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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR.
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
Date of Hearing 22.12.2022 Date of Pronouncement 31.01.2023 ORDER Per:Anikesh Banerjee, JM: The instant appeal of the revenue was filed against the order of the ld. Commissioner of Income Tax (Appeals)-5,Ludhiana, [in brevity the ‘CIT (A)’]bearing appeal No. 10342/ROT/IT/CIT(A)-5/2019-20, date of order 02.09.2021, the order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2017-18 bearing .The assessee has filed cross appeal by challenging the impugned order of the ld. CIT(A) bearing ITA.
94/Asr/2021. The impugned order was emanated from the order of the ld. Asstt.
Commissioner of Income Tax, Central Circle, Jammu,(in brevity the AO) order passed u/s 143(3) of the Act date of order 28.12.2019. The revenue has taken the following grounds: “
1. Whether upon facts and circumstances of the case, the Ld.CIT(A) was justified in restricting the addition of Rs.5,03,336/-, on account of cash deposits during the demonetization period on one particular day in Delhi, by various debtors residing in J&K State?
2. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal.”
The assessee has taken the following grounds:
“1. That the worthy CIT(A) is not justified in partly allowing the appeal by confirming addition of Rs.5,03,336/- in respect of one grower/debtor out of total addition of Rs.6,33,46,052/- made by the ld. AO.
That the appellant craves, leaves to alter, amend and add to substitute any ground of appeal before or at the time of hearing.”
3. Brief fact of the case is that the assessee is a dealer of fresh fruits and commission agent besides under a cold storage plant. In the preceding year for A.Y. 2016-17, the sundry debtors amount of Rs.6,14,67,226/- was reflected in the books of account of the assessee which is finally reflected in the final accounts.
The assessee had paid advanced to the farmer for purchasing of fresh fruit. For the impugned assessment year, the advance was returned back by the farmers after the declaration of demonetisation. The advance amount was returned back to the assessee. The assessee had deposited the cash in bank account in Jammu & Kashmir Bank, Branch Lassipora Pulwama, Kashmir and Azadpur, New Delhi Branch. The total amount was deposited in bank account toRs.6,45,50,000/- out of that in Pulwama Branch amount to Rs. 42,50,000/- & in New Delhi Branch amount to Rs. 6,03,00,000/-. As per the information from bankers Rs.32,50,000/- was demonetised currency (SBN) and rest amount was deposited on normal currency.
Toconsider the demand of the parties, the cash was immediately received from the total 156farmers to maintain the business liaison. During the assessment, the details of transactions were submitted before the ld. AO. The notice u/s 133(6) was issued to 60 debtors. out of 60 notices, 16 notices were returned back undeliveredwith the remark that “incomplete address or no person received here”.
Only denial of transaction from one party was happened during assessment.
Perusal of assessment record the appellate authority confirmed that many of the confirmations from parties were received after assessment. All parties had confirmed the cash transaction. One of the debtors Mohd. Ahmed and Sons, Molu Chitragam, Sopian, was alleged returned an amount of Rs.5,03,336/- denied having made any such payment to assessee. But the assessee had made an objection that the verification was not proper and incomplete one. Later the confirmation from party was filed& reason was well explained. But both the authorities have not accepted the argument of assessee & confirmed the amount of Rs. 5,03,336/-. The total addition was made U/s 68 of the Act by the ld. AO amount of Rs.6,33,46,052/- &the tax was charged U/s 115BBE of the Act. Aggrieved assessee had challenged the assessment order before the ld. CIT(A). In order of appeal the amount of Rs.5,03,336/- was only confirmed by the ld. CIT(A). The rest amount of addition of Rs.6,28,42,716/- was deleted by the appellate authority.
Being aggrieved, the assessee and the revenue both have filed appeal and cross appeal before the ITAT by challenging the order of the ld. CIT(A).
4. During hearing the ld. CIT DR had filed a written submission the relevant part of the written submission is extracted as below:-
“The fact of the case gives rise to following queries -
1. 1. The demonetization was announced at 8.00 p.m. on 08.11.2016. It is unbelievable to accept as to how the news spread so fast so that the illiterate fruit growers got panic and came to the office from different places to return the advances taken by them within a period of 4 hours since all the amounts received from the debtors is shown to have received on 08.11.2016.
2. It is surprising to note how the debtors from various places in Kashmir could reach at the assessee’s office at Pulwama or the Bank Branch at Azadpur, New Delhi for depositing their advances taken from assessee.
