant case.
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3. We have heard the rival submissions and perused the material available on record. The assessee is a retired IAS and Allied Services Officer and is a senior citizen. The return of income for AY 2007-08 was filed by the assessee declaring total income of Rs. 4,11,408/- on 23.07.2007. The case was selected for scrutiny based on the information that there was some cash deposit made by the assessee during July to September 2006 ranging in the sum of Rs. 45,000/- and 49,900/- on various occasions during the said period. The aggregate of cash deposit made thereon in the bank account of the assessee was Rs. 20,02,801/-. Out of said deposits, the investment in fixed deposits were made in the name of the assessee with the same bank. The source of cash deposits was sought to be explained by the assessee by stating that the same was relatable to the will executed by the assessee’s mother dated 22.04.1989 bequeathing certain agricultural land to her; that the said lands were sold by uncle of the mother Mr. KF Rangad on the basis of pattas which was the system for transfer of land from one person to another person prevailing in North East (Shillong, Meghalaya).
4. It would be relevant to note that in the first round of proceedings the ld AO ignored the contention of the assessee and made an addition of Rs. 20,02,801/- as unexplained cash deposits u/s 68 of the Act. The assessee furnished various additional evidences before the ld CIT(A) in the form of will executed by assessee’s mother, confirmation from Mr. KF Rangad for selling of land belonging to assessee, confirmation from KF Rangad that he had retained the sale proceeds belonging to the assessee for quite a long period and gave a gift to the assessee in FY 2006-07, among others. These additional evidences were duly admitted under Rule 46A of the Income Tax
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Rules by the ld CIT(A) and a remand report was sought from the ld AO. The ld AO in the remand proceedings did not bother to examine the veracity of the additional evidences and merely stated that the additional evidences should not be admitted. The ld CIT(A) appreciated all the evidences submitted by the assessee before him and after taking due cognizance of the same allowed the appeal of the assessee in the first round. Aggrieved by this order, revenue preferred an appeal before this Tribunal. This Tribunal in ITA NO. 316/Del/2012 dated 19.07.2013 restored the matter to the file of ld AO with a direction to examine the following:- i. The ownership of the land held by assessee’s mother should be examined. ii. The sale of said land by the brother of the assessee’s mother for the benefit of the assessee is to be examined. iii. Reasons and purposes for retaining the fund of sale proceeds for a long time without handing over the same to the assessee is to be examined.
5. In the second round of proceedings, the ld AO observed that assessee placed on record two Wills dated 11.02.1989 and 22.04.1989. When this fact was confronted to the assessee by the ld AO as to why the two Wills were placed on record, the assessee submitted that the second Will dated 22.04.1989 was merely a clarification which is as under:- "Though by Khasi law, my daughter Gloria Eugenia Rynjah Banerji and grand daughter Miss Dyarisa Rynjah Banerji inherits all properties, this will I am making out of abundant precaution before witness mentioned below.”
6. It was also submitted by the assessee that original of the subsequent Will was not traceable and since the devolution is the same in both the Wills the absence of the original of the subsequent Will make no difference with
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regard to the eligibility of the assessee in the agricultural land obtained through the Will. The assessee submitted that she hails from the North- Eastern part of India and belongs to the 'Khasi' Tribe. The system of inheritance in the family of the assessee is Mawlai which is matriarchal. The assessee inherited land from her well to do mother and being the only issue to her parents, the entire land holdings of her mother fell to the assessee's share. The assessee's mother being the owner of land entrusted in 1988 the sale of such land to her nephew Sri K.F. Rangad who himself was a high official in the Industries department of the Meghalaya Government. Mr. Rangad developed the land, plotted them and then sold them bit by bit. The sale consideration of about 70,000 sq. ft. @ Rs. 35/- per sq. ft. as received was instructed to be retained by him for consideration and eventual transfer. The assessee was in service at the relevant time as an IPS Officer in Delhi. Due to the exigencies of her service, she did not want the amount to be sent to her then and had, therefore, advised Mr. Rangad to retain the money with himself until further instructions. Mr. Rangad continued to retain the money with himself until his own retirement from service. Thereafter, he told the assessee that he would like to be relieved of the responsibility of holding the money and so it was then that he transferred the money in cash to the assessee in 2006. The sole reason for the detention of money with Mr. Rangad was due to the assessee's request for so doing which was due to her exigencies of service and also of a possibility of her moving over to Shillong.
