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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Before: SHRI ABY T. VARKEY, JM & SHRI AMARJIT SINGH, AM
O R D E R
PER ABY T. VARKEY, JM:
This is an appeal preferred by the assessee company against the order of the Ld. Commissioner of Income Tax (Appeals)/(NFAC), Delhi dated 28.12.2022 for the assessment year 2017-18.
2. The main grievance of the assessee is against the action of the Ld. CIT(A)/NFAC confirming the addition of Rs.2,54,47,500/- being cash deposited during the demonetization period.
Brief facts are that the assessee had filed return of income on 28.12.2017 declaring total income at Rs. Nil (loss of Rs.8,888/-). Later, the case of the assessee was selected for complete scrutiny. The AO noted that the assessee company was engaged in the business activity of dealing in gold jewellery. And the assessee had shown total revenue from operation at Rs.95,56,06,224/-. The AO noted that during 2 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd demonetization period, the assessee company had deposited cash in its bank account to the tune of Rs.2,54,47,500/- as under: - Bank Account No. Amount deposited in demonetization period (in Rs.) SBBJ-61143177629 1,49,08,000/- State Bank of Patiala-61185025735/- 17,50,000/- SBBJ-61168647963 87,89,500/- Total 2,54,47,500/-
The AO show-caused the assessee about this deposit of cash, pursuant to which according to AO, the assessee accepted about the cash deposit but it disputed the cash deposit during the demonetization period which according to assessee was only Rs.2,44,77,500/- (Rs.10 Lakhs less). However, the AO didn’t accept the contention and noted that as per the Income Tax records available with him, it was Rs.2,54,47,500/-. Further, according to the AO, the assessee failed to reflect the details of cash deposits during demonetization period in its return of income, and even didn’t file details as sought in the pro- forma u/s 142(1) of the Act. Further, according to the AO, the assessee had only filed cashbook and submitted its reply (reproduced) “cash deposits is higher due to cash sale in Diwali festival. People used to buy jewellery during the Diwali festivals”. According to the AO, the said reply was not satisfactory. According to him, the assessee neither submitted the details of parties from whom cash has been received [after sale of jewellery during Diwali period] nor furnished the sale receipts. Moreover, according to him, the assessee has also not justified the deposit of cash during demonetization period by not giving comparative details of such cash sales prior or subsequent to the demonetization period. And that the assessee has not furnished the 3 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd bank account statement of the three bank accounts for the period 01.04.2016 to 31.03.2017 and preceding years. Thus, according to AO, inter-alia, the assessee failed to produce the source and genuineness of cash deposits in the above three bank accounts. Thus, according to AO, assessee failed to discharge the “burden of Proof” regarding the genuineness of the cash deposited in its account during the demonetization period along with source of cash, therefore, he added Rs.2,54,47,500/- u/s 68 of the Income Tax Act, 1961 (hereinafter “the Act”). Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to confirm the same. Aggrieved, the assessee is before us.
We have heard both the parties and perused the records. Assailing the action of the Ld. CIT(A), the Ld. AR of assessee, inter- alia, pointed out that assessee did not get “proper opportunity” of hearing before the AO and in this regard drew our attention to the ground no.2 raised by assessee. According to the Ld. AR, the AO made the addition on the basis of surmises and conjectures, and failed to appreciate the relevant facts necessary to assess the income objectively. According to Ld AR, the assessee company is engaged in the wholesale business of gold & silver jewellery and furnished the details of trading of Gold ornaments (monthly summary from 01.04.2016 -31.03.2017) which is reproduced as under: - 4 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd
The Ld. AR also submitted the monthly stock of Gold from 01.04.2016 to 31.03.2017 which is reproduced as under: -
According to her, the financials submitted reflects quantity details of monthly stock position of gold and the gold which were traded during that period. According to her, the cash deposited in this year was higher due to cash sale during Diwali festival. And since the assessee was into whole-sale business of gold jewellery, and the assessee had enough gold stock, when there was demand for gold/silver, the assessee grabbed the opportunity and sales was booked. According to Ld AR, the cash sales was miniscule when compared with the sales through banking channel. Ld AR pointed out that no adverse inference can be drawn against the assessee for not 5 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd giving the list of parties who purchased gold worth less than two (2) Lakh, because, as per law on subject, the assessee was not bound to collect the details of those customers viz PAN etc. According to Ld. AR, the assessee had acted in accordance to law, and the cash deposit was nothing but trade receipt, which could not have been added u/s 68 of the Act. Before us, the Ld. AR, filed the following documents to substantiate the source of the cash deposited in its bank accounts (i) Copy of Return Income (ii) Computation of Income (iii) Financials accounts (iv) Audit report under companies Act (v) VAT Audit report
