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Income Tax Appellate Tribunal, “C” BENCH : BANGALORE
Before: SMT. BEENA PILLAI & SHRI LAXMI PRASAD SAHU
O R D E R Per Laxmi Prasad Sahu, Accountant Member :-
The appeal filed by the assessee is against the order passed by the NFAC, Delhi dated 16/12/2021 vide DIN No.ITBA/MFAC/S/250/2021- 22/1037858025(1) u/s 250 of the Act on the following grounds of appeal:-
1. That on the facts and in the circumstances of the case the order passed by the Ld CIT(A), NFAC is bad in law & bad in facts and also without jurisdiction which is highly dishonoring the principle of natural justice. 2] That on the facts and in the circumstances of the case, the ld CIT (A) erred in discovering new source which was not considered by the AO while passing the assessment order. 3] That on the facts and in the circumstances of the case, the ld CIT (A) erred in arbitrarily exceeding the jurisdiction and travel beyond the power u/s 251 to sustain the addition. 4] That on the facts and in the circumstances of the case the CIT(A) NFAC grossly erred in sustaining the addition by applying the provision of section 69A of the Act by substituting the provision of section 68 of the Act which is admittedly, wrongly applied by the Ld AO. 5] That on the facts and in the circumstances of the case the CIT(A) NFAC grossly erred in invoking the provision of section 145(3) and rejecting the books of accounts in arbitrarily manner and beyond the jurisdiction. 6] That on the facts and in the circumstances of the case the CIT(A) NFAC grossly erred in applying estimated profit rate 2% on the turnover of Rs. 1,38,98,378/- by excluding sale of Rs. 57,13,500/- as cash sales. 7] That on the facts and in the circumstances of the case the CIT(A) NFAC grossly erred in making addition of Rs. 2,77,967/- in trading account particularly when the Ld AO had accepted the books of accounts and declared profit rate as genuine and no addition in this regard had been made. 8] That on the facts and in the circumstances of the case the Ld CIT(A), NFAC grossly erred in sustaining the addition of Rs. 57,13,500/- in respect of cash deposited in bank account particularly when the nature and source of such cash deposits had been explained with evidences. 9] That on the facts and in the circumstances of the case the CIT(A) NFAC grossly erred in holding that the appellant did not provide any evidence of the facts in question which Page 3 of 8 is apparently incorrect, false and illegal as complete documentary evidences are on record of Ld CIT(A) and Ld AO. 10] That on the facts and in the circumstances of the case the Ld CIT(A), NFAC grossly erred in invoking the provision of sec 69A of the Act. 11] That on the facts and in the circumstances of the case the CIT(A) NFAC grossly erred in without analyzing the nature of transactions in right prospective and judicious manner and sustained the addition in a hypothetical way which is against principle of natural justice. 12] That on the facts and in the circumstances of the case the Ld CIT(A), NFAC grossly erred in recording findings/observation which are contrary to material record and also against the principle of natural justice. 13] That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing.
The assessee is a partnership firm and filed its return of income electronically on 16/10/2017 declaring a total income of Rs.1,93,840/-. The case was selected for scrutiny under CASS and other statutory notices were issued to the assessee. The assessee filed details in the form of letter on 01/07/2019, stating that the cash deposits made into the bank accounts were out of sale proceeds prior to demonetization period. On verification, it was observed that head office of the assessee is at Bangalore and a Branch office at M/s Lakhpat Trading Corporation, G-I-15/16, Mukhya Krishi Mandi,Mandore Road, Jodhpur, Rajasthan and in respect of branch office, the assessee has produced the details of purchase and sales, VAT return, bank statements and other details. The AO noted that for the assessment year 2016-17, the assessee has not done any purchase or sales and for the relevant year
Page 4 of 8 up to 30/06/2016, there is no business activities carried out by the assessee. It is only on the 18/07/2016, 25/07/2016 and 24/08/2016, the assessee has shown some purchase in total amounting to Rs.54 lakhs and the purchase were made from the Sister Concern of the assessee i.e M/s Lakhpat Trading Corporation, Jodhpur and the entire purchase made by the assessee were sold between 01/10/2016 to 19/10/2016. The AO also verified the VAT return for the period from 01/07/2016 to 30/09/2016, which was filed on 17/11/2016 having the details of purchase and the assessee has also filed VAT return for the period from 01/10/2016 to 31/12/2016 on 10/02/2017.
The cash received from the sale proceeds has been deposited into bank account on 10/11/2017 after a gap of nearly one month out of the cash deposits into the bank account of Rs.51,46,000/- has been paid to the vendor of the goods purchased immediately by cheque on 12/01/2016. As per bank statements, the cash was deposited during the demonetization period into the bank account of the assessee. Accordingly, the AO observed that the assessee has deposited cash into the bank account in old currency notes and has called the unaccounted money in the camouflage of sales and the AO did not accept the cash deposited to the extent of amount of Rs.57,13,000/- and treated it as a cash credit u/s 68 of the Act and applied tax rate u/s 115BBE of the Act.
Aggrieved from the above order, the assessee field appeal before the CIT(A). Before the CIT(A), the assessee filed various documents,
Page 5 of 8 which is clear from the paper books filed by the assessee. After considering the submissions, the CIT(A) dismissed the appeal of the assessee and the CIT(A) also enhanced the income of the assessee and treated the cash deposits u/s 69A of the Act.
Aggrieved from the above order, the assessee filed appeal before the ITAT.
The ld. AR reiterated the documents filed before the lower authorities and vehemently argued the case and he has filed written synopsis containing page nos.1 to 27 which is placed on record. The ld.AR of the assessee also field paper book containing 1 to 266 including documents filed before the lower authorities as well as case laws.
The ld.DR relied on the order of the lower authorities and submitted that the cash was deposited during the demonetization period and the AO has examined this issue in details but he has not examined in the light of the CBDT instructions issued in the light of the cash deposited during the demonetization period.
8. We have considered the rival submissions and noted that the assessee has deposited cash during the demonetization period. The AO has not accepted the explanation of the assessee and treated is as unexplained cash credit to the extent of Rs.57,13,500/-. However, the CIT(A) has enhanced the income of the assessee and he has dismissed the appeal of the assessee. Since the issue involved in this case relates to the demonetization period and on going through the order of the AO and CIT(A), we note that both the authorities have not examined the issue in the light of the instructions issued by the CBDT in regard to the cash deposited during the demonetization period. The co-ordinate bench of the Tribunal in the case of M/s. Bhoopalam Marketing Services Pvt. Ltd., vs. ACIT in & 564/Bang/2022 vide order dated 15.09.2022 has held as under:-
7.1 We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017- ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-ITA.II. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases.
In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. 8.1 The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non- availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is Page 7 of 8 important to examine whether the case of the assessee falls into any of the above parameters are not. 8.2 The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim Respectfully following the above decision, we deem it fit to remit the issue to the file of AO to decide the issue afresh in the light of the above judgement in respect of the cash deposited during the demonetization period. The AO is directed to give reasonable opportunity of being heard to the assessee and assessee is also directed to produce evidences/documents in substantiating its case. The assessee is directed not to seek unnecessary adjournments for early disposal of the case.