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Facts
The assessee's appeal is against the CIT(A)'s order confirming an addition of Rs. 15,12,000/- made by the AO under Section 68. The assessee argued that the addition was made due to the acceptance of old currency notes during demonetization, which was valid, and that the average monthly deposit was higher than the amount added. The assessee also claimed the addition was made without considering cash sales and business nature.
Held
The Tribunal condoned the 408-day delay in filing the appeal, finding that the order was not properly served on the assessee. On merits, the Tribunal found that the cash deposits during demonetization were not abnormal and were substantiated by cash sales and recovery of trade debts. However, to avoid revenue leakage, the addition was restricted to 10% of the disputed amount.
Key Issues
Whether the addition under Section 68 on account of cash deposits during demonetization is justified, and whether Section 115BBE is applicable retrospectively.
Sections Cited
68, 115BBE, 250, 254(1)
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Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of Learned Commissioner of Income Tax (Ld. CIT(A)) dated 19.10.2023 for A.Y. 2017-18. The assessee has raised the following grounds of appeal: “
1. On the facts and in law, the Ld. Commissioner of Income Tax (Appeals) [in short Ld. CIT(A)] erred in confirming the addition made by the Ld. Assessing Officer [in short Ld. AO] to the tune of Rs. 15.12,000/-under Section 68 of the Act.
2. On the facts and in law, the Ld. Assessing Officer (A.O. in short) erred in making addition of Rs.15,12,000/- under Section 68 of the Act.
3. On the facts and in law, the Ld. A.O. erred in making addition merely because the Appellant has accepted old currency notes, which acceptance was valid in law.
4. On the facts and in law, the Ld. A.O. failed to appreciate average monthly deposit by the Appellant during relevant period for A.Y.2017-18 was much more than the amount added Vaibhav Vinod Aggarwal 5. On the facts and in law, the Ld. A.O. has failed to appreciate that there is no abnormal jump in percentage of cash sales as compared to earlier history.
6. On the facts and in law, the Ld. A.O. erred in making addition without considering the fact that there was no abnormal jump in cash deposits during the demonetisation period.
7. On the facts and in law, the Ld. A.O. failed to appreciate the nature of business of Appellant of FMCG Goods.
8. On the facts and in law, the Ld. A.O. erred in making addition as unexplained cash though accepting reduction in debtor's balances.
9. On the facts and in law, the Ld. A.O. erred in making addition of Rs.6.05.000/- which were withdrawn on capital account for Α.Υ.2017-18.
10. On the facts and in law, the Ld. CIT(A) erred by failing to considered submissions, case laws and paper book filed by the Appellant during the course of first appellate proceedings.
11. The appellant craves, leave to add to alter, modify, revise, or delete any ground (s) in the interest of justice.”
2. Rival submissions of both the parties have been heard and record perused. The Learned Authorized representative (Ld. AR) of the assessee fairly submits that there is delay of 408 days in filing appeal before Tribunal. The assessee has already filed his affidavit of assessee in support of condonation of delay. The Ld. AR of the assessee submits that at the time of filing appeal before ld. CIT(A), the assessee has provided e-mail address response@uniliftcargo.com for the purpose of notice of service etc. However, during the hearing before CIT(A), notices were sent on different e-mail ID. Some of the notices served through different e-mail i.e vijayjambhulkar@uniliftcargo.com were responded. Such e- mail ID was of accountant of M/s. Unilift Cargo Systems Pvt. Ltd. wherein, the assessee is also one of the directors. The said accountant has not informed about the further notice if any received by said accountant. The final order passed by CIT(A) was not served either physically or through e-mail provided on Vaibhav Vinod Aggarwal Form 35. The assessee came to know about the dismissal of appeal only when notice of recovery of outstanding demand was served upon the assessee on 06.02.2025, vide notice dated 03.02.2025. Copy of such notice is also filed on record. The assessee immediately on service of recovery of demand asked his Chartered Accountant (CA) to check the status of his pending appeal. On checking ITBA portal, it was realized that appeal of the assessee has already been dismissed vide order dated 19.02.2023. The assessee immediately filed appeal before Tribunal. Though, the appeal is within time from the date of knowledge of impugned order. However, the registry of Tribunal has issued the defect memo pointing out the delay of 408 days of delay in filing appeal. The ld. AR of the assessee submits that delay in filing the appeal is neither intentional nor deliberate but for the reason explained hereinabove. The Ld. AR submits that he has now filed copy of screenshot of ITBA portal showing that ITBA portal that notice was sent on the different e-mail then the e-mail present in the Form 35. The ld. AR submits that assessee is not going to be benefited by filing appeal belatedly. The assessee has good case on merit and would suffer prejudice if delay in filing the appeal is not condoned. Delay in filing the appeal is neither intentional nor deliberate and may be condone in the interest of justice.