(vi) Form no. 3CA & CD (vii) Bank statement SBBJ Mumbai (viii) Bank statement SBB Lucknow (ix) Bank statement SBBJ Varansi (x) Cash Book Head Office (xi) Cash Book Branch (xii) Cash Book Office datewise (xiii) Cash Summary, 2016-17 (xiv) Cash Summary 2015-16
(xv) Cash Summary 2015-16 (xvi) Purchase register party wise (xvii) Sales register party wise (xviii) Month wise sales (xix) Month wise purchase/stock/sales (xx) cash transaction sheet. And, submitted that the assessee had sufficient stock for making sales and the trading receipts were duly deposited in the three (3) bank accounts. It was pointed out by the Ld. AR that the demonetization period was preceded by the Diwali sales on 30th Oct, 2016 and there was increase in sale of jewellary because of this festival. According to the Ld. AR, as per the Rule 114B of the Income Tax Rules, 1962 (hereinafter “the Rules”) r.w.s. 139(1)(5)(c) of the Act, there was no KYC required for cash sales upto Rs.2 Lakhs. According to her, the cash sales are part of the stocks maintained by the assessee, which fact is discernable from 6 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd the documents submitted (supra). According to her, since the cash sale/proceedings receipt received from the customers are reflected in the Audit Profit & Loss account as income and if the cash deposits are added u/s 68 of the Act it will amount to double taxation once as sales and again as unexplained cash credit which is against the fundamental principles of taxation. In the light of the facts, the Ld. AR submitted that addition should be deleted.
Per contra, the Ld. DR vehemently opposed the plea of the Ld. AR and submitted that a perusal of monthly summary of Trading Gold Ornaments for the period of 01.04.2016 to 31.03.2017, would reveal that during the month of November 2016, the assessee company sold gold ornaments in extra of 826.07 gram valued (Rs.63,49,848) which is not from the books of accounts. Further, according to him, assessee has also given stock summary of sales of Gold 995 & summary of silver. And on examination of the summary sheet of Trading Gold Ornaments, it is seen that though there was shortage of stock in Gold Ornaments, still assessee has shown sales of the same, but did not clarify about the availability or delivery of these items. Further according to him, these relevant facts were not found to be examined by the AO during the course of scrutiny assessment proceedings. Therefore, for necessary verification the case may be set aside to the file of AO for specific examination and decision.
In her rejoinder, the Ld. AR cited case laws to support her contention and also brought to our notice that ground no. 2 raised 7 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd before the Ld. CIT(A) has not been properly decided by him [the Ld. CIT(A)]. According to her, the Ld. CIT(A) has not appreciated the fact that assessee had not been given proper opportunity to explain the cash/trading receipt before demonetization period and cited the decision of the Hon’ble Supreme Court in the case of Tin Box Company Vs. CIT (249 ITR 216) (SC) and prayed that this issue be restored back to AO for denovo assessment.
We note that the assessee company is engaged in the business of wholesale trading of gold & silver and has two branches in Mumbai & Lucknow. The assessee has filed return of income for AY. 2017-18 reflecting nil income. The AO noted that during demonetization period (8th Nov -30th Dec, 2016) the assessee had made deposit of Rs.2,54,47,500/- in its three (3) bank accounts (supra). However, the assessee disputed that amount deposited was only Rs.2,44,77,500/- (Rs 10 lakhs less). However, the AO was of the opinion that as per the Income Tax records, it was Rs.2,54,47,500/-. According to the AO, inter-alia assessee has not submitted the details sought by him to prove the source of the cash deposited in its bank accounts. According to the AO, assessee failed to file the details [about cash deposit during demonetization period] in return of income. According to AO, he called for the details of cash deposit to be filed in a proforma, but assessee didn’t comply, and had only replied that cash deposit was higher due to cash sale during Diwali festival. According to him, assessee has neither submitted the details of parties from whom the cash has been received (after selling of jewellery) nor the sale receipts.
