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Amish R. Kapadia Versus ITO, Ward 12 (3) (2) , Mumbai

Levy of penalty u/s. 271(1)(c) - withdrawal on last date of cash deposit - Held that:- in the absence of details as to cash withdrawals and deposits during the immediately preceding year, the claim as to the opening balance cannot be verified or opined upon. In fact, the cash utilized for personal/household purposes would also have to be factored there-into. Why, we wonder the assessee could not furnish, similarly, the said details for the immediately preceding year as well. Continuing further, .....

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ust 2004, being generally drawn at the beginning of the month, so that the surplus of ₹ 0.25 lacs (2.15 lacs -1.90 lacs) can be regarded as toward the same. The explanation of the withdrawals being the source of the deposit would thus not hold for ₹ 2.50 lacs deposited in bank account on 30.7.2004. The explanation offered (qua this deposit) is not valid; rather, cannot be under the circumstances regarded as an explanation at all. The penalty in respect of the addition to this extent .....

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overy, so that there was no imminent need for cash. If the operation, which is stated to be for the same problem, costs ₹ 1.02 lacs a year later, the same would cost the assessee who is even otherwise covered by insurance, a similar amount with we observing the assessee to have funds despite the deposits, cash at ₹ 2.50 lacs for the purpose. The question, however, is: Why does not the assessee state so, revealing the truth of the matter? Is it that only a balance of ₹ 15, .....

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6-5-2016 - Shri Sanjay Arora, AM And Shri Amit Shukla, JM For the Appellant : Shri Dhirendra M. Shah For the Respondent : Shri S. R. Singh ORDER Per Sanjay Arora, A. M. This is an Appeal by the Assessee directed against the Order by the Commissioner of Income Tax (Appeals)-23, Mumbai ( CIT(A) for short) dated 20.01.2010, confirming the levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 ( the Act hereinafter) for the assessment year (A.Y.) 2005-06 vide order dated 31.3.2009. The only iss .....

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Road Branch, Mumbai, Saving Bank account 10390). In explanation as to its source, the same was stated as withdrawals from the same bank account. A total of ₹ 25 lacs had been withdrawn during the year from the said bank account, of which ₹ 16.65 lacs had been deposited back, with a part of the balance of ₹ 8.35 lacs, i.e., ₹ 6.10 lacs, being absorbed for personal/household expenses. There was, as such, no reason to consider the same as unexplained as to its source. Toward .....

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tment and medicines. The said explanation did not find favour with the Revenue. The disease for which the assessee had been operated upon in December, 2005, i.e., BIL Varicose Veins , was, as per the diagnosis, a year old, and not since 1998, as stated by the assessee. The medical treatment, which was estimated to cost ₹ 1.02 lacs by the (Jaslok) Hospital, was covered by a cash-less insurance policy. As the assessee, however, failed to produce the medical bills - which were settled directl .....

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the basis of cash withdrawals during the preceding year as well as the total expenditure for house-hold/personal as well as medical expenses for the said period. Addition was, accordingly, made and confirmed at ₹ 16.50 lacs; the A.O. accepting the cash deposit of ₹ 15,000/- (made on 13.12.2004). The matter travelled up to the Tribunal, which confirmed the addition vide order dated 09.10.2009 (in ITA No. 2747/Mum/2008), the relevant part of which, extracted at para 2.3 of the impugned .....

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the lower authorities nor the claim is supported by any evidence. The claim therefore cannot be accepted. The assessee in the year 2005 had undergone major treatment for varicose vein but the expenditure of ₹ 1,02,000/- had been settled by the Insurance Company and no withdrawal was required. The assessee it is claimed had been treated for the same disease in August 2004 but no details of expenditure had been given. The disease is not such which requires emergency withdrawal of ₹ 10 .....

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uman probabilities as held by Hon'ble Supreme Court in case of Morvi Industries (82 ITR 835). Considering the changing stand of the assessee and the nature of illness and the entirety of facts and circumstances, we agree that the conclusion drawn by the lower authorities that the withdrawals of ₹ 10 lacs and ₹ 6.65 lacs by the assessee had been utilized for undisclosed purposes and were not available for re-depositing the same in December, 2004. For the same reasons we also find .....

