MANJULA PARSOTAMBHAI LILA,RAJKOT vs. INCOME TAX OFFICER, WARD 1(1)(1),RAJKOT, RAJKOT

Grounds of appeal raised by the assessee are as follows: 1. The assessment order u/s 143(3) of the Act is bad in law.

Succinctly, the factual panorama of the case is that assessee before me is an Individual.The Return of income for the Assessment Year 2017-18, was e- filed by assessee on 21/08/2017 with Return Income at Rs.2,08,070/- with the claim of Exempt Agricultural Income of Rs.8,05,816/-. The case was selected for scrutiny in CASS for e-assessment proceedings and a statutory notice u/s 143(2) of the I.T. Act, 1961, was issued on 09/08/2018, which was duly served upon assessee within time limit. Thereafter, during the course of e-assessment proceedings, further notice u/s 142(1) of the Act, along with questionnaire were issued on 04/02/2019 & 01/08/2019 and followed by reminded letter dated 19/09/2019 which were duly served upon assessee. However, assessee in response provided partial details like Copy of ITR, Balance Sheet, Trading account, profit and loss account, Bank Statements, FDs statement, Agriculture Income Bills and Agricultural Expenses Bills. In continuation to assessment proceedings, abide by the assessee's reply on the assessment proceedings, the Assessing Officer following the principle of natural justice gave a final opportunity to assessee and issued show cause notice dated 31/10/2019 which was duly served upon assessee with request to submit the details on or before 11/11/2019. The relevant portion of Show Cause Notice is mentioned as under.

In a response to the above show cause notice, the assessee submitted its reply before the assessing officer and also submitted the cashbook, Bank book, statement of agricultural bills, name and address of the buyers of agricultural products. The details of agricultural expenses along with bills were also submitted. However, the assessing officer rejected the submissions of the assessee and observed that assessee has deposited cash in guise of agricultural income which is nothing but his unaccounted income and also the opening cash on hand has been taken without support of any evidences and also the assessee failed to provide any reason for keeping such huge cash on hand with him. From analysis of bank statement, it was observed that opening cash and agricultural income prior to demonetization period has sole motive to explain the source of cash deposit made during demonetization period and the assessee has grossly failed to substantiate the opening cash on hand and agricultural income with corroborative evidences. Therefore, in view of the discussion made above, assessee has grossly failed to justify total cash deposits of Rs.10,59,000/- made during the demonetization period, therefore, addition of Rs.10,59,000/- was made in the total income of the assessee for year under consideration as unexplained cash credit within the meaning of section 68 of the Act.