3. On merits, the Ld. AR of the assessee submits that the assessee was a proprietor of Unique Logistics, engaged in the business of distributing of Fast Moving Consumer Goods (FMCG) product of Nestle and Britania. The assessee has shut down its business in A.Y. 2019-20 and there is no business operation in Unique Logistics. During assessment, the Assessing Officer (AO) issued show- cause notice to substantiate the cash deposit during demonetization period. The Vaibhav Vinod Aggarwal assessee submitted that he has deposited Rs. 27,51,000/-. The assessee was having cash in hand or Rs. 12,33,605/-. Rs. 6,05,000/- was cash in hand from withdrawal from Unique logistic including of earlier years. Rest of the cash of Rs. 11,07,000/- was collected from clients against the goods supplied before 8th November 2016. The AO not accepted such explanation of the assessee and allowed benefit of Rs. 2,00,000/- only. The AO thereby added Rs. 15,12,000/- on account of unexplained cash credit under section 68. The AO taxed such addition under section 115BBE. The ld. CIT(A) confirms the action of AO by referring certain decisions which has no relevance on the facts of the present case. The addition under section 68 on account of cash deposit is not justified. The ld. AR of the assessee submits that turnover of the assessee during the year was more than Rs. 32.00 Crore. The sale in cash was of more than Rs. 16.00 Crore i.e. of about 50% of total sales. The assessee given month wise cash sales and cash deposit during relevant financial year, detail of which is provided at page 1871 of paper book. During the month of October 2016 the assessee made cash deposit of Rs. 1,46,88,450/- and from 1st November till 8th November 2016, there was deposit of Rs. 33,36,060/- in cash. The assessee received cash from debtor till 08.11.2016 of Rs. 42,67,046/-. During, the period of 09.11.2016 to 30.11.2016 the assessee made total cash deposit of Rs. 85,00,830/- and in December 2016 the assessee deposited Rs. 1,42,85,680/-. Similarly, in January 2017 the assessee made cash deposit of Rs. 1,40,57,540/-. Thus, the pattern of cash deposit in bank during demonetization was not abnormal. All details were provided to the lower authorities. The lower authorities have not disputed the cash sales. Once, cash sales and sale on credit have been accepted then the Vaibhav Vinod Aggarwal disallowance of cash deposit was not justified. Entire cash deposit during demonetization period was substantiated which was part of cash sale and recovery of trade debts from sundry debtor in cash. Therefore, addition on account of cash deposit was not justified. The cash deposit visa-vis turnover is not abnormal. The lower authorities have not rejected the books of account nor were books result disturbed. The ld AR of the assessee prayed for deleting the entire addition.
4. On the other hand, the Learned Senior Departmental Representative (ld. DR) for the revenue, on the plea of condonation of delay submits that once the assessee has received notice on different e-mail and made submission, thus, he has no occasion to object about service of final order through different e-mail. However, on confronting the screenshot of ITBA portal the ld. DR submit that bench may take appropriate view on delay condonation. On merit, the Ld. DR submits the assessee has already been allowed benefit of Rs. 2.00 Lakhs. The assessee failed to substantiate the source of cash deposit, the assessee claimed that cash was collected against the outstanding cash sales, which was against the policy of Central Government. Thus, the assessee failed to substantiate the cash deposit.
5. We have considered the rival submissions of both the parties and gone through the order of lower authorities carefully. First, we are considering the plea of condonation of delay. Before us, the ld. AR of the assessee vehemently argued that impugned order passed by ld. CIT(A) was not served either through e-mail provided on Form-35, while filing the appeal or in a physical mood. To support such contention the Ld. AR placed on record the screenshot of ITBA portal. On comparison of e-mail provided on Form-35 and the various notices issued by ld.
