AMOL CERAMICA PRIVATE LIMITED,MUMBAI vs. INCOME TAX OFFICER 9.1.2, CHURCHGATE

Accordingly, the assessee was asked to furnish the details of cash in hand for the Financial Year 2015-16 and Financial Year 2016-17. In response, the assessee furnished the following details: - Sr.No. Particulars Rs. 1. Total Cash Deposit in Bank in F.Y. 2015-16 In Yes Bank - Powai branch 4404500 In Indusind Bank - Powai Branch 3483000 In Kotak Mahindra Bank 20000 In STATE BANK OF INDIA 31000 a)Total Cash Deposit In Bank from 01-04-15 to 08- 11-15 In Yes Bank - Powai branch 3020000 In IndusInd Bank - Powai Branch 2039000 in STATE BANK OF INDIA 31000 b)Total Cash Deposit In Bank from 09-11-15 to 31- 03-16 In Yes Bank - Powai branch 1384500 In IndusInd Bank - Powai Branch 1444000 In Kotal Mahindra Bank 20000 2. Total Cash Deposit in Bank in F.Y. 2016-17 IndusInd Bank 1280000 Axis Bank 6589 250000 Axis Bank 8603 1150000 Kotak Mahindra Bank 400000 a) Total Cash Deposit in Bank from 01.04.2016 0 b) Total Cash Deposit in Bank from 09.11.2016 to 31.03.2017. IndusInd Bank 1280000 Axis Bank 6589 250000 Axis Bank 8603 1150000 Kotak Mahindra 400000

Thus, the assessee claimed that the cash deposited during the demonetisation period was out of the cash sales. Further, the assessee did not claim any cash receipts during the Financial Year 2015-16. The Assessing Officer (“AO”), vide order dated 28.12.2019 passed under section 143(3) of the Act, after taking into consideration the cash book of the assessee, disagreed with the submissions of the assessee that the cash deposited during (A.Y. 2017-18) 4 the demonetisation period were out of the cash balance available with the assessee on the basis that as per the cash book for Financial Year 2016-17, as on 08.11.2016 the assessee was having cash in hand of ₹ 27,77,630/-, however, the assessee as per its claim in the return of income claimed deposit of cash of ₹ 29 lakh during the demonetisation period. The AO also found fault with the submission of the assessee that the cash available with it was out of the cash sales made during the year, by noting the discrepancies in the cash sale vouchers. Accordingly, the entire cash of ₹ 30,80,000/- deposited by the assessee in its bank account during the demonetisation period was added to its total income under section 69A of the Act and brought to tax under section 115 BBE of the Act @ 60%.

The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that the assessee in the course of its business made cash sales to unregistered dealers in the grey market who do not provide their addresses and PAN and the assessee also failed to furnish cash book and cash sale details. Accordingly, the learned CIT(A) held that the assessee has not submitted any documentary evidence in support of its claim. Being aggrieved, the assessee is in appeal before us.

We have considered the submissions of both sides and perused the material available on record as per Rule 18(6) of ITAT Rules, 1963. During the hearing, reiterating the submission made by the assessee before lower authorities, the learned Authorised Representative (“learned AR”) in respect of the claim that the assessee has made cash sales during the year under consideration, placed reliance upon the cash sale invoices that were furnished (A.Y. 2017-18) 5 during the assessment proceedings. The learned AR submitted that sales were made in the normal course of business from inventories recorded in the stock register, which is duly recorded in the books of account. In this regard, the learned AR placed reliance upon the cash book and cash sale register along with the invoices raised on the customers, which form part of the paper book.

From the perusal of the record, we find that the AO disagreed with the submissions of the assessee that the cash deposited during the demonetisation period was out of cash in hand available with the assessee and the said cash was also generated through cash sales made during the year under consideration. As noted in the foregoing paragraphs, while rejecting the claim of the assessee, the AO not only noted the discrepancies in the cash invoices raised by the assessee but also from the perusal of the cash register found that as on the date of deposit the assessee was having cash less than the cash claimed to have been deposited in the bank account on that date. Further, the AO also noted the fact that no cash sales were made by the assessee in the Financial Year 2015-16. It is also noted that even in the year under consideration, the cash sales claimed to have been made by the assessee were only made during the period from 01.09.2016 to 08.11.2016, and the assessee did not furnish any documentary evidence to counter the claim of the AO. We further find that the learned CIT(A) dismissed the ground raised by the assessee in this regard, merely noting that the assessee failed to furnish the cash book and cash sale details. However, as noted above, these details have been placed reliance upon by the assessee before the AO during the assessment proceedings. Since these details were (A.Y. 2017-18) 6 not considered by the learned CIT(A) while dismissing the ground raised by the assessee on this issue, we deem it appropriate to restore this issue to the file of the learned CIT(A) for de novo adjudication after considering the details filed by the assessee. Needless to mention, no order shall be passed without affording the reasonable and adequate opportunity of hearing to the assessee. Since the issue has been restored to the file of the learned CIT(A) for de novo adjudication, the assessee shall be at liberty to furnish any other information/documents in support of its claim, which may be considered by the learned CIT(A) as per law. Accordingly, on this issue, the impugned order is set aside, and the respective grounds raised by the assessee are allowed for statistical purposes.