Aggrieved by the order of assessing officer, the assessee carried the matter in appeal before Ld. CIT(A) who has confirmed the action of the assessing officer, observing as follows: “Ground No.1 to 4: These grounds deal with the addition of cash deposit of Rs.10,59,000/-. 5.1.1 During the course of assessment proceedings, the appellant has deposited cash of Rs.10,59,000/-. For asking source of cash various opportunities given. The appellant claimed that deposits were sourced from opening cash and agricultural income, but scrutiny revealed serious inconsistencies. Kabala bills from M/s Vekaria Trading Co. were found bogus due to irregular serial numbers and non-existent addresses, and summons issued to the party returned unserved. Other bills lacked GST numbers, complete addresses, and authenticity, and notices u/s 133(6) to verify these remained unanswered. The appellant failed to produce ledger accounts of agricultural income proper expenditure details, or corroborative evidence for the claimed opening cash balance of Rs.9,98,475/- Bank analysis showed deposits of Rs. 10,50,000/- pre-demonetization and Rs.10,59,000/- post-demonetization, with no satisfactory explanation for their source. Judicial precedents such as CIT v. Chinnathamban (SC) and Roshan Di Hatti v. CIT (SC) were relied upon to emphasize that the onus lies on the appellant to prove the nature and source of funds. In view of forged documents, failure to substantiate claims, and manipulation of books, the cash deposit of Rs.10,59,000/- was treated as unexplained cash credit u/s 68. 5.1.2 During the course of appellate proceedings, the appellant was asked to make submissions in support of the grounds of appeal. The appellant respectfully submits that the addition made by the AO on account of cash deposits during the demonetization period and the application of Section 115BBE at the enhanced rate of 60% are wholly unjustified and contrary to law. The appellant has consistently disclosed agricultural income in past returns and owns substantial agricultural land, as evidenced by land records and supporting documents. The source of cash deposits was explained as arising from agricultural income, prior savings, and withdrawals from bank accounts, which are duly reflected in the cash book and bank statements. Minor discrepancies in sale bills or non-response to notices under section 133(6) cannot be the sole basis for treating genuine transactions as unexplained, as held in Sonicwall Technology Systems India Pvt. Ltd. and Suresh Kishinchand Changwani by the Hon'ble ITAT. Further, judicial precedents such as Maulesh Dahyabhai Ukani and Manoj Kothari categorically hold that agricultural income cannot be disallowed merely on estimation without cogent evidence of other sources of income. 5.1.3 On examination of the assessment order, written submissions, and evidences, the documents furnished suffer from serious inconsistencies. The sale bills produced from Mis Vekaria Trading Co. show illogical Kabala serial numbers: for example, Kabala No. 7773 dated 04.04.2016 is followed by Kabala Nos. 7765 (01.08.2016) and 7771 (06.08.2016), which is not possible in normal sequential billing. Further breaking the chronological order. Such discrepancies strongly indicate that the bills were not issued in the regular course of business. It is the responsibility of the appellant to ensure that transactions are properly documented and to verify the correctness of serial numbers and other particulars when dealing with traders. The explanation that these details are beyond the appellant's control cannot be accepted because proper documentation is a basic requirement to substantiate income. Further, the appellant argued that non-response by third parties to summons or notices cannot be a ground for addition. This contention is not acceptable because when the genuineness of the transaction is in question, verification from the counterparty is essential. If the alleged buyers fail to respond or their addresses are found to be non-existent, it raises serious doubts about whether such parties actually existed or whether the transactions were genuine. Mere production of bills without corroboration from the other side cannot establish authenticity. Additionally, expense bills were in the name of third parties without clear linkage to the appellant, two sale bills cited do not appear in the cashbook or bank statements, and the appellant has failed to provide any satisfactory explanation for maintaining large cash balances without any specific purpose. Considering these facts, the appellant has not discharged the onus of proving the source of cash deposits with credible evidence. Therefore, the addition of Rs.10,59,000/- made by the AO under section 68 is found to be justified and is hereby confirmed. The grounds of appeal are dismissed. In the result, the appeal is Dismissed. 6. Aggrieved by the order of the Ld. CIT(A), the assessee is in appeal before this Tribunal.

I have heard, both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. Learned Counsel for the assessee argued that assessee had submitted sufficient documentary evidences during the assessment proceedings and appellate proceedings, despite of this, lower authorities did not consider these documents and evidences submitted by the assessee in right perspective. Without prejudice to the above, Learned Counsel for the assessee further argued that an ad-hoc, estimated addition may be made in the hands of the assessee, if there is deficiency in the documents and evidences submitted by the assessee. Thus, ld.Counsel submitted that since the entire “on- money” cannot be taxed and only profit element can be taxed on account of the “on money”. On the other hand, Ld. D.R. for the Revenue submitted that since it is a case of “on money” therefore higher addition @ 20% may be made in the hands of the assessee on account of “on money”. 8. I have considered the submissions of both the parties. I find merit in the arguments advanced by the learned Counsel for the assessee, to the effect that profit element on account of “on-money” should be taxed in the hands of the assessee. Taxing the receipts only has never been the motto of the Income-tax

In the result, the appeal filed by the assessee is partly allowed.