INCOME TAX OFFICE WARD-7(1), DELHI, DELHI vs. DURGA AGENCIES PVT. LTD, DELHI

The present appeal has been filed by the Revenue against the order dated 27.09.2024 passed by Ld. Commissioner of Income Tax (A), National Faceless Appeal Center (“NFAC”), Delhi [“Ld.CIT(A)”] in Appeal No.NFAC/2016-17/10035782 passed u/s 250 of the Income Tax Act, 1961 [“the Act”] arising from the assessment order dated 30.12.2019 passed u/s 143(3) of the Act pertaining to assessment year 2017-18.

Brief facts of the case are that the assessee company is engaged in the business of trading of dry fruits & kirana items on wholesale and retail basis, e-filed its return of income was on 05.11.2017, declaring income of INR 13,66,270/-. The case was selected for complete scrutiny under CASS. Thereafter, notices u/s 142(1) was issued during the course of assessment proceedings. In response thereto, the assessee filed the requisite documents which have been placed on record. The assessee had deposited cash of INR 3,71,00,000/- during demonetization period between 09.11.2016 to 30.12.2016. Vide notice issued u/s 142(1) alongwith questionnaire, the assessee had been asked to furnish the source of said cash deposit alongwith documentary evidences. In reply thereto, the assessee stated the source of above cash deposit is cash sales. The assessee filed several submissions which were examined and also placed on record. It is found from the reply and submission of the assessee that the assessee has made total cash sales of INR 2,01,38,810/- from 01.04.2015 to 08.11.0215 whereas in the same time during the period between 01.04.2016 to 08.11.2016, the assessee has shown total cash sales of INR 10,99,90,169/-. Thus, the total cash sales during the year 2016 increased by INR 8,98,51,359/- i.e. 446%. The above increase in cash sales during the year 2016 is not justified and does not match the last year cash sales. Apart from this, the assessee had also shown total cash sales of INR 6,17,232/- from 01.11.2015 to 08.11.2015 and during the period between 01.11.2016 to 08.11.2016, the assessee had shown total cash sales of INR 2,78,52,827/-. Thus, the total cash sales during the month November, 2016 is excessively high by INR 2,72,35,595/- i.e. 4,412.5% which is not justified and does not match with the trend of last year cash sales. In view of the above information, a final show cause notice dated 18.12.2019 was issued to the assessee. In response thereto, the assessee had stated that there is a history of transacting sales in cash and depositing the sale proceedings int eh Page | 2 bank account. In the month of October and November which was a festive and marriage season, the assessee had undertaken cash sales. During this period, the company had made goods sales with higher transactions and the sales was gaining peak during the month of October and November 2016. The above reply of the assessee company is considered carefully and is not found satisfactory. From the above discussion and facts of the case, the cash of INR 2,47,71,913/- out of total cash deposited of INR 3,71,00,000/- is taken as unaccounted and unexplained cash held by the assessee and deposited in the bank account during demonetization period and is added back to the income of the assessee u/s 68 of the Act and initiated penalty proceedings u/s 271AAC of the Act on account of unexplained income is initiated.

Aggrieved against the action of AO, the assessee preferred appeal before Ld.CIT(A) who after considering the submissions of the assessee, allowed the appeal of the assessee.

Aggrieved against the order of Ld.CIT(A), the Revenue filed appeal before the Tribunal. The Revenue has raised the following grounds of appeal:- 1. “The Ld. CIT(A) erred in deleting the addition made by AO on account of cash deposited during the demonetization period of Rs. 2,47,71,913/- (difference of Rs. 3,71,00,000/- less Rs. 1,23,28,087/-) being the estimated available cash in hand of the assessee as on 08.11.2016 as unexplained cash credit in terms of section 68 of the Act.

We have heard the contentions of both parties and perused the material available on record. We find from perusal of the case that the assessee had submitted all the relevant details of its cash sales statement to buttress the point that cash deposited during demonetization period is not liable to be added under section 68 of the Act. The Revenue’s stand, on the other hand, is that it was the assessee’s onus only to plead and prove all the relevant facts by satisfying the genuineness/creditworthiness of its explanation tendered during scrutiny as per PCIT v. NRA Iron & Steel Pvt. Ltd (2019) 412 ITR 161 and Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC). We find that the Revenue’s instant substantive ground that the assessee had failed to explain the source of these cash sales out of regular trading activity in dry fruits and kirana items on wholesale and retail basis found some force as the assessee claimed major sales in the month of October, 2016 and November, 2016 (upto 08.11.2016) which is not in parity with preceding years though these are festive months in every year. In view of these facts and in our consideration opinion, INR 5.00 Lakhs would be reasonable to meet the end of justice in this regard as the assessee has failed to offer proper source of deposit. Accordingly, we uphold the addition of INR 5.00 Lakhs on this account. Further, the AO Page | 4 applied the provision of section 115BBE which are applicable for 01.04.2017 relevant to AY 2018-19 as has been held by Hon’ble Madras High Court in the case of S.M.I.L.E Micro Finance Ltd.vs ACIT in W.P.(MD) No.2078 of 2020 and W.M.P.(MD) No.1742 of 2020 order dated 19.11.2024. Therefore, we direct the AO to charge tax at normal sales on the additions sustained by us. Hence, all the grounds raised by the Revenue are partly allowed.