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Income Tax Appellate Tribunal, ‘SMC‘ BENCH
आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against the order dated 11/08/2021, passed by NFAC, Delhi for the quantum of assessment passed u/s.144 for the A.Y.2017-18. 2. In various grounds of appeal, the assessee has challenged the cash deposit in the bank account for sum aggregating to Rs. 19,50,500/- as undisclosed income added u/s.68.
Shri Abdul Gani Abdul Majid Khan 3. The facts in brief are that the assessee is an individual and is engaged in the business of manufacturing of „farsan‟ and wafers catering to the local small hawkers and retailers and selling the items door to door on daily basis. It was noticed that assessee has made cash deposits during demonetization period and has not filed the return of income for F.Y.2016-17. Accordingly, notice u/s. 142(1) was served directing the assessee to file the return of income for A.Y.2017-18. However, as per the AO the assessee did not receive any notice and accordingly, could not file any return of income. The ld. AO issued notice u/s. 133(6) to the banks and called for the bank statements. The ld. AO noted that assessee was served notice u/s. 142(1) on 12/03/2018 on following e-mail ID available in ITBA. sohamgaikwad033@gmail.com 4. AO further noted that all the notices and notice of hearing were served on that same e-mail ID, however, most of these notices sent on e-mail remain uncomplied with. Accordingly, the AO on verification of the bank statement, added amount of Rs.19,50,500/- deposited in cash in the F.Y.2016-17 in the following manner:- Sr. Period Amount No. 1 Pre Demonetization period 54,000/- 2 Demonetization period 11,69,500/- 3 Post Demonetization Period 7,27,000/- Total 19,50,500/- Shri Abdul Gani Abdul Majid Khan 5. Before the ld. CIT (A) following details and information were filed:- “1. It would be relevant to bring the fact before your honor that the appellant is a small farsan and wafer manufacturer catering daily to the local small retailers & hawkers selling their items on door to door basis. He is a lower middle class person with a small proprietary business in the name of Suvikar Wafer and Farsan. The appellant has been filing his IT Return regularly since AY 2007-08 vide PAN number AHQPK4850M. However in between he misplaced his copy of original PAN card and in order to have a hard copy he made an application through an agent and instead of getting new card with existing PAN number he has been allotted a new PAN number AGQPK7866A. This new PAN is not used by appellant anywhere except opening of one bank account with Allahabad Bank. Since the banker had asked to submit copy of PAN card and he did not have any copy of earlier PAN card so he submitted copy of new PAN card. Till that time he was unaware that the PAN numbers are different in the newly allotted PAN card then that of earlier PAN card.
1.Due to his little knowledge of law he could not understand the fact that he has been allotted a new PAN number, Moreover, the banker while accepting the PAN as KYC document also failed to verify it with the copy of Income Tax Returns filed by him with different PAN number.
The appellant has been filing his income tax returns under PAN AHQPK4850M since fast 13 years starting from AY 2007- 08. For the year under reference, his total sale for the year from his farsan business was Rs 32.81 Lakhs and not profit after expenses was Rs 2,83,554/in this proprietary firm. He has filed return of income for this income with the income tax department under old original PAN AHQPK4850M.
Shri Abdul Gani Abdul Majid Khan 3. The appellant has also bought materials and ingredients required for his farsan and wafer business which amounts to Rs. 50.86 lakhs as per the copy of profit and loss account for the year under reference. His nature of business was buying raw material and then making farsan and selling it mostly in cash. He used to deposit this cash received on sale and in turn issued cheques to suppliers from whom the raw material etc is purchased.
At the time of scrutiny assessment, the Learned Assessing Officer (A.O.) has raised question on the basis of AIR information from Allahabad Bank - for cash deposit of Rs 19,50,500/- in current account held in the name of his proprietary firm - Suvikar Wafers & Farsan relating to the activities of sale and purchase of farsan and wafers.
5. The appellant did not have knowledge of the notices issued to him since the email ID on which notices were sent belonged to his friend and was not checked by him. As soon as the appellant got to know about the assessment proceedings, a reply was filed on 10. 6.2019 vide letter dated 03.06.2019. In this letter, the appellant has clearly mentioned the fact of holding dual PAN without his knowledge and the nature of his business activity. As regards cash deposit; the appellant explained to the Learned AO that he is a manufacturer of Farsan and Wafers - selling to small retailers and hawkers who in turn use to sell door to door mainly on cash basis daily. In his reply he has given complete accounts of the sales and purchases as well as expenses incurred by him for the business carried on by him. He has given complete accounts-profit and loss account and balance sheet for this business as well and all entries of cash deposited in the bank account are full explained.
Regarding assessee having two different PAN, it was stated that, assessee before the ld. AO had filed reply on 10/06/2019, Shri Abdul Gani Abdul Majid Khan wherein he has explained about having two PAN cards in his name and informed that only one card was used, other PAN number was issued erroneously to him, as when earlier one was lost, he has applied for new one but it came with different PAN. Regarding cash deposits during demonetization, it was stated that same was out of payment received from supplier and from the customers and immediately after cash payments, payments have been made to the supplier for the purchase of raw materials in cheque and therefore, there was hardly any balance left in the bank account. The payments have been made through cheques for encashment by the raw material suppliers.