Vaibhav Vinod Aggarwal CIT(A), we find that notices under section 250 were issued on different e-mail ID. For non-service of impugned order, the ld. AR of the assessee has filed affidavit of assessee. The assessee has also filed copy of recovery notice dated 03.02.2025, which was received through speed post on 06.02.2025. The assessee claimed that he came to know about dismissal of appeal while notice for recovery of outstanding dues was served and ITBA portal were checked. Considering the plea of Ld. AR of the assessee and the fact that ld. CIT(A) has not communicated the notices or final order through provided on Form-35, rather the assessee realized about dismissal of appeal only on service of demand notice. Thus, we find merit in the submission of ld. AR of the assessee that assessee was not aware about passing of impugned order by ld. CIT(A). Thus, considering the principle of law that when technical considerations are kept against the cause of substantial justice, cause of substantiation justice may be preferred. The assessee is not going to be benefited by filing appeal belatedly, rather, there is chance that appeal may not be admitted for hearing on merit. Thus, we further find that there is no melafide intention on the part of assessee in filing appeal belatedly. Hence, the delay in filing appeal of 408 days is condoned. Now, adverting to the merit of the case.
We find that AO during the assessment noted that the assessee made cash deposit of Rs. 27,51,000/- in the form of specified bank note (SBN). On show- cause notice the assessee explained that Rs. 12,33,605/- was cash in hand in his proprietary firm M/s. Unique Logistic. The AO accepted such cash in hand. The assessee further explained that there was cash balance in his personal book from withdrawal from his proprietary concern of Rs. 6,05,000/- and that Rs. Vaibhav Vinod Aggarwal 11,07,000/-was received against the goods traded. The reply of assessee was not accepted by AO by taking view that there is no reason as to why the assessee was keeping cash in hand when he was paying bank interest as evident from profit and loss account. The cash collection was also disputed by AO by taking view that no business man was authorized to collect the cash from customer, in the form of old notes. Thus, the assessee was having unaccounted cash. The AO allowed benefit of Rs. 2.00 Lakhs only and remaining of Rs. 15,12,000/- was treated as unexplained cash credit. The AO taxed the same under section 115BBE. We find that assessee is having turnover of Rs. 32.00 crore. The assessee has shown gross total income of Rs. 21,21,066/- and after claiming deduction under Chapter VIA, the assessee has declared total income of Rs. 19,62,150/-. From the detail furnished by assessee, we find that in the month of October 2016 the assessee made cash deposit in bank of Rs. 1.46Crore. Similarly, in December 2016, the assessee has made has made cash deposit of Rs. 1.48 Crore. Even in subsequent to demonetization period i.e in January 2017 there is cash deposit in bank of Rs. 1.40 Crore. The assessee has also shown cash received from debtor in each and every month. Such figure of cash deposits regularly and cash received from debtor is not disputed by AO. Only objection of AO is that the assessee was not authorized to receive specified bank note from his debtor after demonization of high value currency note. We find that assessee in his reply before AO about Rs. 11,07,000/- clearly stated that such amount was collected against the goods supplied. It not the case of assessee that he has a received currency note of 500 or 1000 after declaring demonetization period. Thus, we do no find any justification for treating the cash Vaibhav Vinod Aggarwal deposits against the regular sale as unaccounted money. However, to avoid the possibility of revenue leakage, we are of the view that the disallowance of 10% of addition made by AO would be sufficient to avoid the possibility of revenue leakage. Therefore, addition is restricted to the extent of Rs. 151200/-.
So far as taxing the addition under section 115BBE at enhanced rate of tax @ 60% under Section 115BBE of the Act, is concerned, we find that that Division Bench of Surat Tribunal in case of Samir Shantilal Mehta Vs ACIT (Surat Trib), Arjunsinh Harisinh Thakor Vs ITO in and in Jitendra Nemichand Gupta Vs ITO ITA No. 211/Srt/2021 and Indore Bench in DCIT Vs Punjab Retail Pvt. Ltd 677/Ind/2019 (Indore Trib) and Jabalpur Bench in ACIT Vs Sandesh Kumar Jain in ITA No. 41/Jab/2020 held that applicability of amended provision of section 115BBE is not retrospective. Thus, the Assessing Officer is directed to tax the remaining addition at normal rate of tax and applicable surcharges if any. Thus, the assessee is allowed relief against taxing the addition at higher rate under section 115BBE. In the result, the ground of appeal raised by the assessee is partly allowed.
In the result, the appeal of the assessee is partly allowed. Order pronounced in open court on 30.04.2025.