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Income Tax Appellate Tribunal, ALLAHABAD ‘SMC’ BENCH, ALLAHABAD
A.Y. 2017-18 Asha Tewari, vs. Income Tax Officer, Partawal, Maharajganj, U.P. Maharajganj PAN:ADJPT8320L (Appellant) (Respondent) Assessee by: Sh. Arvind Shukla, Advocate Revenue by: Sh. A.K. Singh, Sr. DR Date of hearing: 23.10.2024 Date of pronouncement: 31.12.2024 O R D E R PER NIKHIL CHOUDHARY, A.M.: This is an appeal filed against the order of the ld. CIT(A), NFAC, on 18.03.2024 under section 250 of the Income Tax Act, 1961. The grounds of appeal preferred by the assessee are as under: -
1. Because the learned authorities below have erred in law as well as on facts in sustaining addition of Rs 21,55,000/- u/s 69A which actually represented receipts from sale of Petroleum products routed through the audited books of accounts.
2. Because the learned CIT(A) has erred in sustaining addition of Rs 21,55,000/- u/s 69A without appreciating that the said section is not applicable to the facts of the case as the entries of bank deposits are flowing directly from the audited books of accounts.
3. Because the addition of Rs 21,55,000/- has been made and sustained simply on negative presumptions, conjectures and surmises to the entire exclusion of facts on record.
4. Because the learned authorities below have failed to appreciate that during demonetization petrol Pumps were exempted from taking old SBN and hence there was nothing unusual or incorrect with all entries routed properly through audited books of accounts.” 1
The facts of the case are that the ld. AO obtained information that the assessee, Smt. Asha Tewari had deposited cash of Rs.1,51,15,500/- in her bank account during the demonetization period (9th November, 2016 to 30th December, 2016). He, therefore, issued a notice under section 142(1) along with questionnaire, asking the assessee to explain the nature and source of cash deposits in all her bank accounts, during the year and especially during the demonetization period. The assessee was also required to produce the cash book and the stock register for the full year, for both F.Ys. 2015-16 and 2016-17 to verify the sources of cash. The ld. AO does not record what the reply of the assessee was, but thereafter proceeded to make an analysis of the cash deposits made during the financial year by the assessee in its account with Union Bank of India. The ld. AO found, that out of total cash deposits of Rs.10,40,20,000/- made during the F.Y. 2016-17, cash deposits worth Rs.2,08,37,500/- had been during the demonetization period. He recorded the fact that the assessee had regularly deposited cash in the bank account throughout F.Y. 2016-17. He also made a comparison with cash deposits made by the assessee in F.Y. 2015-16 and found that the assessee had deposited Rs.1,20,52,000/- in November, 2015 (as compared to Rs.1,62,75,000/- in November, 2016) and (Rs.1,12,88,000/- in December, 2015 as compared to Rs. 81,93,500/- in December, 2016). Thereafter, he analyzed the monthly sales of the assessee and found that in the Month of November, 2016, sales had been disclosed at Rs.16,83,571/-, but cash of Rs.30,99,000/- had been deposited up to November, 8th 2016. Doing a detailed examination of the cash deposit for the month of November, 2016, the ld. AO observed that against the average cash deposits per day of Rs.3,87,375/- between 1 to 8th November, an average cash deposit of Rs.6,42,714/- had been made between 9th to 15th November, Rs.5,75,000/- had been made between 16th to 21st November, Rs.5,04,357/- was made between 22nd to 28th November and Rs.8,46,000/- was made between 29th to 30th November. He observed that the assessee had disclosed total sales turnover of Rs.11,48,90,684/- and this yielded to average monthly sales of Rs.95,74,224/-. He though concluded that there was an excess turnover of Rs.67,00,776/- in November, 2016. He did record the fact that there had been a regular payment to Indian Oil Corporation (IOC) from the bank account during the year. Looking at the deposits made before 8th November, 2016, the ld. AO deduced, that before beginning of the demonetization period, the assessee was having an average sales turnover of Rs.3,68,000/- per day between 5th and 7th November, 2016. Taking this trend, he determined that the sales turnover of Rs.6,12,000/-, that was in excess of this average turnover computed by him, was deemed to be unexplained money and added to the income of the assessee. Similarly, Rs.6,82,000/-, in excess of his computed average turnover, deposited on 11th November, 2016 was taken to be unexplained money under section 69 of the Act and in this same vein, Rs.8,61,000/-, which was the excess of deposits over the average turnover computed by him and claimed to be the sales of 18th November, 2016, was held to be unexplained money under section 69A of the Act. Thereafter, the ld. AO went into discussing various case laws such as the case of Chuharmal vs. CIT (1988) 172 ITR 252 and Smt. Srilekha Banerjee vs. CIT, Bihar & Orissa, 1964 AIR 697, to point out that the onus was upon the