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considering the smallness of the amount is easily explained from the monthly withdrawals in the preceding months. We therefore accept the source of deposit of ₹ 15,000/-, but confirm the additions made on account of deposits of ₹ 2,25,000/- (*), ₹ 9,00,000/- and ₹ 5,00,000/- on different dates. Accordingly we confirm the additions of ₹ 15,60,000/- (@)." [(*) ₹ 2,50,000/- (@) ₹ 16,50,000/-] 2.2 Penalty proceedings, initiated on the passing of the as .....

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(Ker); Addl. CIT vs. Bhartiya Bhandar [1980] 122 ITR 622 (MP); Western Automobiles (India) vs. CIT [1978] 112 ITR 1048 (Bom); and Durga Timber Works vs. CIT [1971] 79 ITR 63 (Del). The same was confirmed by the ld. CIT(A), meeting the assessee s argument of both sections 68 & 69 being not applicable, relying on the order by the tribunal on quantum and finding the case law cited by the A.O. as relevant and applicable. Aggrieved, the assessee is in second appeal. 3. We have heard the parties, .....

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plicable in the admitted facts of the case, i.e., cash deposit in the assessee s bank account. In fact, the very fact that the argument does not address the application of section 69, the other section stated by the AO, which is clearly applicable in the undisputed facts of the case - the cash deposit in the assessee s bank account, i.e., is incomplete, is itself a tacit admission of the said provision, which mandates for the deeming of the impugned deposit as income where not satisfactorily exp .....

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ed cash deposits. Rather, in our clear view, the mention of section 68, which is superfluous, even if regarded as a commission, is saved by the provision of section 292B of the Act. 3.2 The basis for the levy and confirmation of penalty by the Revenue is that no plausible explanation for cash retention (for 4 ½ months, i.e., from mid August to end December, 2004) and, in turn, for the cash deposit/s in the assessee s bank account, admittedly by the assessee himself, has been furnished by .....

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nder: Date Withdrawals Deposits (Amount in Rs.) 30.4.2004 50,000 27.5.2004 10,000 05.6.2004 15,000 10.6.2004 40,000 02.7.2004 20,000 10.7.2004 50,000 15.7.2004 15,000 23.7.2004 15,000 30.7.2004 2,50,000 18.8.2004 10,00,000 19.8.2004 6,65,000 27.8.2004 40,000 02.9.2004 50,000 04.10.2004 30,000 11.10.2004 20,000 28.10.2004 50,000 30.10.2004 45,000 08.11.2004 20,000 09.11.2004 30,000 13.12.2004 15,000 30.12.2004 9,00,000 31.12.2004 5,00,000 28.01.2005 30,000 31.1.2005 50,000 05.2.2005 1,00,000 10.2 .....

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377; 3.35 lacs). Further, the assessee, though does not maintain any day-to-day cash-book, claims an opening cash balance (as on 1.4.2004) at ₹ 3.75 lacs (PB pgs. 1 - 3), which did not find acceptance by the Revenue. We agree that in the absence of details as to cash withdrawals and deposits during the immediately preceding year, the claim as to the opening balance cannot be verified or opined upon. In fact, the cash utilized for personal/household purposes would also have to be factored t .....

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ade from during this period. In fact, another ₹ 40,000/- to ₹ 50,000/- would be required toward such monthly expenses for the month of August 2004, being generally drawn at the beginning of the month, so that the surplus of ₹ 0.25 lacs (2.15 lacs -1.90 lacs) can be regarded as toward the same. The explanation of the withdrawals being the source of the deposit would thus not hold for ₹ 2.50 lacs deposited in bank account on 30.7.2004. The explanation offered (qua this depo .....

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edly at ₹ 3.10 lacs (PB pages 2-3). The cash deposit of ₹ 15,000/- (on 13.12.2004) having been accepted as out of these withdrawals, the cash consumed out of such withdrawals, allowing for the excess (Rs.0.25 lacs) available (as on 01.8.2004), works to ₹ 3.0 lacs, leaving a balance of ₹ 16.50 lacs with the assessee. This is sufficient to cover the next deposits, made in December 2004, at ₹ 14 lacs. The bulk of the withdrawal (i.e., at ₹ 16.65 lacs) is, as in t .....