3. There were 156 debtors who returned the advances taken form the assessee on 08.11.2016. There are only 10 deposit entries from 11.11.2016 to 30.11.2016. It is the moot question that as per the directions of the assessee, how 156 debtors can deposit the amounts in only 10 entries.
4. It is the question as to who collected the money and deposited the same in the bank account of the assessee since either the pay slips are unsigned or they are only initialled (not having complete signature) due to which depositor cannot be identified easily. (Refer - 24 of the assessment order) 5. When the amount was deposited in 10 instalments on various dates, then why the total amount of Rs.6,33,46,052/-was shown to have received on 08.11.2016 i.e. on single date.
6. How the assessee came to know that the total amount of Rs.6,33,46,052/- was received from all 156 debtors on 08.11.2016 when the amounts were deposited on various dates in 10 instalments on subsequent dates.
Amongst the debtors who returned their advances are (i) Mohd. Maqbul and Sons, Check Keeham, Chowgal, Kupwara who returned its outstanding amount of Rs.208.85 and (ii) Irshad Ahmed Lone, Chitragam, Awenura, Anantnag who returned his outstanding amount of Rs.779.20. It is the question as to why such persons will run here and there for such a miniscule amount and return the said amount on 08.11.2016 within 4 hours of the announcement of demonetization.”
4. The ld. CIT DR further relied on the order of the ld. AO the relevant para no. 11 page 31 is extracted as follows: -
“11. Therefore, in view of the above discussion, the cash credits aggregating to Rs. 6,33,46,052/- in respect of 156 persons as per para “4.1” credited in the books of accounts of the assessee as on 08-11- 2016, which have been allegedly received back from debtors remained unexplained. The explanations offered by the assessee are not satisfactory with regard to the nature and source of these credits. Earlier assessee had stated that the cash was received by them from their debtors to whom advances were given by them. As per them, the cash received from the debtors on 08-11-2016 was deposited in bank account during the period of demonetization and out of all the cash deposited during demonetization period, only Rs. 32.50 Lakhs was in SBN currency. However, when the assessee was confronted with the fact that out of total cash deposited, Rs. 6.03 crores was deposited in New Delhi and that too in SBN currency, assessee changed his version and thereafter stated that the cash was accepted from the debtors but with the instructions to deposit the same directly in the bank account. This changed version of the assessee is also not acceptable in view of the discussion in the foregoing paras. It is a clear case of surplus unexplained cash lying in old, demonetized currency with the assessee has been deposited in the bank account under the colour of realization from the debtors. It is pertinent to note here that three directors of the assessee company, who are holding around 67% of shares and having control over the affairs of the assessee company are located in Delhi. It was thus most likely that major cash in SBN deposited in the Delhi Branch was actually the unaccounted cash of the assessee lying in possession and control of directors. As such, an amount of Rs, 6,33,46,052/- is being added to the total income of the assessee u/s 68 of the I. T. Act, 1961 as unexplained cash credits as deemed income of the assessee, since the assessee has failed to furnish any satisfactory explanation regarding nature and source of such credits. The tax shall be charged u/s 115BBE of the I. T.Act, 1961. Since the addition has been made u/s 68 of the I. T. Act, 1961 as deemed income penalty proceedings u/s 271AAC of the I. T. Act, 1961 are initiated.”
4.2 The ld. counsel in his argument submitted a paper book containing page 1 to 30 which is kept in record. In argument, the ld. counsel categorically stated that the assessment in preceding assessment year 2016-17 was completed for assessee u/s 143(3) of the Act.The copy of the assessment order u/s 143(3) is enclosed in APB page 1 to 4. The assessee had declared the in account of “Advance to Grower” in the return of income which was assessed during the time of assessment in preceding year. The amount of “Advance to Grower” was reflected in Balance Sheet for AY 2016-17 amount toRs.6,46,70,127.23, APB-Page-11. The copy of the submission before the ld.DCIT, CC, Jammu for A.Y. 2016-17 is enclosed in APB pages 10 to 17.
4.3 The ld. Counsel for assessee further mentioned that during assessment proceeding for assessment year 2017-18, he submitted the list of details of 156 sundry debtors, to whom the assessee paid the advance and copy of the submission is enclosed in APB pages 18 to 27. In his argument, he further mentioned that the notice issued for Mohd. Abdul & Sons, the address was wrongly mentioned by revenue and the confirmation letter of Mr. Mohd. Abdulla is submitted who had confirmed the transaction amount of Rs.5,03,336/- with assessee. The copy of the letter and the confirmation is also enclosed in APB pages 28 to 29.
