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Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of NFAC for the assessment year 2017-18 dated 9.3.2023 passed u/s 250 of the Income-tax Act,1961 ['the Act' for short]. The assessee raised following grounds:
1. The ld. CIT(A) erred in confirming the addition in the manner which he did.
2. The ld. CIT(A) erred in confirming the amount of Rs.4,50,000/- as unexplained money u/s 69A of the Act. Further erred in not appreciating submission of the appellant that the cash was deposited out of the cash available in the hands of the appellant as per the cash book. Thus, the addition confirmed is bad in law.
3. The learned CIT(A) ought to have appreciated the fact that there was no unexplained money at all and the credits in bank account are duly explained. Therefore, the provisions of section 69A of the Act will not applicable to the facts of the case.
4. The ld. CIT(A) further erred in confirming the additional tax under sec 115BBE of the Act.
5. The ld. CIT(A) erred in upholding the interest u/s 234 of the Act.
Manish Kumar Jain, Bangalore Page 2 of 7 6. Without prejudice the disallowances as confirmed by the learned CIT(A) are arbitrary excessive and ought to be reduced substantially. 7. For these and other grounds that may be urged at the time of hearing of the appeal the appellant prays that the appeal may be allowed.”
At the outset, it is observed that there were 113 days delay in filing appeal before this Tribunal. In this case, assessee has received the order of NFAC on 9.3.2023 and the appeal is ought to have been filed before 8.5.2023. However, the same has been filed on 29.8.2023. Thus, there was 113 days delay in filing appeal before this Tribunal. The assessee has filed condonation petition along with an affidavit stating that the NFAC uploaded the order to the Income- Tax portal. Since the assessee was not well aware of the operation of Income-Tax Portals, the assessee has not noticed the same. Thus, there was delay of 113 days in filing the appeal before this Tribunal and prayed that the same be condoned.
We have heard the rival submissions and perused the materials available on record. With regard to delay in filing appeal before this Tribunal, as seen from the submission of the ld. A.R., assessee was not well versed in the Income-Tax portal and order of the NFAC came to the knowledge of the assessee with delay as the assessee is not regularly checking the Income-Tax portal. In our opinion, there is a good and sufficient reason in filing appeal before this Tribunal with delay of 113 days. This delay is condoned and the appeal is admitted for adjudication. 4. Facts of the issue are that the assessee is aged about 34 years. He is regularly assessed to income tax for more than the past 12 years. Returns are regularly filed each year declaring substantial income each year. The assessee was carrying on independent business in bullion on wholesale basis up to 31.3.2015. With effect from 1.4.2015 relevant to AY 2015-16, business was discontinued and the assessee has been assisting his mother Smt. Manju Devi in carrying on her bullion and jewellery business. For the services so rendered, he is receiving salary income which is offered for taxation. The assessee is also in receipt of Manish Kumar Jain, Bangalore Page 3 of 7 interest on amounts advanced out of his savings from earnings of the past so many years. In addition, after discontinuance of business, the assessee has also earned some commission income from real estate transactions and also by linking buyers and sellers of gold jewellery/bullion. The assessee has also earned some income from commodity futures and derivative transactions which is also offered to tax. The assessee's earnings and admitted tax liability of the past few years are summarized in the table below;
Admitted Tax Assessment Returned Date of Filing Year Income R/I 2013-14 12,53,170/- 2,12,130/- 27.09.2013 19.11.2014 2014-15 40,72,570/- 10,80,679/- 2015-16 67,70,728/- 19,11,906/- 19.09.2015 2016-17 40,04,147/- 10,57,032/- 18.06.2016 2017-18 53,50,025/- 14,72,909/- 14.07.2017 4.1 The above table shows that the assessee is a person of substantial means and sound financial standing. Following demonetization on 8.11.2016, the assessee deposited demonetized currency to the extent of Rs.4,50,000/- (Rupees Four Lakhs and Fifty Thousand Only) into his bank account. The said amount is deposited out of balance available with him from his earlier savings as well as current income upto date of demonetization. Following the said deposit an online notice was received by the assessee from the income tax department seeking confirmation and clarification about the deposit for which an online response has been submitted by the assessee vide transaction no. 3625726938 confirming the deposit as well as explaining the source as out of previous income and savings.