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ion, the tribunal also observing of the assessee s medical problem being not such as would require cash (cost) to that extent. That could in fact at best explain a withdrawal/retention of ₹ 1 lac to 3 lacs; the assessee in fact retaining ₹ 2.5 lacs (Rs.16.50 lacs - ₹ 14 lacs) out of these withdrawals. Further, the cash withdrawals continue unabated, in sums ranging from ₹ 20,000/- to ₹ 45,000/-, at regular intervals of time upto 09.11.2004, adding to ₹ 2.85 la .....

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hip for the relevant year is at a meager ₹ 3,000/- (refer pg. 4 of the assessment order), so that funds of the firm stand, as it appears, diverted, resulting in either loss of business or met by incurring borrowing (at a cost). Continuing further, even if such huge expenditure is contemplated, of which there is no evidence - why we wonder the same could not be adequately substantiated or in fact even met through the banking channel, viz. bankers cheque or demand draft, being only a matter .....

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tracted, has been brought on record or even to our notice. Even the assessee s case qua medical treatment is sans any details, which, where so, would be fully evidenced in-as-much the treatment would be well-documented and from a credible source. The question however that arises is: Is it necessary for the assessee to disclose the purpose of his withdrawals to the Revenue where he claims the same has not been consumed and, further, considering that the period of retention is from 4 to 5 months. .....

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which the assessee could as a partner be a beneficiary. These are surrounding facts and circumstances, which have a bearing in the matter, even if not direct. When the question is with regard to the validity of an explanation, the same could only be considered having regard to the entirety of the facts and circumstances. That is, there is nothing on record to suggest either the cash withdrawn being consumed (to the extent of ₹ 16.50 lacs), so as to be not available with assessee in end-Dec .....

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gard to the entirety of the facts and circumstances of the case. As afore-stated, there are mitigating factors, viz. the retention period; no possible source of income being indicated, etc., which have prevailed with us in making the said statement in the present case. Why, the assessee states of the medical emergency, for which cash was withdrawn, having subsided, leading to its deposit in the account - an explanation, though not substantiated, has not been controverted. 3.5 So, however, the tr .....

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the assessee s operation (for Varicose Veins) in December, 2005, which states of his medical condition (problem) having a history of a year (refer para 8 of assessment order and para 2.3 of impugned order). The credibility of the information is, in any case, not in doubt. If that be so, it becomes incumbent both for the assessee to reveal the truth of the matter. The Revenue is also required to satisfy itself with regard to the veracity or the truth of the assessee s explanation. What was the tr .....

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es with the assessee s explanation of the cash deposited representing the unutilized sum of the withdrawals made for an imminent medical condition, materially changes the complexion of the entire case (also refer paras 2.1, 3.2 & 3.4 of this order). We, accordingly, only consider it fit and proper that the assessment qua the addition of ₹ 14.00 lacs is restored for consideration of this aspect of the matter back to the file of the AO. If the assessee fails to lead evidence, either disp .....

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scussion, is purely and principally factual, with a view as to the acceptability of the assessee s explanation being required to be taken on the anvil and upon a consideration of the entirety of the facts and circumstances of the case. Our earlier finding of the assessee s explanation of the cash withdrawn (from his bank account) as the stated source of cash deposits, made after 4 ½ months, as acceptable even in the absence of a proper explanation or the substantiation of the purpose of w .....

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he concomitant expenditure incurred thereat. It may well be that the assessee spent the surplus (Rs.2.50 lacs) or similar amount on the said treatment, depositing the balance (Rs.14 lacs) in end-December, 2004, upon full recovery, so that there was no imminent need for cash. If the operation, which is stated to be for the same problem, costs ₹ 1.02 lacs a year later, the same would cost the assessee - who is even otherwise covered by insurance, a similar amount - with we observing the asse .....

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