4.4 In his argument the ld. Counsel mentioned that the disallowance of Rs.5,03,336/- of M/s Mohd. Abdulla and Sons was not allowed for any cross examination by the revenue authority.
The ld. Counsel for assesse respectfully on the following judgments which are as follows:- 1. Income Tax Officer Vs. Atul Kumar Mittal, ITAT Delhi, Asstt. Year 2007-08:- When The debtor was considered genuine at the end of preceding year, the receipt from the said debtor during the year under consideration cannot be treated as bogus. The observation of the Bench is extracted as follows: - “8. We have heard both the parties and carefully gone through the material available on record. In the present case it is noticed that a sum of Rs.4,55,990/-was outstanding in the name of M/s Pankaj International and the said amount was received by the assessee during the year under consideration. However, the AO was of the view that the account in the name of M/s Pankaj International belonged to Shri Pankaj Mittal in whose account, no such entry was appearing. However, the AO did not bring any material on record to substantiate that the debtor M/s Pankaj International was not outstanding in the earlier year. On the contrary the claim of the assessee was that the amount was outstanding in the name of said party since 31.3.2005 and the amount was received during the year under consideration. In our opinion when the debtor was considered genuine at the end of the preceding year, the receipt from the said debtor during the year under consideration cannot be treated as bogus. We, therefore, are of the view that the ld. CIT(A) has rightly deleted the addition.
3.Racmann Springs (P) Ltd Vs. DCIT (1995) 55 ITD0159.TheITAT Delhi Bench has observed that realisation from Sundry Debtors cannot be treated as cash credits. The observation of the Bench is reproduced as below: - “35. The CIT (Appeals) proceeds on the basis that the impugned addition of Rs. 15,59,845 is made as the assessee was not able to prove the cash credits. This is evident from para 29 of his order. He speaks of identity and creditworthiness of the creditors. The Assessing Officer never held that the said amount represents unproved credits. The Assessing Officer only held that it represents "undisclosed sales of the assessee". This shows the utter confusion in the mind of the CIT (Appeals) which led to the dismissal of the assessee’s appeal.
Besides the total of the amounts of drafts as per list-I reproduced in the assessment order dated 13-1-1992 comes only to Rs. 15,09,845. But the Assessing Officer had made an addition of Rs. 50,000 more by taking the figure to be added at Rs. 15,59,845. Neither the assessee’s counsel nor the Departmental Representative have noticed this. This shows the light attitude taken by the Assessing Officer.
In the above facts and circumstances of the case, we hold that the Assessing Officer is not at all justified in adding Rs. 15,59,845 towards undisclosed sales of the assessee and in applying section 68 of the Income- tax Act, 1961 to the same. We delete the sustained addition of Rs. 15,42,000.”
Lalchand Bhagat AmbicaRamVs. CIT (1959) 37 ITR 288 (SC) The relevant paragraph of the Hon’able Apex Court respectfully is reproduced as follows: - “A decision of the Allahabad High Court reported in Kanpur Steel Co. Ltd. v. Commissioner of Income-tax [1957] 32 ITR 56 may also be noted in this context. The assessee there encashed 32 currency notes of Rs. 1,000 each on January 12, 1946, when the High Denomination Bank Notes (Demonetization) Ordinance, 1946, came into force, and when the Income-tax Officer called upon it to explain how these currency notes came into its possession, the assessee claimed that the notes represented part of its cash balance which, on that date, stood at Rs. 34,313. The Income-tax Officer rejected the explanation and assessed the amount of Rs. 32,000 represented by these currency notes as suppressed income of the assessee from some undisclosed source. The Tribunal took into account the statement of sales relating to a few days preceding the date of encashment and found that the highest amount of any one single transaction was only Rs.
