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Facts
The Revenue filed appeals against the order of the CIT(A) deleting an addition made under Section 69A of the Income Tax Act. The addition was for cash deposits of Rs. 49,86,34,855/- in the assessee's bank account. The Assessing Officer made the addition as the assessee failed to explain the nature and source of these deposits. The assessee contended that the deposits were from sale proceeds and cash realized from debtors.
Held
The Tribunal held that the CIT(A) had correctly analyzed the facts and admitted additional evidence. The Tribunal found that the cash deposits were from explained sources, primarily sale proceeds, and there was a regular pattern of such deposits in earlier and subsequent years. The business model involved significant cash sales and collections from vendors/customers.
Key Issues
Whether the cash deposits in the bank account by the assessee were from explained sources of business income or unexplained income, warranting addition under Section 69A of the Income Tax Act.
Sections Cited
148, 151, 142(1), 69A, 46A, 69
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Income Tax Appellate Tribunal, DELHI BENCH ‘A’: NEW DELHI
Before: SHRI VIKAS AWASTHY & SHRI S. RIFAUR RAHMAN
(APPELLANT) (RESPONDENT) ASSESSEE BY : None REVENUE BY : Shri Javed Akhtar, CIT DR Date of Hearing : 24.04.2025 Date of Order : 30.06.2025 O R D E R PER S.RIFAUR RAHMAN, ACCOUNTANT MEMBER : 1. These appeals are filed by the Revenue against the order of ld. Commissioner of Income-tax Appeals/National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as ‘ld. CIT (A)] dated 05.08.2024 & 31.07.2024 for Assessment Years 2015-16 & 2017-18.
Since the issues are common and the appeals are connected, hence the same are heard together and being disposed off by this common order. We take for AY 2015-16 as lead case.
Brief facts of the case are, assessee is a cooperative society registered under Societies Act and is in existence from 01.04.2003. This society is controlled by Haryana Dairy Development Cooperative Federation Limited. It is engaged in procurement of milk from various sources and then supply of milk under the brand of ‘VITA’ and also engaged in manufacturing of milk products like Ghee, skimmed milk, etc. and selling the same under the brand name ‘VITA’.
The assessee had filed its return of income for AY 2015-16 on 27.09.2015 declaring the total income of Rs.54,39,140/-. A notice u/s 148 of the Income- tax Act, 1961 (for short ‘the Act’) was issued to the assessee on 30.03.2021 proposing to assessee/reassess the income and called for filing of the return of income, after getting the proper approval u/s 151 of the Act. In response, assessee filed return of income and notices u/s 142 (1) of the Act were issued and served on the assessee. The assessee was provided with the reasons to believe that income escaped assessment. In the reasons it was informed that the assessee has made cash deposit in his bank account of Rs.49,86,34,855/- during the year. Therefore, the income declared by the assessee is not true income for the year under consideration. Since assessee could not explain the nature and source of cash deposits of Rs.49,86,34,855/- along with any documentary evidence. Assessing Officer observed that they merely submitted the return of income filed. Since assessee has not submitted any information before the Assessing Officer even though several notices were issued to the assessee. Accordingly, the abovesaid cash deposit was added to the income of the assessee u/s 69A of the Act.
Aggrieved assessee preferred an appeal before the NFAC, Delhi and raised grounds of appeal, filed additional evidences, filed detailed submissions and the same is reproduced by the ld. CIT (A) at pages 5 to 26 of the impugned order. After considering the above submissions, ld. CIT (A) called for the remand report and the remand report was reproduced at pages 27 to 32 of the appellate order. After considering the detailed submissions and additional evidences and remand report submitted by the Assessing Officer, ld. CIT(A) deleted the abovesaid addition with the following observations :- “5.1.3 The remand Report and submission of the appellant have been considered. In view of the submissions of the appellant it is held that the failure of appellant in responding the notices issued during assessment proceedings was on account of justifiable reasons. The contention of the appellant that it had submitted various documents during assessment proceedings has not been verified by the AO in the Remand report. Further, the evidences submitted by the appellant are vital for deciding the appeal ensuring justice and fair play. Accordingly, the additional evidences submitted by the appellant are admitted under rule 46A of the Income Tax Act. 5.2 First ground of appeal is general in nature; therefore it needs no separate adjudication. 5.3 Vide second and third grounds of appeal, the appellant has challenged the addition made by AO of Rs. 49,86,34,855/- u/s 69 of the Income Tax Act on account of sales proceeds. The appellant has contended that the AO has erred in assessing the income of Rs.50,40,73,995/- against the returned income of Rs. 54,39,140/-. 5.3.1 In the instant case the appellant had filed its Return of Income for the assessment year 2014-15 declaring total income of Rs.54,39,140/-. Further in response to notice u/s 148 the appellant had filed its Return of Income on 27.09.2013 for the A.Y 2015-16 declaring total income of Rs.54,39,140/-. The appellant had made cash deposited of Rs.49,86,34,855/- in its bank account during the FY 2014-15 relevant to AY 2015-16. The appellant had failed to explain the source and nature of cash deposit during the assessment proceedings. Therefore, the AO made the addition ofRs.49,86,34,855/-u/s69 of the Income Tax Act on account of cash deposit. 