4.2 The ld. A.R. submitted that the assessee is maintaining regular books of account and is preparing/filing Balance Sheet also. The cash balance as on 01.04.2016 was Rs. 2 Lakhs. The cash balance as on Manish Kumar Jain, Bangalore Page 4 of 7 08.11.2016 (just before demonetization) was Rs.4,57,820/-. The sum of Rs. 4.50 Lakhs was deposited out of this cash balance. The cash flow from 01.04.2016 to 08.11.2016 is as under:
CASH FLOW STATEMENT FOR THE PERIOD FROM 01.04.2016 TO 08.11.2016 SOURCES AMOUNT APPLICATION AMOUNT Opening Cash Balance 2,00,000/- Cash Deposited into Bank 9,01,180/- 3,11,500/- 52,500/- Commission Received Personal Drawings 9,00,000/- 4,57,820/- Cash withdrawn from Bank Closing Balances -pash * TOTAL 14,11,500/- TOTAL 14,11,500/-
Returns of income for all the above years are filed voluntarily. As can be seen substantial income has been declared each year. Therefore, the assessee had the means and the capacity to deposit the nominal amount of cash of Rs. 4,50,000/- which was admittedly out of his savings from current and past income.
4.3 He submitted that after filing the Return of income for AY 2017-18, the assessee received an online Notice U/s 143(2) of the Act, which was followed by subsequent notices U/s 142(1) of the Act from the office of the ld. Assistant Commissioner of Income Tax, Circle 5(2)(1), Bangalore (AO) calling for sources for the cash deposited into bank during the demonetization period. In response the assessee has submitted a detailed online response on 6.8.2019. In the concluding paragraph of the said letter the assessee has clearly undertaken to furnish further details that may be required by the learned AO. In response, the ld. AO issued an online show Cause Notice dated 9.9.2019 calling for further clarifications on or before 13.9.2019. It was submitted that since the assessee was traveling during the relevant period, he was not able to check emails and therefore was not aware of any such notice. At the same time, the assessee's CA Shri S Abhay Kumar Kothari was also undergoing treatment for kidney stone and other problems and hence he was also absent from office and therefore could not respond to the notice.
Manish Kumar Jain, Bangalore Page 5 of 7 4.4 The ld. A.R. submitted that the assessee was shocked to receive an assessment order dated 14.9.2019 whereby the learned AO without waiting for the assessee's response or granting him further opportunity had concluded the proceedings by adding back the said sum of Rs.4,50,000/- as undisclosed income U/s 69A and taxing the same U/s 115BBE of the Act and also initiating penal proceeding U/s 271AAC of the Act. The assessee submitted to highlight the fact that though the learned AO categorically stated that addition of Rs.4,50,000/- is made, the computation sheet attached to the assessment order very clearly reflects addition of Rs.9,99,000/- as against Rs.4,50,000/- stated by the learned AO. This very clearly indicates that the assessment was made in a hurry and without proper verification of the assessee's antecedents, facts of the case and due application of mind. The matter was not getting time barred immediately and there was still sufficient time to complete the proceedings and hence there was no urgency of concluding the matter without giving due opportunity to the assessee. The ld. A.R. submitted that the order as passed is arbitrary, unfair, opposed to principles, of equity and natural justice and causes hardships to the assessee. The assessee denied the liability to pay taxes on the above additions and hence this appeal.
4.5 On this issue, assessee went in appeal before ld. CIT(A) who has confirmed the order of ld. AO. Against this assessee is once again in appeal before us.
We have heard the rival submissions and perused the materials available on record. Similar issue came for consideration before this Tribunal in the case of Bhoopalam Marketing Services Pvt. Ltd. in dated 15.9.2022, wherein held as under: “7. We have carefully considered the rival contention and perused the orders of the lower authorities.
Admittedly the assessee has deposited Rs.298,08,080/- during the post- demonetization between 09/11/2016 and 30/12/2016.
Manish Kumar Jain, Bangalore Page 6 of 7 Therefore, Ld.AO made addition of INR 5,82,76,300/- as income of the assessee u/s. 68 of the income tax act, by passing assessment order u/s. 144 of the Act. The Ld.AO made such addition as the assessee could not file requisite details as the notice was issued to the email address that was not functional. In the interest of justice, we deem it proper to remand the issues back to the Ld.AO for a de novo verification.
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 one 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 important to examine whether the case of the assessee falls into any of the above parameters are not.”
Manish Kumar Jain, Bangalore Page 7 of 7 5.1 In view of the above order of the Tribunal, in our opinion, it is appropriate to remit the issue to the file of ld. AO to examine the same in the light of above order of the Tribunal. The assessee shall file cash flow statement explaining the source of cash available to deposit into the bank account during period of demonetization.
In the result, appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 28th Nov, 2023