The Tribunal also referred to another statement of the daily cash balances of the assessee from December 20, 1945, to January 12, 1946, and noted that the cash balance of the assessee was steadily increasing. The Tribunal, however, estimated that high denomination currency notes to the value of Rs. 7,000 only could form part of the cash balance of the assessee. It therefore upheld the assessment to the extent of Rs. 25,000. On a reference to the High Court it was held (i) that the burden of proof lay upon the Department to prove that the sum of Rs. 32,000 represented suppressed income of the assessee from undisclosed sources, and the burden was not on the assessee to prove how it had received these high denomination currency notes; for, until the Demonetisation Ordinance came into force high denomination currency notes could be used as freely as notes of any lower denomination and no one had any idea that it should be necessary for him to explain the possession of high denomination currency notes, the assessee had naturally not kept any statement regarding the receipt of these currency notes, and it was for the first time on January 12,1946, when the Ordinance came into force, that it became necessary for the assessee to explain its possession of these currency notes; and (ii) that the explanation given by the assessee that the notes formed part of the cash balance of Rs. 34,000 and odd was fairly satisfactory and was not found by the Tribunal to be false; the statement of sales was hardly relevant to the question; the Department, in relying on the entries relating to the bills of each day, committed an error and no inference should have been drawn from them ; that any one single transaction did not exceed Rs. 399 did not preclude the possibility of payment in high denomination notes for such transaction ; therefore, the Tribunal rejected the explanation of the assessee on surmises, and there was no material for the Tribunal to hold that the sum of Rs. 25,000 represented suppressed income of the assessee from undisclosed sources. In arriving at the above decision the High Court referred to the cases of Mehta Parikh & Co.'s case (supra) and ChunilalTicamchand Coal Co. Ltd.'s case (supra) It is, therefore, clear that the Tribunal in arriving at the conclusion it did in the present case indulged in suspicions, conjectures and surmises and acted without any evidence or upon a view of the facts which could not reasonably be entertained or the facts found were such that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, perverse and this court is entitled to interfere. We are, therefore, of opinion that the High Court was clearly in error in answering the referred question in the affirmative. The proper answer should have been in the negative having regard
to all the circumstances of the case which we have adverted to above. The appeals will accordingly be allowed, the judgment and order passed by the High Court will be set aside and the referred question will be answered in the negative. The appellant will be entitled to its costs of the reference in the High Court and of these appeals in this court as against the respondent.” 4.5 The ld. counsel further argued and relied on the order of the ld. CIT(A) the relevant part of the order is extracted as below:-
We consider the rival submission and perused the documents available in the record. In our factual matrix, the assessee has “Advance to Grower” in other sense Sundry Debtors which were carry forwarded from preceding years. There is no doubt, that the assessee has a sundry debtor in sufficient amount to liquidate the amount for depositing in the bank. Only, the question is the mode of receiving of cash by the assessee and deposited it in Kashmir and in Delhi. In argument, the ld. CIT DR only pointed out the mode of receiving of cash or returned of cash by the Growers during demonetisation. The ld.CIT(A) had clearly verified that the amount was duly deposited by the farmers and most of the Growers are verified and accepted the facts.
5.1 The ld. Counsel has relied on catena of judgments. In summary the assessee has enough amount to advance to party/ grower. In preceding assessment year there, the assessee was maintain more than 6 crore in “Advance to Grower” account. The full amount was disclosed in books and assessed U/s 143(3). In the impugned assessment year, the verification was initiated& the part response was in favour of assessee. Pending verifications were accepted by the appellate authority.
But total addition was made U/s 68 of the Act by the ld. AO.
We relied on the order of ITAT Delhi bench that Sundry Debtor cannot be added back U/s 68 as it is not creditor. The assessing authority has doubt on transaction of assessee with the party. The Hon’able Apex court, supra in observation that assessment cannot be done on suspicion. The ld. CIT-DR was not able to submit any contrary judgment against the submission of assessee. In the submission of CIT-DR reiterated by demurring onthe mode of transaction of assessee with parties to whom the advance was given. This can not be negated only on basis of suspicion.
In our considered view, that there is no infirmity in the order of the ld. CIT(A). So, we are not interfering in the order of ld. CIT(A) related allowing of assessee’s appeal amount to Rs.6,33,46,052/-. We respectfully relied on the order of Apex Court, supra. Section 68 is not empowered to allow addition of sundry debtors/ advance to growers. The ld. CIT(A) without any cross verification had disallowed the amount of Rs.5,03,336/-. The rest amount was accepted which was also not verified& Section 68 is not proper for entertaining the addition. So, we find that the disallowance of Rs.5,03,336/- is erroneous and liable to be dismissed.
In the result, the appeal of the revenue bearing is allowed.
Order pronounced in the open court on 31.01.2023