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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of NFAC dated 18.10.2022 for the assessment year 2017-18. The assessee has raised following grounds:
1. On the facts and in the circumstances of the case the learned CIT(A) erred in upholding the order of the AO without appreciating the submission of the Appellant.
2. The learned CIT(A) erred in proceeding to pass the order by dismissing the appeal without considering the grounds of appeal raised before him and also facts provided by the appellant.
3. The learned CIT(A) ought to have held that reopening of the assessment under section 147 of the Act was bad in law since the condition precedent to justifying the reopening were absent.
4. The ld. CIT(A) ought to have appreciated that the cash deposits were made out of his sales and there were purchases made through banking channel. Thus, the addition confirmed ought to have been deleted.
Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli Page 2 of 18 5. The ld. CIT(A) erred in confirming entire cash deposits as unexplained cash credits without appreciating that these deposits were explainable. The audit report also were submitted to show the genuine transaction, accordingly, the addition made has to be deleted.
6. Without prejudice, the income as sustained was excessive, arbitrary and unreasonable and liable to be deleted.
7. The learned CIT(A) erred in confirming the interest charged under section 234A and 234B and 234C of the Act.
8. 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. Total tax effect Rs.2,08,12,152/-
The registry has noted that there was a delay of 74 in filing the appeal before this Tribunal. However, the assessee filed condonation petition stating that the ld. CIT(A)’s order passed on 18.10.2022 and the assessee has filed the appeal before this Tribunal on 1.3.2023. Thus, there was a delay of 72 days in filing the appeal before this Tribunal and the computation of delay by Tribunal at 74 days is incorrect. She submitted that either date of receipt of CIT(A) order or date of filing of appeal before this Tribunal to be excluded. If we exclude this one, the actual delay is only 72 days. Accordingly, she filed an affidavit that the assessee is not well-versed in ITBA portal and assessee came to know from her Chartered Accountant that while filing the return for the assessment year 2022-23 on 4.11.2022, going through the ITBA portal, the CA came to know that ld. CIT(A) has already passed the order on 18.10.2022. As such, he downloaded first appellate order and this fact has been communicated to the assessee. Consequently, the assessee took steps to file the appeal and able to file the appeal with the above delay and prayed that the delay was wanton or unintentional and requested to admit the appeal on merit.
The ld. D.R. has not put any serious objection.
Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 3 of 18 4. We have heard the rival submissions and perused the materials available on record. In our opinion, there is a good and sufficient reason in filing the appeal belatedly by 72 days before this Tribunal as the assessee was not well-versed in ITBA portal and the assessee came to know from his CA while filing the return for the assessment year 2022-23 and the explanation given by the assessee is bonafide. Accordingly, we admit the appeal for adjudication.
5. The assessee has also filed additional ground along with a petition for admission of this additional ground, which reads as follows:- “On the facts and in the circumstances of the case, whether the CIT(A) is correct in confirming the order passed by AO on making addition of Rs.1,25,89,399/- u/s 68 of the Income Tax Act, 1961 towards alleged unexplained deposit in the bank account in as much as a bank account is not a book of account maintained by the appellant?”
6. We have heard the both the parties on admission of additional ground. In our opinion, all the facts are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication of above ground. Accordingly, by placing reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383 (SC) we inclined to admit the additional ground for the purpose of adjudication as there was no investigation of any fresh facts otherwise on record and the action of the assessee is bonafide.