Another important fact was that appeal before the ld. CIT (A) was filed belatedly for which assessee had given reasons and also filed an affidavit that assessee‟s wife was suffering from illness and was under medical observation for a long period time during the assessment proceedings as well as after the assessment proceedings. Further, assessee is completely an illiterate person having a very small business and limited resources to handle his affairs, therefore, there was marginal delay. The ld. CIT (A) has not condoned the delay on the ground that affidavit was not notarized. Apart from that he has confirmed the order of the ld. AO in the summarily manner:- “5. I perused the grounds of appeal
, Assessment Order, Appellant's submission and material available on record. My observations in respect of the grounds raised by the appellant are as follows:
6. Delay in filing the appeal not condoned.
Shri Abdul Gani Abdul Majid Khan 6.1 As per the information given in Form No.35, the appellant received the Assessment Order dt 30/6/2019 on 26/11/2019 and filed the appeal on 9/12/2019. 6.2 Appellant filed Affidavit dt 29/11/2019 for condonation of delay. In the Affidavit for condonation of delay the appellant stated that delay was because the Assessment Order dt 30/6/2019 was received on 26/11/2019 and his wife was suffering from illness. However, the Affidavit was not notarized. 6.3 The assessee did not bring any material on record in support of the reasons stated i.e. (1) Assessment Order dt 30/6/2019 was received on 26/11/2019 and (II) his wife was suffering from illness. On verification of records, it is noticed that the Assessment Order dt 30/6/2019 was sent to the appellant through e-mail on 30/6/2019. Hence the appellant is deemed to have received the Assessment Order on 30/6/2019. Hence the appellant should have filed the appeal on or before 30/7/2019. However, the appellant filed the appeal on 9/12/2019 with a delay of 132 days. Assessment Order dt 30/6/2019 was served on the appellant on 30/6/2019 through e-mail as stated above. However, the appellant stated that the delay in filing the appeal was due to the fact that the Assessment Order was received by him on 26/11/2019. Delay in filling the appeal cannot be condoned on reasons which are evidently wrong. Hence the delay in filing the appeal is not condoned and the appeal is dismissed as barred by limitation.
In result, the appeal of the assessee is dismissed.”
Shri Abdul Gani Abdul Majid Khan 7. Before us the assessee appeared in person alongwith his authorised representative. At the time of hearing, the assessee was confronted with regard the fact of having two PAN cards and why he was using two PAN, which he clarified that earlier he had PAN Card No. AHQPK4850M, which he was using for filing of income tax return as well as using in all the bank accounts. However, some 13 years ago, he has misplaced the PAN card and had applied for duplicate PAN card through some agent. Therefore, new PAN card was allotted bearing No. AGQPK7866A. Thus, there were two PAN numbers. It is noticed that second PAN was different because there was a mistake of one alphabet in the name. Later on assessee had requested for surrender of the subsequent PAN No. and also gave a letter to the agent and thereafter, the agent helped him in receiving the original PAN card i.e. AHQPK4850M. He admitted that there was a mistake not intimating to the bank for change in PAN card details, because these matters were looked after by his children and nephew and he was not aware of anything, being completelt illiterate.
Regarding the cash deposits, assessee in person submitted before that he runs a small business of „farsan‟ manufacturing the name of “Suvikar Wafer and Farsan” which he is operating from his small house. He sells these farsans to small retailers and hawkers and all the payments are received in cash only which he used to deposit in the bank account. After depositing the cash in the bank, he used to purchase raw materials from Shri Abdul Gani Abdul Majid Khan various suppliers through cheque or bearer cheque. When we enquired from him, whether he maintains any kind of books of accounts or how he records his sales and purchase, he submitted that he maintains day to day „parcha‟ (kind of self made vouchers) for sales and even for the purchases he maintains small „parcha / chit‟ and after the transaction is being done, the same is destroyed and a rough note is made in the register, because the amounts transacted in day to day basis are very small amount and are mostly deposited in bank account to issue cheques. He also stated that in last several years he has not made any investment in any movable or immovable asset and all the earnings from sale of farsan is only to meet the daily requirements of his life and his family.
When he was enquired how this much of amount has been deposited during demonetization period, he submitted that all the persons to whom sales were made on credit which is normal practice, after demonetization, he started receiving payments from the retailers and hawkers which were even due from last several months. He told he had been selling farsan in loose and entire purchases made by these small hawkers are made on daily basis and as when cash is received, it had always been regularly deposited in the bank account and it is not that in this period only huge amount has been deposited except for the reason that suddenly post demonetization, the persons who were not paying earlier had paid the cash. He also informed that he has some 100 hawkers / vendors to whom he made sales in cash on regular basis. However, when it comes to purchase of raw Shri Abdul Gani Abdul Majid Khan materials he has made payment through cheque out of cash deposited in the bank accounts.
We noticed that, the bank statement reflected cash deposits right from 1st April 2016 to 31st March 2017, which apparently shows that the major cash have come after 12/11/2016 till March 2017. However, nowhere, the ld. AO or the ld. CIT (A) or the bank has given any certificate or any details as to out of these cash deposits how much were on account of Specified Bank Notes, i.e., notes which were banned. Thus, it is very difficult to say that only Specified Bank Notes have been deposited and not the regular notes. Apart from that, in every year assessee has been showing sales of farsans and wafers manufactured by him in cash to the tune of Rs.16-18 lakhs and in support, profit and loss account for the F.Y.2019-20 and 2018-19 has also been filed. In A.Y. 2017-18 the sales have been disclosed of Rs.32,81,707/- in the return of income for A.Y.2017- 18 filed on 04/02/2018 and the statement and observation of the AO is completely incorrect as return of income has been filed online, the copy of which has been placed in the paper book.
Thus, in these facts and circumstances, and after we ourselves have examined the assessee and also perused the relevant documents placed before us, we find that, he is completely illiterate and doing small time business and it is a genuine case where assessee has been regularly depositing cash out of his small business which pattern was there in earlier years also and therefore, cash deposit cannot be held to be undisclosed