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Facts
The assessee's appeal for AY 2017-18 arose from an order involving proceedings under section 143(3) of the Income-tax Act. The AO made an addition of Rs. 50,11,500 on account of cash deposited during demonetization, treating it as undisclosed income under section 69.
Held
The Tribunal held that while the cash deposits were not satisfactorily explained, they likely represented business receipts. Therefore, a lump sum addition of Rs. 2.5 lakhs was deemed appropriate, not to be treated as a precedent.
Key Issues
Whether cash deposits made during demonetization, though not perfectly explained, can be treated as undisclosed income warranting addition under Section 69 and potentially Section 115BBE.
Sections Cited
143(3), 250, 69, 145, 115BBE
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Income Tax Appellate Tribunal, DELHI BENCH: ‘A’ NEW DELHI
Before: SHRI SATBEER SINGH GODARA & SHRI S. RIFAUR RAHMAN
This assessee’s appeal for assessment year 2017-18, arises against the Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre [in short, the “CIT(A)/NFAC”], Delhi’s DIN and order no. ITBA/NFAC/S/250/2023-24/1059660561(1), dated 12.01.2024 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’).
Heard both the parties. Case file perused.
This assessee’s appeal raises the following substantive grounds:
1. 1. That the order passed on 31.12.2019 u/s 143(3) and Order passed by CIT (A) on 12.01.2024 u/s 250 of Income Tax Act, 1961 is against facts and bad in law.
2. That the addition of Rs. 50,11,500/- made by Ld. AO u/s 69 is bad both in eyes of law and on facts.
3. On the facts and circumstances of the case the Ld. AO erred in law and on facts in making an addition of Rs. 50,11,500/ in taxable income on account of cash deposited during the demonetization period.
4. On the facts and circumstances of the case the Ld. AO erred on facts and in law in imposing the provision of section 69 of the Act treating the cash deposit so made to be an undisclosed income.
5. That Ld. AO erred on facts and in law in making addition of Rs. 50,11,500/- to the Income of the assesee without pointing out any defects in the books of accounts so produced during the course of assessment proceedings which is in utter disregards to the provisions contained in Section 145 of the Act.
6. That the Ld. AO erred in applying provisions of Section 115BBE of the Act in the facts and circumstances of the case of Appellant and determining the tax liability as per the aforesaid section without appreciating that provisions of Section 69 were not applicable in the facts of the case and, therefore, provisions of Section 115BBE of the Act could not be invoked.
7. That Ld. AO erred in saying that the purchases made by the appellant were bogus purchases due to none or less payment to the creditors. For this we would like to clarify that the appellant is in business of trading of precious gemstones relating to religious sentiment and he is supposed to keep stock of all kind of stones, metals etc. in order to sell them to the customer of every cuts & size as much as possible. Thus, payment is done on basis of sale of the same and late payment cannot be the basis of declining the sanctity of the purchases when there are proper records to examine the same.
8. That Ld. Assessing Officer erred in mentioning that appellant has not produced books of accounts, ledger accounts, cash book, purchase books and sale books for verification.
9. On the facts and circumstances of the case the order of the Ld. AO is arbitrary, unwarranted, without any merit and is bad in law, the same should be quashed and the assessee be given such relief as prayed for.
10. That the appellant craves Leave to add/alter all or any of the grounds of appeal before or at the time of hearing of the appeal.
Suffice to say, the sole substantive issue which arises for our adjudication is that of correctness of the learned lower authorities’ action treating the assessee’s cash deposits of Rs.50,11,500/- as unexplained under section 69 r.w.s. 115BBE of the Act. So far as the assessee’s above latter pleading is concerned, we hereby quote S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) to conclude that the same does not apply in FY 2016-17. The assessee succeeds on this instant first and foremost issue therefore.
Next comes the assessee’s explanation regarding source of his cash deposits added as unexplained. Learned counsel invites our attention to the assessee’s detailed paper-book running into 77 pages comprising of his balance-sheet, profit and loss account, annexures, stock statement for FY 2017-18 and 2016-17 as well as purchase and sales ledgers to buttress the point that the same in fact represents his regular business receipts in astrology as well as in trading of precious gems stones and jewellery in the name of M/s. G.K. Gems and Jewellery. And that the assessee had already declared sales of Rs. 1,35,61,545/- which happened to be much more than the cash deposits forming subject matter of addition.
We are of the considered view in this factual backdrop that only inference which would prima facie arise in the assessee’s favour is that the impugned cash deposits; although not satisfactorily explained before the learned lower authorities, represent his business receipts whose credit could not be altogether denied. It is thus deemed appropriate in this factual backdrop that a lump sum addition of Rs. 2.5 lakhs only to cover all of the assessee’s alleged shortfalls would be just and proper with a rider that the same shall not be treated as a precedent. Necessary computation shall follow as per law. Learned counsel does not pray for any other ground(s) raised at the assessee’s behest.