Facts of the case are that as per assessment order, ITO(Inv.), Hubbali came in possession of information that the assessee was holding special savings account with the Hubbali Branch of a Society by the name, Renukamata Multi-State Urban Credit Co-operative Society. In the said account, cash of Rs. 1,25,89,399/- was deposited during the year under Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 4 of 18 consideration. The said ITO(Inv.) conducted verification of the information and required the assessee to explain the sources of cash deposits. The assessee claimed that he was in the business of selling of fish and the cash deposit was his turnover. The ITO(Inv.) required him to establish the claim by way of bills and vouchers for sale and purchase of fish. However, the assessee could not furnish any evidence in support of his claim. The ITO forwarded the information along with the findings of his verification to the AO concerned. Meanwhile, the assessee e-filed audit report u/s 44AB of the Income-tax Act,1961 ['the Act' for short] on 30.10.2018 and filed his ITR on 31.10.2018. The AO concerned examined the information received from ITO(Inv.), Hubbali and arrived at the conclusion that there was escapement of income in the form of unexplained cash deposits. He, therefore, proposed action u/s 147 of the Act. He recorded the reasons for taking proposed action. Notice u/s 148 was issued on 27.03.2021. However, no return was filed in response to that notice. AO issued various notices. The details of such notices and compliance thereto stand described on Page 2 of the assessment order of the AO. Since there was no compliance at all to any notice, AO issued show cause notice u/s 144 of the Act on 27.01.2022. In response, the assessee e-filed his submission on 28.01.2022. After considering the submission, AO issued another notice u/s 142(1) of the Act along with a questionnaire, seeking additional/further details. That notice was issued on 31.01.2022. However, no compliance was made to that notice. AO then went ahead to complete the assessment. AO noted in the assessment order that during the course of the verification carried out by ITO(Inv.), the assessee had failed to furnish the bills and vouchers for sale, purchase and expenditure. The tax audit report u/s 44AB of the Act was obtained/submitted after the ITO(Inv.) initiated the verification. He also noted in the assessment order
Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 5 of 18 that the assessee had claimed (and was also mentioned in the audit report) that he maintained cash book, sales ledger, purchase ledger etc. but no such books were furnished/submitted/uploaded for AO's examination. AO finally concluded that the claim of running business of selling fish was false one. It was attempted to hide the real source of the cash deposits. He then held that the cash deposits of Rs. 1,25,89,399/- were cash credits within the meaning provided in the Section 68 of the Act. Accordingly, he added Rs. 1,25,89,399/- to the income of the assessee and completed the assessment. Against this assessee went in appeal before ld. CIT(A).
The ld. CIT(A) observed that the assessee had opportunity before three forums - ITO(Inv.), AO and these proceedings — to furnish requisite material to establish that he was indeed in the business of selling fish. How it is possible that not a single party issued any bill for the sale made to the assessee (purchase for the assessee). He observed that total of Rs. 48,00,000/- were paid during the year to a party named B. Baskar. If B. Baskar was seller of fish he had other clients like the assessee. The largest sum paid to him through a single cheque was Rs. 10,00,000/- and the lowest sum paid was Rs. 2,00,000/-. He observed that how such a trader was not in a position to issue any bill to the assessee. There are other parties to whom single payments have been made in round figures of 5,00,000/-, 2,00,000/, 4,00,000/- & 3,00,000/-. There are other parties whom total of Rs. 10 lakhs or more has been paid. Why all the payments were in round figures. Why the fresh/wet sea fish business was carried out mainly during the monsoon months of July, August and September — there is no transaction in October and for November and December there are very few transactions. There is not a single corroborating evidence showing that he was Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 6 of 18 indeed in the business of selling fish. As per Schedule 10 of Form 3CD, the business was wholesale business. Wholesale business is carried out by traders, not by fisherman. That means the sellers were also wholesalers. As per Schedule 11(c) of Form 3CD, Books and Documents examined were: bank book, cash book, journal, ledger, purchase register, sales register, stock register and purchases & sales. What is the meaning of purchases & sales examined? If there were no sale and purchase bills what more was examined than purchase register and sales register. If there were indeed documents for purchase and sale or bills for the same and they were examined by the auditor, then why they were not furnished before any of the 3 fora. Why the audit was not completed by the original due date of 30.09.2017 or even the extended date. Why the return of income was not filed by the original due date. In the written submission, the assessee has claimed that he was wholesale dealer in wet fish and he purchased wet fish from various fisherman from coastal region in lots and sold it on wholesale basis in local open market. However, he has not mentioned how he transported the fish from coast to Hubbali. How a fisherman sold fish worth Rs. 48,00,000/- to the assessee in only 40 days, i.e. B. Baskar was paid first on 15.07.2016 and last on 24.08.2016. In the written submission, the assessee has once again claimed that every sale and every purchase was recorded in regular books. But no books were ever furnished before any forum/authority. Why the assessee did not have business/trading license from local municipal authority. Why a single party did not issue a