assessee to explain deposits to the account, as arising out of its explained sources of income and, in view of his perception of the failure of the assessee to do so, he held that Rs.21,55,000/- was unexplained money in the hands of the assessee under section 69A. Recomputing the turnover of the assessee after deducting this amount, he estimated the profit of the assessee at Rs.4,27,268/-. Thereafter, he initiated penalty proceedings under section 271AAC. The matter went in appeal before the ld. CIT(A), Gorakhpur. Subsequently, the appeal was transferred to the NFAC. Before the NFAC, the assessee submitted that she was an individual having a dealership of Indian Oil Corporation, she had submitted her audited return of income before the due date disclosing income of Rs.4,35,802/- along with tax audit report in Form 3CD on 24.10.2017. It was submitted, that the cash deposited during demonetization, were the sale proceeds of business duly recorded in the cash book and deposited in the normal course of business. The proceeds were subsequently transferred to IOC, for the purchase of MS and HSD. It was submitted that all the transactions were in accordance with the notification of the Government of India dated 8.11.2016, which specifically allowed for purchase of petrol, diesel and gas at the stations operating under the authorization of public sector oil marketing company. The ld. CIT(A) observed, that during verification, a sum of Rs.30,99,000/- was found deposited up till 8th November, 2016, against disclosed sales of Rs.16,83,571/- and in this way, there was a huge difference between the cash sales and the cash deposits found. He, therefore, observed that since the ld. AO had observed discrepancies between sale proceeds and corresponding cash deposit, he was justified in adopting the method of average calculation of sale proceeds, in order to arrive at discrepancies of cash deposits during the demonetization period. The total such discrepancies identified were Rs.21,55,000/-, for which no explanation could be provided, either during the course of assessment proceedings or during the appellate proceedings. He held that merely claiming to have submitted the details with respect to cash deposits did not amount to substantial evidence to explain the discrepancies of cash deposits which was found during the course of assessment proceedings. He also observed that since, the onus was squarely on the assessee to prove that the cash deposits made bore the character of income, and the assessee had failed to meet this onus, the unexplained money added back under section 69A of the Act was upheld to be a part of the assessee’s income.
Aggrieved with this summary disposal of her appeal, the assessee has come in appeal before us. Shri. Arvind Shukla, Advocate (hereinafter referred to as the ‘ld. AR’) appearing on behalf of the assessee, submitted that the entire assessment order 4 was based on surmises and conjectures. It was submitted that in so far as section 68 is concerned, the onus was wholly upon the assessee to explain the source of the entry. But in cases falling under section 69, 69A, 69B and 69C, the words used, showed that before any of these sections could be invoked, the condition precedent as to the existence of investment, expenditure, and money must be conclusively established by the material on record / evidence. But here, the ld. AO had assumed average sale and comparing it with bank deposits, manufactured an unexplained amount. It was submitted, that for section 69A, the three basic conditions were that the money should not be recorded in the books of accounts; that taxpayer did not offer any explanation about the nature of the money or that the explanation offered by him was not satisfactory. As against this, it was submitted that every receipt of cash, sale and cash deposit in bank, was duly recorded in the cash book that was submitted during the course of assessment proceedings. The cash book, the stock register, the cash deposit bank slip and the bank statements were placed on record. Thus, complete and proper explanation was offered and no case of addition section 69A was made out against the assessee. Furthermore, the assessee pointed out, that a question of unexplained money did not arise when petrol, diesel and gas was specifically allowed to be traded in SBN, after 8th November, vide the Government notification. Further, it was submitted that the ld. AO had ignored the cash book submitted on 26.09.2019 and detailed replies on the issue and acted against the decisions of the Hon’ble Supreme Court laid down in Lal Chand Bhagat Ambika Ram vs. CIT (1959) 37 ITR 288 and the ITAT, Kolkata in the case of CIT vs. Associated Transport (P.) Ltd., (1996) 84 taxman 146, which held that if an assessee maintained books of accounts and there was sufficient cash balance in his cash books and such balance was not challenged by the ld. AO, then there was no reason to treat the amount as income from undisclosed sources as the assessee had explained the nature and source of such deposits. It was also submitted, that the ld.
