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Facts
The assessee, a proprietor engaged in trading gold, declared an income of Rs.6,34,640/- for AY 2017-18. During assessment, the AO noticed cash deposits of Rs.66,45,000/- in the assessee's bank account during the demonetization period.
Held
The Tribunal held that the tax authorities had not properly examined the assessee's claim that cash deposits were made from cash sales. The matter was restored to the AO for fresh examination.
Key Issues
Whether the cash deposits made by the assessee during the demonetization period were sufficiently explained as arising from cash sales, and if the lower authorities had properly examined the supporting documents.
Sections Cited
142(1), 144
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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: JUSTICE (RETD.) SHRI C.V. BHADANG & SHRI B.R. BASKARAN
O R D E R PER B.R. BASKARAN, A.M : The assessee has filed this appeal challenging the order dated 09-05-2024 passed by the Ld CIT(A)-52, Mumbai and it relates to the Assessment Year (AY.) 2017-18. The only issue urged in this appeal relates to the assessment of Rs.66,45,000/- relating cash deposits made into the bank account as unexplained cash credit in the hands of the assessee.
2. The facts relating to the issue are stated in brief. The assessee is the proprietor of M/s Pratham Enterprises, which is engaged in the business of trading in gold bars and gold ornaments. He filed his return of income for the year under consideration declaring a total income of Rs.6,34,640/-. During the course of assessment proceedings, the AO issued a notice u/s 142(1) of the Act calling for details of cash deposit made by him in his bank account. However, the assessee did not respond to the same. Hence, the AO collected the copy of bank account of the assessee from IndusInd Bank. On analysis of the bank account, the AO noticed that the assessee has deposited cash aggregating to Rs.66,45,000/- during demonetization period. The assessee did not furnish any details relating to cash deposits except the copies of financial statements. Hence, the AO assessed the above said amount as unexplained cash credit in the hands of the assessee in the order passed to the best of his judgement u/s 144 of the Act.
Before the Ld CIT(A), the assessee submitted that the cash has been generated out of cash sales made by him and the deposits into the bank account have been made out of the cash balance available in the books of account. In support of the submission, the assessee furnished copies of financial statements, Return of income, Tax audit report, copy of Sales ledger and also copy of cash ledger account. The Ld CIT(A) noticed that the assessee did not furnish purchase register, stock register, purchase bills, sales bills, VAT return, sources of cash deposit etc. He further noticed certain discrepancies in the copy of cash book furnished by the assessee. Accordingly, he disbelieved the documents furnished by the assessee and accordingly confirmed the addition made by the AO.
4. We heard the parties and perused the record. We notice that the assessee did not furnish necessary details before the AO, but furnished some details before the Ld CIT(A), but the Ld CIT(A) has refused to accept the same, as he was of the view that those documents are not reliable. However, we notice that the assessee was having stock of gold, made sales and the said sales have been reported to the VAT authorities. It is the claim of the assessee that the cash has been generated out of the cash sales made by him, which is supported by the books of accounts and the VAT returns filed by the assessee before the sales tax authorities. It is submitted that the cash so generated has been deposited into the bank account of the assessee. We notice that the Ld CIT(A) has noticed negative cash balance on certain dates and also other deficiencies. When such things are noted, it is necessary to call for explanations from the assessee and it is not proper for the Ld CIT(A) to reject the documents without calling for explanations and also without confronting them with the AO.
We thus notice that the claim of the assessee that the impugned cash deposits have been made out of cash balance available in the books of accounts have not been properly examined by the tax authorities. If the explanation of the assessee that the cash has been generated out of cash sales and accounted in the books of accounts is found to be correct, then the sources of the impugned said deposits would stand explained and accordingly no addition is called for. Since the books of accounts of the assessee and the explanations given by the assessee require proper examination, we feel it proper to restore this issue to the file of the AO for examining it afresh. Accordingly, we set aside the order passed by the Ld CIT(A) and restore the same to the file of the AO for examining it afresh in the light of discussions made supra. We also direct the assessee to fully Order pronounced in the open court on 10-03-2025 Sd/- Sd/- (JUSTICE (RETD.) C.V. BHADANG) (B.R. BASKARAN) PRESIDENT ACCOUNTANT MEMBER Mumbai, Date: 10-03-2025 TNMM Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file