purchase bill or subsequently a confirmation when the assessee sought for it when verification by ITO(Inv.) was conducted and then the assessment was carried out. As it is clear from the above facts, the assessee deposited huge cash in an account of a credit co-operative society. Yet he did not file his ITR. He filed it only after verification by the department had Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 7 of 18 commenced. As a matter of fact, there is no record of his having filed any return of income in the 4-5 years preceding to the year under consideration and 2-3 years succeeding the year under consideration. In view of these facts, the ld. CIT(A) observed that assessee's contention that AO mechanically issued notice u/s 148 of the Act on the basis of information received from ITO(Inv.), without application of mind is incorrect. As a matter of fact, the AO had enough material to initiate valid proceedings u/s 147 of the Act. In the written submission, the assessee claimed that notices were sent to wrong address. This is incorrect. The notices were issued online and were duly delivered. But the assessee chose only to comply to the notice u/s 144of the Act issued on 27.01.2022. He had uploaded his submission online on 28.01.2022. Previously, he had filed his return online and had also filed audit report online, much before AO issued any notice. Therefore, there was no question of physical notices. Upon due consideration of the material on record, the ld. CIT(A) observed that in order to escape from the consequences of his having deposited undisclosed income in cash in the said account, the assessee devised the story of trading in fish, which was chosen as it was exempt from VAT registration. However, in the absence of any direct, indirect or corroborating evidence to show that he was indeed in that business, the story remains unsupported. Therefore, the ld. CIT(A) observed that AO was justified in treating the cash deposits as unexplained cash credits within the meaning provided in Section 68 of the Act. Accordingly, he concluded that the action of AO to be upheld and the addition was confirmed. Against this assessee is in appeal before us.
Regarding additional grounds, the ld. A.R. submitted that the AO made addition on account of deposit into assessee’s bank account. This cannot be considered as unexplained credit. On the Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 8 of 18 other hand, it is an unexplained investment. An unexplained bank account cannot be considered as income u/s 68 of the Act. It should be u/s 69/69A of the Act. For this purpose, she relied on the judgement of Visakhapatnam bench of this Tribunal, in the case of Dirisala Bala Murali in dated 29.7.2020, wherein held as under:
“8. We have heard the arguments of the Ld.AR as well as the DR and gone through the additional ground raised by the assessee. In the instant case, the deposit was made in the bank account, but not in the regular books of accounts maintained by the assessee. As per the provisions of section 68, the amount found credited in the books of accounts for which the assessee failed to offer explanation to the satisfaction of the AO required to be brought to tax u/s 68, whereas in the instant case, the said sum was not credited in the books of accounts, but the amount was found credited in the bank account of the assessee. The correct course of action for taxing the sums paid into the bank account is to tax u/s 69 of the Act. Neither the AO nor the Ld.CIT(A) has made addition u/s 69. On identical facts in the case of Smt.Asha Sanghavi in this Tribunal held that the cash deposits or deposits made in bank account required to be brought to tax u/s 69 and not u/s 68 of the Act. For the sake of clarity and convenience, we extract para No.10 to 10.1 which reads as under :
“10. We have heard both the parties and perused the material placed on record. In the instant case, the AO made the addition of Rs.1,22,29,000/- representing cash deposits made in the bank account u/s 68 of the Act. Section 68 allows the AO to make addition for the sums credited in the books of accounts maintained by the assessee for which the assessee fails to offer satisfactory explanation with regard to source. In the instant case, the assessee is maintaining the books of accounts but did not make any entry in the books of accounts. The amounts were deposited in the bank accounts, but not made relevant entry. Hence, the Ld.AR argued that since the assessee did not make any entry in the books of accounts, the AO is not permitted to make the addition u/s 68. The issue with regard to deposits made in the bank account, whether to be brought to tax u/s 68 or not was considered by the coordinate bench of ITAT Mumbai in Mehul V.Vyas Vs. Income Tax Officer (supra) and held that the amounts found credited in the bank pass book or bank statement cannot be considered to be books maintained by the assessee in any previous year as understood for the purpose of section 68 of the Act. For the sake of clarity and convenience, we extract para No.8 of the cited order which reads as under :
“5. We have heard the Id. Authorized representatives of both the parties, perused the orders of the lower authorities as well as the material produced before us. We will first deal with the objection raised by the Id. A.R as regards the addition of Rs.10,53,000/- which was made by the A.O under Section 68 of the 'Act,' in respect of the Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 9 of 18 cash deposit in the bank account of the assessee We find substantial force in the contention of the Id. A.R that an addition under Section 68 can only be made where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee either offers no explanation about the nature and source as regards the same, or the explanation offered by him in the opinion ofthe assessing officer is not found to be satisfactory. That before adverting further, we herein reproduce the relevant extract of the aforesaid statutory provision, viz. Section 68, which reads as under: - "Cash Credits.
Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing] officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year That a bare perusal of the aforesaid deeming section therein reveals that an addition under the said statutory provision can only be made where any sum is found credited in the books of an assessee maintained for any previous year. Thus, the very sine qua non for making of an addition under Section 68 presupposes a credit of the aforesaid amount in the 'books of an assessee' maintained for the previous year. We not being oblivious of the settled position of law that a statutory provision has to be strictly construed and interpreted as per its plain literal interpretation, and no word howsoever meaningful it may so appear can be allowed to be read into a statutory provision in the garb of giving effect to the underlying intent of the legislature, thus confining ourselves within the realm of our jurisdiction, therein construe the scope and gamut of the aforesaid statutory provision by according a plain meaning to the language used in Sec.
We are of the considered view that a credit in the 'bank account' of an assessee cannot be construed as a credit in the 'books of the assessee, ' for the very reason that the bank account cannot be held to be the 'books' of the assessee. Though it remains as a matter of fact that the 'bank account' of an assessee is the account of the assessee with the bank, or in other words the account of the assessee in the books of the bank, but the same in no way can be held to be the 'books' of the assessee. We have given a thoughtful consideration to the scope and gamut of the aforesaid statutory provision, viz. Sec. 68, and are of the considered view that an addition made in respect of a cash deposit in the 'bank account' of an assessee, in the absence of the same round credited in the 'books of the assessee' maintained for the previous year, cannot be brought to tax by invoking the provisions
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Page 10 of 18 of Section 68. That our aforesaid view is fortified by the judgment of the Hon’ble High Court of Bombay in the case of CIT Vs. Bhaichand N. Gandhi (1983) 141 ITR 67 (Bombay) wherein the Hon’ble High Court has held as under: -
"As the Tribunal has pointed out, it is fairly well settled that when moneys are deposited in a bank, the relationship that is constituted between the banker and the customer is one of debtor and creditor and not of trustee and beneficiary. Applying this principle, the pass book supplied by the bank to its constituent is only a copy of the constituent's account In the books maintained by the bank. It is not as if the pass book is maintained by the bank as the agent of the constituent, nor can it be said that the pass book is maintained by the bank under the instructions of the constituent. In view of this, the Tribunal was, with respect, justified in holding that the pass book supplied by the bank to the assessee in the present case could not be regarded as a book of the assessee, that is, a book maintained by the assessee or under his instructions. In our view, the Tribunal was justified In the conclusions at which it arrived."
