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Facts
The assessee's appeal arose from an order sustaining additions made by the AO under Section 69A read with Section 115BBE of the Income Tax Act, 1961, concerning cash deposits during demonetization. Other grounds involved disallowance of bad debts and partners' remuneration.
Held
The Tribunal held that a lump sum addition of Rs. 1,00,000/- was appropriate for the cash deposits, providing a relief of Rs. 25,50,000/-. The disallowance of bad debts was deleted for lack of proper grounds by the lower authorities, and the disallowance of partners' remuneration was also deleted based on the partnership deed.
Key Issues
Whether the addition of cash deposits during demonetization was justified, and whether disallowances for bad debts and partners' remuneration were correctly made by the lower authorities.
Sections Cited
69A, 115BBE, 143(3), 40(b)
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Income Tax Appellate Tribunal, DELHI BENCH ‘SMC’, NEW DELHI
Before: Sh. Satbeer Singh Godara
Asstt. Year : 2017-18 Ram Sarna Dass & Sons, Vs Income Tax Officer, C/o IPSO Legal, H-35, 1st Floor, Ward-35(5), Jangpura Extension, New delhi-110002 New Delhi-110014 (APPELLANT) (RESPONDENT) PAN No. AALFR1104M Assessee by: Sh. Rajiv Saxena, Adv., Ms. Umangla Saxena, Adv. & Sh. Dishant Sethis, Adv. Revenue by : Sh. Manoj Kumar, Sr. DR Date of Hearing: 29.05.2025 Date of Pronouncement: 29.05.2025 ORDER
This assessee’s appeal for Assessment Year 2017-18, arises against the CIT(A)/NFAC, Delhi’s DIN & order No. ITBA/NFAC/S/250/2024-25/1072505822(1) dated 24.01.2025, in proceedings u/s 143(3) of the Income Tax Act, 1961 (in short “the Act”).
Heard both the parties at length. Case file perused.
This assessee’s appeal raises the following substantive grounds:
“1. That the ld. CIT(A), NFAC Delhi has grossly erred in law as well as on facts in sustaining the addition of Rs.26,50,000/- made by Ld. AO u/s 69A r.w.s. 115BBE of the Act.
Ram Saran Dass & Sons 2. That the ld. CIT(A), NFAC and Ld. AO has erred in law as well as on facts in not considering the fact that cash deposited in the bank account of assessee was from the cash sales made by assessee from the business of sale of crockery etc., and for this, all the relevant details and documentary evidences were furnished before them.
3. That the ld. CIT(A), NFAC has grossly erred in law as well on facts in sustaining the addition of Rs.2,31,747/- against the bad debt written off.
4. That the ld. CIT(A), NFAC has grossly erred in law as well as on facts sustaining the addition of Rs.61,526/- against the disallowance of expenditure incurred on account of sale tax.
5. That the ld. CIT(A), NFAC has grossly erred in law as well as on facts in sustaining the addition of Rs.7,20,000/- against the disallowance of expenditure incurred on account of partners salary.
That the order passed by ld. CIT(A), NFAC is bad in law and required to be quashed as no reasonable and sufficient opportunity of being heard was provided and thereby violating the Principles of natural justice.”
Learned counsel does not wish to press the assessee’s fourth substantive ground involving sales tax issue keeping in mind smallness of the amount involved. Rejected in very terms.
Now comes the first and foremost issue between the parties wherein both the learned lower authorities have added the assessee’s cash deposits during demonetization of Rs.26,50,000/- u/s 69A r.w.s. 115BBE of the Act. The Revenue could hardly dispute that the assessee all along been carried out his regular business activity in the preceding as well as succeeding assessment year involving cash sales and it’s book results have not rejected by both the learned lower authorities.
Ram Saran Dass & Sons 6. The facts also remains that the assessee has not proved source of the impugned cash deposits in the entire satisfaction of the learned lower authorities. Be that as it may, it is deemed appropriate in these peculiar facts that a lump sum addition of Rs.1,00,000/- only out of that in question to the tune of Rs.26,50,000/-; would be just and proper with a rider that the same shall not be treated as a precedent. The assessee gets relief of Rs.25,50,000/- in other words.
Next comes bad debts deduction disallowance of Rs.2,31,747/- made by both the learned lower authorities on the ground that the assessee has not placed on record a list of the concerned parties. A perusal of page 89 in the assessee’s paper book makes it clear that it had indeed filed a list of all the concerned parties before the learned assessing authority in the course of assessment proceedings. That being the case, I hereby quote T.R.F. Ltd. vs. CIT (2010) 323 ITR 397 (SC) to hold that the impugned bad debts is not sustainable and the same is directed to be deleted.
Lastly comes section 40(b) disallowance of the assessee’s partners’ remuneration reading a sum of Rs.7,20,000/- made in both the lower proceedings. The Revenue vehemently argues that the assessee has all along not been able to above to prove as to whether it’s twin partners are working partners as per the Ram Saran Dass & Sons assessment discussion. A perusal of the assessee’s partnership deed at page no. 128 indicates that it is all along having two partners Sh. Prayag Raj Arora and Sh. Arun Arora since April 2009. That being the case, I find no merit in the learned lower authorities impugned disallowance. The same is directed to be deleted.
So far as assessee’s assessment under Section 115BBE is concerned, we quote S.M.I.L.E Microfinance Limited Vs. The ACIT CC-1 in W.P.(MD) No.2078 of 2020 & W.M.P. (MD) No. 1742 of 2020 held that the said provision applied for transactions done on or after 01.04.2017 only.
This assessee’s appeal is partly allowed. Order Pronounced in the Open Court on 29/05/2025.