The next issue that arises for our consideration in the present appeal pertains to the addition made under section 68 of the Act on account of alleged unsecured loans received by the assessee.

The brief facts of the case pertaining to this issue, as emanating from the record, are:- During the assessment proceedings, it was observed that the assessee had received unsecured loans from the following entities: - Sr. Name of the parties PAN Date of Amount of Interest No. from whom assessee receipt of loan paid by the has received loan loan received assessee during the F.Y. 2016-17 company 1 Compact Finstock Pvt. AACCC0765H 20.02.2017 20,00,000 23,671 Ltd. 2 Everest Commerce Pvt. AAACE5393D 20.02.2017 20,00,000 23, 671 Ltd. 3 Flaxible Merchandise AABCF4697E 20.02.2017 20,00,000 23, 671 Pvt. Ltd. 4 Keynesian Financial AABCK3459M 20.02.2017 25,00,000 29,589 Services 5 Kothari Granite Pvt. AAACK5482d 16.01.2017 8,00,000 27,720 Ltd.

Accordingly, the assessee was asked to furnish various details to prove the identity and creditworthiness of the loan lender and the genuineness of the transaction. However, the assessee failed to submit ledger confirmation, books of the respective parties, return of income for the assessment year 2017-18, financial statement of respective parties, bank account of the respective parties and supporting evidence explaining the source in the hands of the respective parties. The AO during the assessment proceedings, further noted that one of the party, namely, Subhkari Marketing Private Limited has been found to be merely a paper/shell company during the investigation by the DDIT(Inv.), Unit-I(3) Kolkata. Accordingly, the amount of ₹ 2,58,00,000/- received as an unsecured loan was treated as unexplained cash credit under section 68 of the Act by the AO and taxed under section 115BBE at 60%. The AO also disallowed the interest amounting to ₹ 5,44,540/- paid by the assessee in respect of these loans. Further, considering the transaction with Subhkari Marketing Private Limited as an accommodation entry, the AO also made an addition on account of commission expenditure and disallowed the sum of ₹ 25,000/-, being the commission charged at 0.5% under section 69C of the Act.

The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that the assessee could not discharge (A.Y. 2017-18) 8 the initial burden of proof, i.e., the identity and creditworthiness of the loan lenders and genuineness of the transaction, as the assessee could not submit ledger confirmation from the respective parties, audited accounts, ITR of the respective parties, financial statement of the respective parties and bank statements. Accordingly, the learned CIT(A) upheld the addition made by the AO under section 68 of the Act. Further, the learned CIT(A) also upheld the disallowance of interest and addition on account of commission expenditure made by the AO. Being aggrieved, the assessee is in appeal before us.

We have considered the submission of both sides and perused the material available on record as Rule 18(6) of the ITAT Rules, 1963. During the hearing, by referring to the separate paper book filed by the assessee, the learned AR submitted that the assessee obtained all the information as sought by the lower authorities, however, none of these details were considered while making the impugned addition. As noted above, the learned CIT(A) also did not consider the details as referred to by the learned AR during the hearing before us to prove the identity and creditworthiness of the loan lenders and the genuineness of the transaction. Accordingly, we restore this issue to the file of the learned CIT(A) for de novo adjudication after considering the details filed by the assessee in support of its claim. As the issue is restored to the file of the learned CIT(A) for consideration afresh, the learned CIT(A) shall be at liberty to seek the remand report from the AO, if considered necessary. Needless to mention, no order shall be passed without affording the reasonable and adequate opportunity of hearing to the assessee. With the above directions, the impugned order on this issue is set aside, and (A.Y. 2017-18) 9 the respective grounds raised by the assessee are allowed for statistical purposes.

The last issue that arises for our consideration in the present appeal pertains to the disallowance made under section 43B of the Act vide intimation issued under section 143(1) of the Act.

Having considered the submissions of both sides and perused the material available on record, we find that this addition was made by the AO- CPC vide intimation under section 143(1) of the Act, and this issue was not picked up for scrutiny under section 143(3) of the Act. Therefore, as regards this issue, there was no merger of findings during the assessment proceedings. As this addition was made vide intimation issued under section 143(1) of the Act, which is a separate appealable order, and the same is not the order in appeal before us, this issue is decided against the assessee and the respective ground raised by the assessee is dismissed.

In the result, the appeal by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 14/07/2025