We find that the aforesaid view of the Hon'ble jurisdictional High Court had thereafter been followed by a 'SMC of the ITAT Mumbai bench in the case of Smt. Manshi Mahendra Pitkar Vs. ITO 1(2), Thane (2016) 73 taxmann.com 68 (Mumbai Trib.) wherein it was held as under: - I have carefully considered the rival submissions. In the present case the addition has been made by the income tax authorities by treating the cash deposits in the bank account as an unexplained cash credit within the meaning of sect/on 68 of the Act The legal point raised by the assessee is to the effect that the bank Pass book is not an account book maintained by the assessee so as to fail within the ambit of section 68 of the Act. Under section 68 of the Act, it is only when an amount is found credited in the account books of the assessee for any previous year that the deeming provisions of section 68 of the Act would apply in the circumstances mentioned therein. Notably, section 68 of the Act would come into play only in a situation "Where any sum is found credited in the books of an assessee ". The Hon'ble Bombay High Court in the case of Shri Bhaichand Gandhi (supra) has approved the proposition that a bank Pass Book maintained by the bank cannot be regarded as a book of the assessee for the purposes of section 68 of the Act. Factually speaking, in the present case, assessee is not maintaining any books of account and section 68 of the Act has been invoked by the Assessing Officer only on the basis of the bank Pass Book. The invoking of section 68 of the Act has to fail because as per the judgment of the Hon'ble
Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 11 of 18 Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), the bank Pass Book or bank statement cannot be construed to be a book maintained by the assessee for any previous year as understood for the purposes of section 68 of the Act. Therefore, on this account itself the impugned addition deserves to be deleted. I hold so"
We further find that a similar view had also been arrived at in a 'third member' decision of the Tribunal in the case of Smt. Madhu Raitani Vs. ACIT (2011) 10 .taxmann.com 205 (Gauhati) (TM), as well as by a coordinate bench of the Tribunal in the case of ITO, Barabanki Vs, Carnal Kumar Mishra (2013) 33 taxamann.com 610 (Lucknow Trib.) Thus in the backdrop of the aforesaid facts of the case read in light of the settled position of law, we are of the considered view that the addition made by the A.O in respect of the cash deposit of Rs.10,53000/-(supra) in the bank account of the assessee by invoking Section 68 has to fail for the very reason that as per thejudgment of the Hon'ble Bombay High Court in the case of Shri Bhaichand N. Gandhi (supra), a bank pass book or bank statement cannot be considered to be a 'book' maintained by the assessee for any previous year, as understood for the purpose of Section 68 of the Act. Therefore, on this count itself the impugned addition Rs.10,53,000/- deserves to be deleted.
10.1. While delivering the decision, the Coordinate Bench relied on the decision of Hon’ble Bombay High Court in the case of CIT Vs. Bhaichand N.Gandhi (supra). Similar view was taken by the coordinate Bench of ITAT, Delhi in the case of Smt Babbal Bhatia in TS-306-ITAT-2018.
In the instant case, though the assessee has maintained the books of accounts, the cash deposits made in the bank account were not found credited in the books of accounts. The entire transactions were made outside the books of accounts. In the absence of any finding with regard to cash deposits recorded in the books of accounts of the assessee, the addition made by the AO u/s 68 in respect of cash deposits made in the bank account are unsustainable. During the appeal hearing, the Ld.DR did not bring any other decision to support the revenue’s contention that the cash deposits made in the bank account to be brought into the purview of section 68 of the Act. The case law relied upon by the Ld.DR in the case of Sachdeva (supra) though related to sale of jewellery and the failure of the assessee to prove the genuineness of sale, it was not related to the addition u/s 68. The case law relied upon by the Ld.DR is distinguishable and does not help the Revenue’s case. Since the facts are identical to the decision of Mehul V.Vyas (supra), respectfully following the view taken by the coordinate bench of ITAT, Mumbai, we hold that the addition made by the AO u/s 68 in respect of cash deposits made in the bank account is unsustainable, accordingly, we set aside the Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli Page 12 of 18 order of the Ld.CIT(A) and delete the addition made by the AO. Accordingly, the appeal of the assessee is allowed.” Since the facts are identical, we hold that the AO is not permitted to make the addition u/s 68 of the Act in respect of the deposits made in the bank account. Accordingly, we set aside the order of the Ld.CIT(A) and delete the addition made by the AO.”
9.1 Further, she relied on the judgement of Hyderabad bench of this Tribunal in the case of Shobha Gupta in dated 10.7.2013.
9.2 Further, she also relied on the judgement of Delhi bench of this Tribunal in the case of Vinay Kumar Prop. V.K. Medical Hall in dated 27.11.2018 wherein held as under: 11. “Admittedly, assessee has not maintained any books of accounts, and it is also an undisputed fact that cash has been deposited in saving bank account of assessee, which he explains to be sale proceeds received on sale of agricultural plot. Ld. AO applied provisions of section 68 of the Act to cash found deposited in bank account, since assessee could not explain source to satisfaction of Ld. AO, and by holding that, assessee has not discharged identity, credibility and most importantly genuineness of transaction.