8 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd According to AO, despite calling for the comparative details of cash sales prior to or subsequent to the demonetization period, the assessee failed to comply. Further according to AO, the assessee failed to file details to show that there has been consistent cash sales in earlier or subsequent years to justify the cash deposit. Therefore, according to the AO, the assessee failed to produce the source and genuineness of the cash deposit during the demonetization period and drew adverse view against the assessee. However, according to the Ld. AR for assessee, Diwali festival preceded the demonetization period and there was huge demand for jewellery this year compared to earlier years and the money deposited in its bank accounts was nothing but cash sales during the Diwali festivals and as per the Rules, assessee was not obliged to collect the PAN/details of the customers if the sales were below Rs.2 Lakhs. During the hearing, she filed the following documents summoned by us (i) monthly summary of Gold Ornaments for the period of 01.04.2016 to 31.03.2017 (ii) Monthly summary of Gold 995 for the period of 01.04.2016 to 31.03.2017 and (iii) Monthly summary of Silver for the period of 01.04.2016 to 31.03.2017 and drawing our attention to it, she contended that the assessee had enough stock for effecting sale; and the sale proceeds thus collected has been duly shown in the profit and loss account and cash sale is part of total sale of Rs.95,56,06,224/-. According to her, the cash sale when compared to the total revenue of Rs.95,56,06,224/-, was less than 2%. Moreover, according to her, due to technical snag, the assessee did not get proper opportunity to explain the details of cash before the AO; 9 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd and that assessee was in the dark about some of notices issued by AO and therefore, could not file relevant documents called for by AO. According to assesse, adverse view has been taken by AO due to non- filing of relevant documents and that omission was attributable to technical snag in internet/computer, for which assessee should not be penalized. In the light of the aforesaid facts, the Ld AR assailed the action of Ld CIT(A) not appreciating ground number 2 filed before him, (regarding the prayer for providing one more opportunity before AO to prove source of cash). Taking into consideration, the aforesaid facts, and also considering the documents filed before us to substantiate the source of cash deposited in its bank account, in the interest of justice and fair play, we are of the opinion that one more opportunity need to be given to assessee, since we find that the assessee did not get proper opportunity before the AO. For taking such an action we, rely on the decision of the Hon’ble Supreme Court in the case of Tin Box Company (supra) wherein it was held as under: - “ It is unnecessary to go into great detail in these matters for there is a statement in the order of the Tribunal, the fact-finding authority, that reads thus : "We will straightway agree with the assessee's submission that the ITO had not given to the assessee proper opportunity of being heard." That the assessee could have placed evidence before the first appellate authority or before the Tribunal is really of no consequence for it is the assessment order that counts. That order must be made after the assessee has been given a reasonable opportunity of setting out his case. We, therefore, do not agree with the Tribunal and the High Court that it was not necessary to set aside the order of assessment 10 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd and remand the matter to the assessing authority for fresh assessment after giving to the assessee a proper opportunity of being heard.
Two questions were placed before the High Court, of which the second question is not pressed. The first question reads thus : Whether, on the facts and in the "1. circumstances of the case, the Tribunal was justified in not setting aside the assessment order in spite of a finding arrived at by it that the Income-tax Officer had not given a proper opportunity of hearing to the assessee ?" In our opinion, there can only be one answer to this question which is inherent in the question itself: in the negative and in favour of the assessee.
3. The appeals are allowed. The order under challenge is set aside. The assessment orders, that of the Commissioner (Appeals) and of the Tribunal are also set aside. The matter shall now be remanded to the assessing authority for fresh consideration, as aforestated. No order as to costs.”
Since the assessee did not get proper opportunity before the AO during the assessment proceedings, we set aside the impugned order of the Ld. CIT(A) and restore the matter back to the file of the AO for denovo assessment. And assessee is directed to file the written submission/relevant documents and if it desires to request for hearing as per Rules and AO to decide the issue regarding cash deposited 11 A.Y. 2017-18 Sancheti Ornaments Pvt. Ltd during demonetization in accordance to law, after hearing the assessee in accordance to Rules.