AURAINE BOTANICALS PRIVATE LIMITED,GURGAON vs. INCOME TAX OFFICER, GURGAON

Aggrieved with the above order, assessee preferred an appeal before the NFAC, Delhi and raised several grounds. However, several notices were issued to the assessee giving multiple opportunities for furnishing the details in support of the grounds of appeal

That the learned AO has erred in law and facts of the case by making an addition of INR 41,50,000/- in the income of the assessee, by treating the cash as unexplained money and disregarded evidence of bank withdrawals and cash book and the nature of business of the assessee, requiring expenditure in cash.

The learned AO has erred in law and facts of the case by not complying with the provisions of section 68 of the Act and making addition of INR 41,50,000/- on account of alleged unexplained cash credits in the books of assessee.

That the learned AO has erred in law and facts by computing the interest liability u/s 234B on the addition made in the assessment order under section 68 and disallowing the amount under section 36(1)(va) of the Act.

That the learned AO has erred in law and facts of the case by not providing reasonable opportunity of being heard before passing an adverse order under the Act.

That the learned AO has erred in law while initiating penalty proceedings u/s 271AAC(1) of Income Tax Act,1961 since the section was inserted by the Taxation laws (Second Amendment) Act, 2016 which was enacted as an act on 15th December,2016. Hence, the same cannot be applied on cash deposits done before 15th December 2016.

That the learned AO has erred in law in applying the Section 271AAC(1) of Income Tax Act,1961 on the assessee since the Article 20(1) of the Constitution of India prohibits that "No person shall be convicted of any offence except for violation of a law in force at the time of the commission of the Act charged as an offence, not be subjected to a penalty greater than that which might have been inflicted under the law in force at the time of the commission of the offence.”

At the time of hearing, ld. AR of the assessee brought to our notice relevant facts on record and brought to our notice that assessee has withdrawn cash from Kotak Mahindra Bank and unutilized funds were redeposited in the bank. He brought to our notice cash book for FYs 2015-16 and 2016-17 and submitted that during FY 2015-16, assessee has withdrawn cash from bank and utilized the funds for the purpose of business and he also brought to our notice that assessee has utilized the whole cash withdrawn for the purpose of business. For the FYs 2015-16 & 2016-17, he brought to our notice summary of cash book for the abovesaid two years as under :-

He submitted that assessee has withdrawn Rs.1.38 crores during the year and utilized for the requirement of business similar to previous financial year and excess funds were redeposited in the bank to the extent of Rs.41,50,000/-. He submitted that assessee has maintained books of account which were duly audited and assessee has already demonstrated the excess cash withdrawn from the bank and unutilized funds were deposited in the bank. Therefore, he submitted that the cash deposited by the assessee are already accounted for. He also brought to our notice details of cash withdrawn and details of cash deposited by the assessee as under :- Date Cash deposited (INR) Page no. of paper book 09th December, 2016 9,50,000/- 335 14th December, 2016 9,00,000/- 334 16th December, 2016 5,00,000/- 333 17th December, 2016 9,00,000/- 333 20th December, 2016 9,00,000/- 332 Total 41,50,000/- Month Cash withdrawn (INR) April 2016 26,000/- May 2016 25,000/- June 2016 18,85,000/- July 2016 21,50,000/- August 2016 20,45,000/- September 2016 36,70,000/- October 2016 36,01,000/- November 2016 4,01,400/- Total 1,38,03,900/-

Further he submitted that the AO has initiated the provisions of section 115BBE of the Act. With regard to PF and ESI issue, he agreed that the addition may be sustained.

Considered the rival submissions and material placed on record. We observe that assessee has deposited Rs.41,50,000/- during demonetization period as per the chart submitted by the assessee. Further it is brought to our notice that assessee has withdrawn cash from Kotak Mahindra Bank and he submitted cash book indicating the withdrawal of cash from the bank and he also submitted the details of expenditure incurred by the assessee and more or less the expenditure incurred by the assessee are similar to the expenditure incurred by the assessee in the previous assessment year. Excess cash which was not utilized by the assessee for the purpose of business were redeposited due to declaration of demonetization during the current assessment year. Considering the cash book and bank book brought on record, we noticed the excess cash maintained by the assessee, it is evident from the cash book brought on record, therefore, we are inclined to allow the claim of the assessee also it has demonstrated that it has carried the respective cash balance in the business, which was deposited in their bank account due to declaration of demonetization. No other material brought on record by the Assessing Officer except observation and surmises on the basis of information that assessee had deposited cash during demonetization, accordingly, ground raised by the assessee is allowed.