It has been vehemently canvassed by Ld.AR that passbook/bank statement obtained from a bank do not construe “books of account” of assessee, as defined under section 2(12A) of the Act. It is also been proposed by Ld.AR that section 68 of the Act is not applicable, when assessee does not maintain any books of accounts. He, thus, vehemently argued that, provisions of section 68 is applicable, only when, no explanation and/or explanation offered by assessee is not satisfactory, regarding any amount found credited in “books of account” of assessee.
Be that as it may, we have carefully perused provisions of section 68. This section starts with words, “where any sum is found credited in the books of an assessee maintained for any previous year, ”. Therefore, section 68 can be applied only where, there are sum found credited in “books of account” maintained by assessee. No doubt passbook /bank statement, are maintained by a bank for its customers. Thus, in our considered opinion, we agree with proposition advanced by Ld.AR of non-applicability of section 68 in case of cash credit found in saving bank account.
It is further observed that Ld. AO applied section 68 and made additions in hands of assessee, as unexplained cash credits, to such amount, which has been found deposited by assessee in his saving bank account. To our mind in present facts of case section 69 should have been initiated by Ld.AO. It is unfortunate that Assessing Officers blindly apply provisions,
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Page 13 of 18 which can be fatal to the interest of Revenue. However, as a Tribunal, we are not competent to make addition u/s 69A of the Act, by virtue of the decision of Hon’ble Allahabad High Court in case of Smt. Sarika Jain vs. CIT reported in 407 ITR 254. Hon’ble High Court observed as under.
“18. In view of the above, when the said income cannot be added u/s 68 of the Act and the Tribunal was not competent to make the said addition under section 69A of the Act, the entire order of the Tribunal stand vitiated in law.” Respectfully following the above observation by Hon’ble Allahabad High Court, we allow additional ground raised by assessee, only because addition u/s 68 is not sustainable in present facts of case. Accordingly the additional ground raised by assessee stands allowed.”
The ld. D.R. relied on the order of the lower authorities.
We have heard the rival submissions and perused the materials available on record. In the present case, the assessment order was passed u/s 144 of the Act. The AO has mentioned the section in para 5.5 of the assessment order. He mentioned that addition of Rs.1,25,89,399/- added back to the total income of the assessee u/s 68 of the Act. However, while making final addition he has not mentioned that addition on account of unexplained cash deposit at Rs.1,25,89,399/-. Section 68 of the Act refers to any unexplained credit found in the books of accounts of the assessee. To apply section 68 of the Act, the AO has to find that assessee has maintained the books of accounts and in that book of accounts, there are credit entries, which are not satisfactorily explained to AO. In the present case, the assessee has not produced books of accounts before the AO. As such, there is no question of applying section 68 of the Act. On the other hand, in case of deposit of assessee’s bank account, if the assessee has not explained the source of deposit, section 69 of the Act is applicable, which shall be treated as unexplained deposit into bank account. Hence, merely wrong mentioning of provisions of law namely section 68 of the Act, would not vitiate the assessment order. In the present
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Page 14 of 18 case, it is clear that AO has the power to question the deposit into bank account. While doing so, if the provision of law has been wrongly mentioned, it would be wholly immaterial, it would not make any difference so long as such power is with the AO under other provisions of the Act for which purpose, we rely on the judgement of Hon’ble Supreme Court in the case of N. Mani Vs. Sangeeta Theatre & Ors. (2004) 22 SCC 278, wherein held as under:
“It is a well settled principle of law that mentioning of a wrong provision or non- mentioning of a provision does not invalidate an order if the court and/or statutory authority had the requisite jurisdiction therefore. Also, in Ram Sunder Ram v. Union of India & Ors. [2007 (9) SCALB 197], it was held:
“……..It appears that the competent authority has wrongly quoted Section 20 in the order of discharge whereas, in fact, the order of discharge has to be read having been passed under Section 22 of the Army Act It is well settled that if an authority has a power under the law merely because while exercising that power the source of power is not specifically referred to or a reference is made to a wrong provision of law, that by itself does not vitiate the exercise of power so long as the power does exist and can be traced to a source available in law [see N. Mani. Sangeetha Theatre and Ors. (2004) 22 SCC 278.”