5.3.2 The appellant has stated in its submission that the appellant the Ballabgarh Milk Producers Union Ltd is a Co-operative Society registered under society Act and is in existence from01.04.2003. The society is ultimately guided/controlled by Haryana Diary Development Cooperative Federation Limited which basically is a parent body of 6 milk producer of Haryana. It is engaged in procurement of milk from various sources and then the supply of milk under the brand of VITA and also engaged in manufacturing of milk products like Ghee, Skimmed milk, Powder, Butter and Cream etc. and selling them under the brand of VITA. 5.3.3 Further, the appellant has submitted in his submission that the cash deposits in bank out of sale proceeds and cash realized from debtors from sale made on credit basis. In the case of appellant this is very common as almost all the customers of the buyer are running small booths or shops and making payments in cash and mostly directly deposit in bank. This cash deposit is our normal deposit and quite comparable with the cash deposit as in earlier year and also in later years as detailed below:-
Particulars A.Y2014-15 A.Y2015-16 A.Y2016-17 A.Y2017-18 Sales 190.57 175.00 166.94 157.27 Cash 110.07 127.84 121.63 110.00 deposited Further, the appellant has submitted that turnover of the appellant during the under consideration was Rs.175 Crores & in the preceding year it was Rs.190.57 Crores. Further appellant had filed all the vat returns to sales tax department and the total sales as per balance sheet are in agreement with VAT return. Copy of vat return is as per page no. 48 to 49 of paper books. 5.3.4 The appellant has stated in his submission that: "Nature of business of the appellant is such that appellant himself sold in cash milk, ghee and other milk products through their booths I sale counters. Further these products are sold to different vendors. who in turn make the payments in cash as well as deposit cash directly in the bank accounts of the appellant. Mainly cash is deposited in two accounts namely Bank of Baroda account no. 98230100001455 and /CIC/ Bank account no. 015801002186.In fact in these two accounts cash amounting to Rs. 109.30 Crores has been deposited during year under consideration. It is pertinent to mention here that in the computation of income Bank of Baroda account no. 98230100001455is very much there along with complete address of this bank. The learned AO even did not call for the bank statements. It is not out of place to mention here that this Bank of Baroda was the same account in which Rs.49.85 Crores were deposited by the appellant. The appellant had vide two more letters on dated 24.03.2022 &30.03.2022 have elaborated with documentary evidences that nature of business of appellant is such that sale is made in cash on their booths as well as through their vendors/customers. In turn these vendors I customers deposit cash directly in the bank account of the appellant. As such cash is deposited by appellant himself on account of cash sales and cash collection from debtors and also by vendors/customers directly." 5.3.5 During the appellate proceedings the appellant has stated that it had submitted the documents relating to balance sheet, P&L sheet, formno.3GB& 3CD, Audit Reports, ledgers of sale of milk and milk Products vita and sale of trading goods. In its reply the appellant had also submitted date wise case deposit having narration clearly indicated the source of cash deposit in Bank of Baroda account no. 98230100001455 & in ICICI Bank account no 016801002186 relating to complete financial Year 2014-15. Details of cash deposited in Bank of Baroda comprising 67 pages and ICICI Bank comprising of 64 documents filed with the same reply on dated 24.03.2022.
Further, the appellant has submitted that the appellant society has maintained proper books of account and all the bank account has been duly included in regular books of accounts. The same has also been considered in balance sheet where in all bank accounts are appearing and are duly audited by the auditors and also subjected to Tax Audit u/s 44AD of Income tax act and the appellant has duly recorded in his books of accounts all cash deposited in the bank accounts and these cash deposited are basically out of sales proceeds as well as cash collection form debtors by the appellant. Since all the transactions are duly recorded in regular books of accounts maintained by the appellant and there is not even single transaction which is not recorded in the books of account as such there is no question of applicability of section 69A of Income Tax Act in this case.
5.3.6 The submission of the appellant and Remand Report of AO have been perused. The bank accounts and total sales / turnover are duly reflected in balance sheet of the appellant and sources of cash are very clear and that is from sale proceeds of the milk and its products. All cash deposited in the bank accounts and these cash deposited are basically out of sales proceeds as well as cash collection form debtors by the appellant. The appellant has submitted date wise case deposit that clearly indicated the source of cash deposit in Bank of Baroda account no.98230100001455 & in ICICI Bank account no.016801002186 relating to financial Year 2014-15. Further, there is a regular pattern of cash deposits in earlier years and subsequent years. The nature of business of the appellant society is sale of milk, ghee and other milk products through their booths / sale counters. These products are sold to different vendors who in turn make the payments in cash as well as deposit cash directly in the bank accounts of the appellant.
