PRAFULLA JAIN,JABALPUR vs. INCOME TAX OFFICER WARD1(1) JABALPUR, JABALPUR

The brief fact of the case are that the assessee, a dealer for a stockist of two- wheelers (Brand: Hero Honda), M/s. Super Agencies, Jabalpur, was found to have deposited Rs. 26.25 lacs in his current account with State Bank of India (SBI), Majhouli, during the demonetizing period, i.e., from 9.11.2016 to 31.12.2016, including Rs. 11.22 lacs in old notes, i.e., on 17.11.2016 (Rs. 8.72 lacs) and on 29.11.2016 (Rs. 2.50 lacs). That apart, he had deposited Rs. 1.90 lacs and Rs. 1.0 1 | P a g e (A.Y. 2017-18) Prafulla Jain v. ITO lac in old currency during this period in his other saving bank accounts. His return of income for the relevant year, filed on 17/12/2017 at an income of Rs. 3.92 lacs, was selected for scrutiny. All the cash deposits were accepted, save Rs. 2.50 lacs, on 29.11.2016, which explains the instant appeal.

During hearing, the assessee, through his counsel, Sh. Nema, Advocate, was at pains to explain that the cash deposited on 29.11.2016 was transferred on the very same day to the Principals, M/s. Super Agencies (SA), through RTGS. The same represents cash sales and, accordingly, remitted immediately to the Principals, as indeed was the earlier deposit of Rs. 8.72 lacs on 17.11.2016, toward which Sh. Nema would take us through the bank statement (PB pgs. 23-24). On being inquired as to how, then, the sale was realized by him in old currency, Sh. Neema would explain that the same (i.e., sale) was in fact prior to 9.11.2016, the commencement of the demonetization period. The assessee, he clarified, on collection, issued a provisional receipt to the customer on behalf of the Principals, and which explains the non-maintenance of the cash-book, found wanting by the Revenue. The assessee only receives commission for his efforts which, for the relevant year, is at nearly Rs. 4 lacs, duly returned, and for that reason, no accounts are maintained, which is only in terms of section 44-AA.

We have heard the parties, and perused the material on record. 4.1 On denial of opportunity, which constitutes the assessee’s first Ground, it was admitted by Sh. Nema that all the four notices of hearing were sent to the two e-mail Ids provided by the assessee himself for the purpose per his return of income. None having been responded to by the assessee, the first appellate authority could not possibly be faulted with for proceeding to decide the appeal, which he does on merits, ex parte the assessee. 4.2 On merits, to begin with, why we wonder is the cash, stated to be belonging to the Principal (SA), not deposited by the asseesee direct in it’s bank account, rather than in his own account and then remitting it thereto. This has not been 2 | P a g e (A.Y. 2017-18) Prafulla Jain v. ITO shown to be the practice continuing from the past, or its rationale explained, at any stage. Further, why, one may ask, was the cash, upon collection, claimed to be prior to 09.11.2016, not deposited forthwith, but withheld, for, depending upon the date/s of collection, for weeks, if not months together, with, on the contrary, Sh. Neema emphasizing before us on the immediate transfer of funds (to the Principal) to justify the same being not the assessee’s money. The receipts, stated to be issued to the customers on collection, copy thereof would surely be marked for the Principal, are conspicuous by their absence. The assessee has also not produced a confirmatory statement from the Principals, much less shown the cash receipt/ deposit to be in terms of the receipts issued. In other words, not only is it quizzical that the asseessee accumulates over Rs. 11 lacs in cash prior to 9.11.2016, he does not deposit it in his bank account, much less transfer the same, even as the same, as per his own statement/case, collected on behalf of the Principals, is banked immediately and transferred thereto with dispatch. That is, the claim is wholly un- evidenced and inconsistent with the conduct. Further, contrast this with no cash sales for the period 9.11.2016 to 29.11.2016, and the assessee’s case is no more than a set of bald claims. True, the assessee, not be required or obliged to maintain accounts under law, could yet, as indeed obliged to, prepare memoranda accounts or at least the statement of sales. That is, why one wonders does the assessee not justify the cash available with him as at the close of 08.11.2016 on the basis of sale receipts issued to the customers for on behalf of the Principal? In fact, that there are no sales other than in cash is itself inexplicable. Further still, any prudent person would, upon demonetization, and irrespective of the cash accumulated, immediately deposit the cash available with him with the bank as the same is no longer legal tender. This becomes all the more imperative where it is, as claimed, not his own money and backed by receipts, so that it would stand deposited preferably in the bank account of the Principal, or at least his own bank account, transferring the same immediately together with the sale statement/copy of the receipts to the Principal. The assessee deposits cash for the first time only on 3 | P a g e