AO had failed to appreciate that the cash deposits co-related with sale proceeds of MS and HSD and it duly corresponded to the movement of stock recorded in the stock register, which was also submitted on 26.09.2019. Furthermore, it was submitted that the ld. AO had failed to notice that the cash so deposited, was not left idle in the bank account, but funds were immediately transferred to Indian Oil Corporation, for further purchase of MS and HSD. The said additions were made ignoring the sale proceeds and the cash in hand, by adopting an arbitrary yardstick of determining an average sale price and thereafter computing a figure of unexplained money, which had no basis whatsoever. It was further submitted that in similar cases, the ld. AO had accepted similar submissions by other petroleum dealers, but adopted double standards when it came to the assessee. It was submitted that when demonetization was announced there was,in fact, an increased demand for petrol and diesel, because the Government had permitted trading in SBNs at such outlets. Therefore, persons began spending heavily at such all such places where trading in SBNs were allowed. There was no reason to doubt the sales made by the assessee, because the assessee dealt in a controlled commodity, which was purchased from public sector undertakings. Therefore, without finding any discrepancy in the stock position or the cash register, the ld. AO was not justified in making the addition. It was further submitted that the case laws relied upon by the ld. AO were not at all applicable to the facts of the assessee’s case and instead the assessee submitted that its case was similar to that of Hira Panna Jewellers vs. ACIT wherein the ITAT, Vishakhapatnam Bench held that when the sales were duly accounted for in the books of accounts and there was no abnormal profits and where there was sufficient stock to affect the sales, there was no case for making any addition under section 68 or to bring the same to tax under section 115BBE. The assessee also invited our attention to extracts from the daily stock register for the months of October and November, 2016 with regard to MS and HSD. It was submitted that the stock was taken on a daily basis and the sale was duly recorded in the meter readings. Thus, the fact that sufficient stocks were available with the assessee, were purchased as and when required and were sold, as per the meter readings, was not a matter of doubt or debate. In the circumstances, when the cash deposits were totally backed up by sales, there was no justification for treating the same as undisclosed. The assessee also furnished the extract of the audited cash book and the cash flow statement in support of its case. In response, Shri. A.K. Singh, Sr. DR, relied upon the orders of the ld. AO and the ld. CIT(A).
We have duly considered the facts and circumstances of the case. We observe that the assessee was dealing in a controlled commodity i.e. MS and HSD, which was purchased from M/s Indian Oil Corporation and the extent of such purchases was duly recorded in its books of accounts. These purchases have not been called into question by the ld. AO. We also observe that there was sufficient stock in the books which were duly depleted and replenished, as and when sales were made out of that stock. We observe that the ld. AO has not noticed any discrepancy in either the stock position or in the sales effected by the assessee. That being the case, we hold that there was absolutely no basis for the ld. AO to come to a conclusion of any unexplained money being deposited in the assessee’s bank account, without pointing out any deficiencies in the books of accounts regularly maintained by the assessee. We further observed that the arithmetical exercise conducted by the ld. AO on the basis of a comparison of the average sales prior to 8.11.2016, with the sales made after 8.11.2016, is a meaningless exercise in the absence of any specific discrepancy being pointed out in the purchases, stock position or sales or cash flow statements as represented in the books of the assessee, which have been used to explain the said deposits . Accordingly, we hold that there is no basis for the addition made by the ld. AO and sustained by the ld. CIT(A) and we accordingly delete the same. 7