In view of the above, it is held that during the financial year 2014-15, the appellant had made the cash deposits from explained sources i.e. proceeds of sales. Accordingly, the addition made by AO of Rs.49,86,34,855/-u/s 69 of the Income Tax Act is hereby deleted.” 6. Aggrieved with the above order, Revenue is in appeal before us raising following grounds of appeal :-
1. Whether the impugned order given by the Ld. CIT(A) is perverse both on the law and the facts of the case?
2. Whether the impugned orders given by the Ld. CIT(A is perverse both on the law and fact in holding that mere discussion of bank account number in the balance sheet of the assessee absolves the assessee from discharging its onus to actually prove the nature and genuineness of the cash deposits made in these bank accounts? 3. Whether the impugned orders given by the Ld. CIT(A) is perverse both on the law and the fact in holding that mere submissions of bank books for different bank accounts are sufficient to establish the identity, genuineness and creditworthiness of the parties without furnishing the PAN, address, contact No. and individual ledger account of these parties when the assessee was given enough opportunities to do so at the time of assessment proceedings and thus the onus has not discharged by the assessee.
4. Whether the impugned orders given by the Ld CIT(A) is perverse both on the law and the fact in holding the impugned cash deposits are from cash/cash collected from debtors without verifying the actual business model of the assessee that whether assessee actually supplied the manufactured milk and milk products to distributors or directly to end customers from whom such cash has been claimed to be received by the assessee.
5. Whether the impugned orders given by the Ld CIT(A) is perverse both on law and the fact by not ascertaining the reason that if different sales parties have deposited the amount in the bank account then different cash deposit entries shall be made in the bank book and not an aggregation of the same, therefore, making the order perverse.”
7. At the time of hearing, ld. DR brought to our notice the relevant facts on record and submitted that the assessee has submitted the additional evidences before the ld. CIT (A) and submitted that ld. CIT (A) has allowed the appeal of the assessee merely on the basis of additional evidences, ld. CIT (A) held that the submissions of bank books for different banks are sufficient to establish the identity, genuineness and creditworthiness of the parties without furnishing the PAN, address, contact number and individual ledgers accounts etc. Further he objected that the cash deposits made by the assessee were held to be out of cash /cash collected from debtors without verifying actual business model of the assessee whether it has actually supplied the manufactured milk and milk products to distributor or directly to end customers etc.. He objected to the relief granted to the assessee and prayed that the same may be sustained.
On the other hand, ld. AR of the assessee brought to our notice relevant material submitted before the ld. CIT (A) and also before the Assessing Officer, no doubt, during remand proceedings, he submitted that the Assessing Officer has not appreciated various documents and evidences submitted during remand proceedings and he heavily relied on the findings of the ld. CIT (A).
Considered the rival submissions and material placed on record. We observe that the Assessing Officer noted that assessee has declared the income lesser than the huge cash deposits made during the year. Since assessee has not submitted relevant information before him, he treated the whole cash deposit as income of the assessee u/s 69A of the Act. We observe that assessee is a cooperative society and engaged in the supply of milk and manufacture of milk products. It is controlled by Haryana Dairy Development Cooperative Federation Limited and we further observe that during the year, assessee has registered sales of Rs.175 crores and during the year, it has deposited cash of Rs.127.84 crores. In the preceding assessment year also, society registered sales of Rs.190.75 crores and cash deposited of Rs.110.07 crores. Since it is a cooperative society meant for non-profit and for the purpose of welfare of the society/farmers. During remand proceedings, assessee has submitted various document and also demonstrated that the nature of its business and majority of the sales are carried through by cash. The historical data submitted before us demonstrated that about 70 to 75% of the sales are through cash only and the same are deposited in their bank account. Since assessee has already demonstrated the source of cash deposited in their bank account and also ld. CIT (A) has analysed the facts in this case thoroughly and gave a clear finding that assessee has got source of cash deposits in their bank account, therefore, we do not see any reason to disturb the same. Accordingly, we are inclined to dismiss the grounds raised
by the Revenue.
10. In the result, the appeal filed by the Revenue for AY 2015-16 is dismissed.
11. With regard to Assessment Year 2017-18, since the facts are exactly similar to AY 2015-16 our above findings in AY 2015-16 are applicable mutatis mutandis in Assessment Year 2017-18. Accordingly, the appeal filed by the Revenue for AY 2017-18 is dismissed.