11.1 Same view was taken in the following judgements:
1) By the coordinate bench of Bangalore in case of Karan Sharma in dated 22.2.2021 for the assessment year 2011-12 2) By the coordinate bench of Bangalore in the case of Shri Arif in ITA No.976/Bang/2022 dated 16.1.2023 for the AY 2017- 18. 3) In case of Action for Welfare & Awakening In Vs. Deputy Commissioner of Income-tax in 130 Taxman 82 (AP) by the Hon’ble Andhra Pradesh High Court.
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Page 15 of 18 4) In the case of CIT Vs. Smt. Basana Rani Saha reported in 243 ITR 780 (Gwh.) by Hon’ble Guwahati High Court. 5) In the case of Ramesh Kumar Vs. State of Rajasthan High Court in Civil reference no.1/2013 dated 16.4.2013.
11.2 In our opinion, the mistake of mentioning wrong provision as made by AO while making addition is to be treated as having been made u/s 69 of the Act as the source of cash deposits during demonetization into bank account remains unexplained and thus to be treated as unexplained investment within the realm of section 69 of the Act. Therefore, based upon the facts in the surrounding circumstances, we are of the opinion that source of cash deposit into bank account in the accounts of the assessee is to be explained by assessee herself. To that extent, we do not find any merit in the argument of the assessee’s counsel.
12. Now coming to the merit of the argument, ld. A.R. submitted that the assessment order passed by AO u/s 144 of the Act and there was no participation of the assessee before AO even before the NFAC. The assessee was not able to lead necessary evidence due to shortage of time and prayed that one more opportunity may be given before AO to present assessee’s case.
13. We have heard the rival submissions and perused the materials available on record. Admittedly, assessee deposited huge cash of Rs.1,25,89,399/-Before the AO, assessee has not led any evidence. Assessment order passed ex-parte. Even before ld. CIT(A), assessee failed to produce necessary evidence in view of shortage of time and the order of the ld. CIT(A) also very cryptic which cannot be upheld. In our opinion, the deposit was made by assessee during the demonetization period. In case of demonetization, the AO is required to examine the same in the light
Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 16 of 18 of CBDT instructions dated 9.8.2019. For this purpose, we place reliance on the order of the Tribunal in in case of Arif Hussain for the assessment year 2017-18 dated 27.6.2023, wherein held as under:
“Admittedly cash has been deposited to the account of the assessee amounting to Rs. 14,55,000/-. The only explanation offered by assessee is that the source of cash deposits are from cash sales of the business. Further Rs. 2,35,48,326/- was received by assessee as commission. It is submitted that these are business receipts in the hands of assessee. It is also submitted that the sum was received in cash prior to the date of demonetization. We note that the Ld.AO while verifying the claim has not considered the circulars issued by CBDT pertaining to cash deposits during demonetisation period.
We note that no specific query was raised by the Ld.AO, in respect of the cash deposits during the demonetisation period. The Ld.AO did not follow the circulars issued by the CBDT to carry out necessary verifications in respect of the genuineness of cash deposited by the assessee during the relevant time.
5.1 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.
5.2 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. 5.3 The instruction dated 21/02/2017 requires the assessing officer to verify 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 has also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there
Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
Page 17 of 18 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. 5.4 The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions as the case may be. 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. Assessee is also directed to establish the genuineness of the cash received prior to the date of demonetisation if any by way of evidences and the circumstances under which such cash was received.
5.5 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. Accordingly, we direct the Ld.AO to verify the cash deposited in the light of the above circular by granting proper opportunity of being heard to the assessee.
We thus remand this issue to the Ld.AO to carry out necessary verification of the cash deposited in the bank account of the assessee in the light of the above circulars and instructions. Needless to say that proper opportunity of being heard may be granted to assessee by way of a physical hearing. In the result, the appeal filed by the assessee stands partly allowed for statistical purposes.”
13.1 In view of the above, we are of the opinion, that it is just and fair to remit entire issue in dispute with regard to deposit of cash to the assessee’s SB notes during demonetization to the file of AO to re-examine the issue.
Mohammed Hanif Mahommed Yusuf Dharwadkar, Hubli
14. The ld. A.R. not put any argument with regard to re-opening of assessment, though the assessee raised ground with regard to this issue in ground No.3. Accordingly, this ground is dismissed.
The appeal of the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 25th July, 2023