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Facts
The assessee appealed an addition of Rs. 90,00,000 made on account of cash deposits in Yes Bank and ICICI Bank during the demonetization period. The Assessing Officer (AO) and the CIT(A) confirmed the addition, stating the assessee failed to substantiate the source of these huge cash deposits.
Held
The Tribunal held that the assessee failed to provide satisfactory explanation regarding the nature and source of the cash deposits. The claims of cash withdrawal and cash sales were found to be unsubstantiated and in some cases, manipulated, leading to the confirmation of the addition.
Key Issues
Whether the assessee could substantiate the nature and source of cash deposits made during the demonetization period, specifically relating to Section 68 of the Income Tax Act.
Sections Cited
143(3), 68
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “E” BENCH, DELHI
Before: M BALAGANESH&
The instant appeal filed by the assessee is directed against the order dated 08.01.2024 passed by the Ld. National Faceless Appeal Centre (NFAC), Delhi, arising out of the Assessment Order dated 21.11.2019 passed by the DCIT, Circle 17(2), Delhi, under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as 'the Act') for Assessment Year 2017-18.
The matter relates to addition on account of cash deposit to the tune of Rs.90,00,000/- credited into the bank account of Yes Bank and ICICI Bank during the demonetization period. As the assessee failed to substantiate the huge cash deposit the addition was made in the hands of the assessee by the Ld. AO which was further confirmed by the First Appellate Authority. Hence, the instant appeal before us.
None appeared at the time of hearing of the matter on behalf of the assessee. It appears from the record that on previous occasions the assessee was never represented though notices were duly issued upon the assessee. In that view of the matter, having no other alternative, we have proceeded to deal with the matter ex-parte.
The addition was made under Section 68 of the Act on account of cash deposit made by the assessee to the tune of Rs.90,00,000/- during the demonetization period commencing from 09.11.2016 to 30.12.2016; Rs.15,00,000/- were deposited with ICICI Bank on 05.11.2016 and the balance Rs.25,00,000/- was deposited with Yes Bank on 15.11.2016. This cash deposit could have been justified had the assessee been able to show that such cash was withdrawn either immediately before such deposit or the assessee had enough cash in hand to deposit the same in the bank account or that assessee was having enough cash sale to deposit the same in the bank accounts. No cash deposit during 01.04.2016 to 15.11.2016 i.e. deposit made by the assessee with Yes Bank is reflecting from the statement of the said bank account neither there was no cash withdrawal either from ICICI Bank or the other account lying with RBL Bank. In that view of the matter the cash deposit out of withdrawal in the immediate past is not established. As the cash book has not been shown by the assessee, the cash in hand with the assessee for making such deposits could not be verified. Further that the daily sales of immediate past or cash book or invoices to support the cash deposits were not made available with the authorities below.
Having regard to this entire aspect of the matter the Ld. CIT(A) upheld the addition made by the Ld. AO with the following observations:
“6. DECISION: I have perused the assessment order and considered the submission of appellant. The issue is addition u/s 68 of deposit of cash of Rs. 90,00,000/- in bank account during demonetization period of 9.11.2016 to 30.12.2016. Out of this, Rs. 15,00,000/- was deposited in ICICI Bank on 5.11.2016 and Rs. 75,00,000/- was deposited on a single date, 15.11.2016, in Yes Bank.
Section 68 has two limbs, viz., it should be credited in books of accounts. In this case, it is. The second condition is that explanation about its nature and source should be satisfactorily explained. What constitutes satisfactory explanation is not mentioned in the section. But the settled principle of law on section 68, as available from case laws, is that (genuineness of identity of creditor/ payer (b) genuineness of the transaction and (c) creditworthiness should be explained. The appellant claimed the source of such money as (a) past withdrawals from bank (b) regular sale proceeds and (c) cash in hand and not receipt from some other person. So, identity and creditworthiness are not relevant here.
Regarding genuineness of transaction the precise issue for adjudication is whether (a) assessee had cash withdrawal in the immediate past or (b) cash of more than Rs. 15 lakh in hand on 5.11.2016 and cash of more than Rs. 75 lakh on 15.11.2016 or (c) enough cash sale in the immediate past of 5.11.2016 and 15.11.2016 to generate such cash for deposit.
I first consider the aspect of past withdrawals and cash in hand. Appellant has not submitted any details showing how much cash he withdrew on which date and when he deposited the same back into the banks. On the contrary, I find from Yes Bank account statement that there was no cash withdrawal at all during 1.4.2016 to 15.11.2016 (date of cash deposit). Similarly, there was no cash withdrawal at all from two accounts in ICICI Bank (113351000001 and 113305000345) and one account with RBL Bank. So, there is no merit in the claim that the cash were from cash withdrawals in the immediate past. Therefore, I reject the argument.
Appellant has also not produced copy of its cash book showing amount of cash in hand as on the dates of cash deposit. Appellant has also not produced any statement of daily sales of immediate past or cash book and invoices to support his claim that the cash deposits on 5.11.2016 and 15.11.2016 were from cash sales. On the contrary, as per copy of VAT return for the quarter 1.10.2016 to 31.12.2016, total sale of assessee was Rs. 1,03,51,743/-. On the other hand, cash sale itself during the same period was Rs. 1,15,43,218/- as per month-wise break-up of cash sale submitted by appellant before me which is as under:
Opening balance 5,40,011.35 Dr April 130491.00 May 24,57,584.00 June 21,85,892.00 July 2,78,997.00 August 6,62,312.00 September 7,30,193.00 October 1,01,228.00 November 1,13,34,132.12 (62% of total cash sale)
December 1,07,858.65 January 65, 117.00 February 47,335.00 March 95, 132.00 Total 18205271.77 The above shows that assessee strangely and inexplicably showed as much as Rs. 1.13 crore cash sale in November, 2016, which was 62% of total cash sale during the year. It is also strange and unexplained that while the cash sale in the immediately preceding month of October, 2016, was just Rs. 1.01 lakh and that in immediately succeeding month of December, 2016 cash sale was Rs. 1.07 lakh only, the sale in November, 2016 was shown unusually high. Whereas assessee painted a gloomy picture of his business and claimed that he had to discontinue business due to the failure of business after December, there is no bona fide reason why cash sale could surge so high suddenly in November, 2016. Nothing has been submitted to prove the bona fide or genuineness of claim that cash sale shot up to Rs. 1.13 crore in November, 2016, from Rs. 1.01 lakh in October, 2016 and again plummeted to Rs. 1.07 lakh in the very next month, December, and then further slumped to less than Rs. 1 lakh. Last year, in FY 2015-16, cash sale in November, 2015 was Rs. 5,77,364/- which gives the impression of cash sale and deposit in corresponding month of November. Therefore, it seems that assessee manipulated it willfully to explain the high cash deposit amount as sale proceed of regular business. In view of the above, I find no merit in appellant's claim about nature and source of the cash. Therefore, the addition of Rs.90,00,000/- is confirmed.
Appellant stated at length about alleged fall in its business after November, 2016. Such words have no relevance and significance with the issue for adjudication, i.e., nature and source of cash of Rs. 90 lakh deposited on 5.11.2016 and 15.11.2016.
In the result, the appeal is dismissed.”
As we have discussed above that the assessee has not been able to substantiate the huge cash deposit during the demonetization period as discussed hereinabove, the order passed by the Ld. CIT(A) in upholding the addition is found to be just and proper so as not to warrant interference. The appeal filed by the assessee is found to be frivolous and thus, dismissed.
7. The appeal filed by the assessee is thus, dismissed.