7. With regard to the assessee depositing cash in various denominations in less than Rs 50,000/- on various dates are concerned, it was submitted that banks charge handling charges for cash deposit exceeding Rs. 50,000. In order to avoid the payment of such bank charges, the amounts in
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question were deposited in lots of less than 50,000/- from time to time as evidenced by the bank statement.
8. The ld AO in the second round of proceedings observed that assessee being only child to her mother there was no need to execute any Will. Further two Wills were presented by the assessee before the ld AO. Both the Wills were made in 1989 whereas as per the submission, the mother of assessee had given power of attorney to Shri KF Rangad, brother of the assessee to dispose of the land. Further, there is no mention in both the Wills about any such activity i.e. sale of land and the use of its name. Further, the copy of power of attorney was not furnished by Shri KF Rangad along with the details sent by him to the department. The ld AO also observed that cash being deposited in less than Rs. 50,000/- on various dates is not acceptable and the explanation given in that regard by the assessee that the same was done to avoid cash handling charges levied by the bank for cash deposit was also rejected by the ld AO. The ld AO observed that this was done by the assessee only to avoid disclosure of PAN while making the cash deposits. Further, Shri KF Rangad who is also senior Govt employee could not have held huge cash of Rs 24.50 lakhs that too in the year 1989 without depositing the same in the bank account thereby losing interest on such deposits. By making all these observations, the ld AO again made the addition on account of cash deposits in the total sum of Rs. 20,02,801/- as unexplained money in the hands of the assessee in the second round of proceedings also. This action of the ld AO was upheld by the ld CIT(A) in the 2nd round by even ignoring the additional evidence filed by the assessee before the ld CIT(A) in the first round of proceedings which was duly admitted by the ld CIT(A) in the first round.
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9. We find that the ld AO had categorically accepted and admitted the fact that assessee is the only child to her mother. Hence execution of a single Will or two Wills would have no relevance at all even if such validity of the Will is being questioned by the revenue, as in either way, the property belonging to the assessee’s mother would get vested with assessee only. It is not the case of the revenue that assessee’s mother had executed yet another Will holding some other third party as the beneficiary of the agricultural lands. Hence, the ownership of the agricultural land having been conferred on the assessee is established beyond reasonable doubt as per the observation of the ld AO itself. The assessee had explained the modus operandi of transfer of land in North Eastern part of India which has already been reproduced herein above. None of the procedure adopted therein in the modus operandi is disputed by the revenue. The land has been sold by Shri KG Rangad on behalf of the assessee. This fact is evident from the confirmation given by him on 04.06.2011 which is enclosed in pages 31 to 32 of the paper book and which was also filed directly before the ld CIT(A) in the first round of proceedings. For the sake of convenience, the said confirmation is reproduced herein below:-
Date: 4th June 2011
From: K.F. Rangad, Retired Director of Industries. Govt. of Meghalaya, 'Queenville' Laban, Shillong, Meghalaya-793004.
To: The Hon'ble Commissioner of Income Tax (Appeals)-XXX. Ayakar Bhawan, Room No. 512, 5th Floor, Laxmi Nagar, Delhi-110092
Reg: Confirmation regarding Mrs. Gloria E. Rynjah Banerji in Appeal No. 388/09-10
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Esteemed Sir,
My sister Mrs. Gloria E. Rynjah Banerji has written to me vide her letter dated 31st May 2011 that an appeal is pending before your Honour for Assessment Year 2007-08. I am informed that the issue in question is pending before your Honour for want of confirmation from me with regard to the remittance of a sum of Rs. 20 lakhs made by me to her. These are on account of sale proceeds of land which belong to her Mother Late Dr. (Mrs.) P. Rynjah. The proceeds were all realized by me while at Meghalaya.
My sister Mrs. Gloria E. Rynjah Banerji had informed me that her Income Tax Officer (ITO) had made an addition of Rs. 20 lakhs approximately on account of cash deposited by her in her S.B. A/c No. 539 with Bank of India, Khan Market Branch, New Delhi. She had tendered her explanation to the ITO regarding the source of such deposit as being the monies received by her from me on account of sale proceeds of the land of her Mother, I am further informed that she had submitted two certificates before your Honour issued by me confirming the factum of the sale and the amount of the sale consideration and the fact of the remittance such sale consideration in cash in a sum of Rs. 20 lakhs by me to her. My sister has also informed me that certificates and other documents were submitted by her before your Honour in support of her case and you had in turn sent those papers to her ITO, Ward- 40(2), Room No. 304, Mayur Bhawan, New Delhi for his comments and verification. I would submit that I have not received any communication from the said ITO so far in this connection for attestation or acknowledgment.
Under such circumstances I am sending my direct confirmation to your Honour (with a copy to the ITO) in support of the contentions made by my sister Mrs. Gloria E. Rynjah Banerji before your Honour. Kindly consider them for evaluation and adjudication. I am also sending copies of confirmation that I had already issued alongwith copies of some of the sale deeds. I am finid sure that you would found the documents and certificates useful in the disposal of my sister's appeal.
Thanking you,
Yours faithfully, (K.F. Rangad)
10. We find that the aforesaid confirmation was not even sought to be examined by both the lower authorities. Further, we find that the assessee has given proper explanation for making deposit of cash in denomination
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less than Rs. 50,000/- on various dates to avoid cash handling charges by the banks. This is one of the plausible explanation given by the assessee. Either way, the assessee is assessed to tax and holding a PAN even before these cash deposits were made. Hence, there is no reason for the assessee to even hide the fact of making these cash deposits in the bank by not furnishing the PAN. Hence, this observation of the lower authorities is rejected at once. The entire additional evidence filed by the assessee before the ld CIT(A) in the first round of proceedings were duly admitted by the ld CIT(A) in the first round and remand report was sought from the ld AO in the first round. Despite the fact of admission of those additional evidences by the ld CIT(A), the ld AO in the first round had objected to the admission of those additional evidences and did not give any finding on merits of those additional evidences in the first round. This prompted the Tribunal to restore this issue to the file of ld AO with a clear direction to examine three items as narrated supra thereby paving way for the second round of proceedings. Strangely the very same additional evidence stood rejected and not appreciated by the revenue in the second round of proceedings. As stated earlier, the ld CIT(A) had already admitted the additional evidence filed before him in the first round of proceedings. But strangely he sought for a remand report again from the ld AO for the purpose of admission of those additional evidences in the second round of proceedings. The ld AO vide his remand report objected to the admission of the additional evidences vide letter dated 18.12.2018. The assessee filed rejoinder to the remand report on 14.02.2019 which are enclosed at pages 64 to 68 of the Paper Book.
11. Hence we hold that there is no point in restoring this appeal to the file of lower authorities as it is clearly established that no purpose would be served as revenue does not want to examine those evidences. The
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assessee on her part had furnished the following documents to prove the ownership of the agricultural land:- a) Evidence of land holding of assessee’s mother in Shillong containing patta and other documents which are enclosed in pages 41 to 45 of the Paper Book. b) Copies of sample sale deeds executed by Shri KF Rangad on behalf of assessee where the fact of the power of attorney is executed in favour of KF Rangad is also duly mentioned. These documents are enclosed in pages 48 to 52 of the Paper Book.
12. Further, the assessee has also enclosed a certificate dated 05.01.2010 from Shri KF Rangad, retired Govt employee of Meghalaya confirming that he had sold the plot of land at Mawlai pursuant to power of attorney executed by his aunt i.e. assessee’s mother and out of sale proceeds received thereon, he had send Rs. 20 lakhs to his cousin Mrs Gloria E Benarji (assessee herein) in the year 2006. This certificate is enclosed in page 39 of the Paper Book.
13. Further, there is confirmation given by Shri KF Rangad on 20.07.2010 narrating the entire events as to how he entered the picture of obtaining the power of attorney from assessee’s mother; selling the land on behalf of the assessee in various phases; receiving the sale proceeds of land on behalf of assessee; retaining the said cash on behalf of the assessee and sending Rs. 20 lakhs to assessee in the year 2006. This confirmation is enclosed in pages 40 of the Paper Book.
14. Further, a certificate from Administrative Officer, Directorate of Commerce & Industries, Meghalaya, Shillong was also obtained to state that the land which has been sold was a tribal land (not falling within Shillong Municipality) in the year 1989 to prove that there cannot be any capital gain
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tax liability on the sale of such land as it is only a rural agricultural land. This certificate is enclosed in page 46 of the Paper Book.
15. From the perusal of all the documents and due appreciation of all the evidences already placed on record, we have no hesitation to conclude that assessee had duly explained the source of cash deposits made in the total sum of Rs. 20,02,801/- made in the bank account. Hence, nothing remains unexplained thereon warranting any addition. The ground raised by the assessee is allowed.
16. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 07/03/2025.
-Sd/- -Sd/-
Dated: /03/2025 A K Keot Copy forwarded to 1. Applicant 2. Respondent
4. CIT (A)
5. DR:ITAT
ITAT, New Delhi