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Income Tax Appellate Tribunal, “SMC” “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of NFAC, Delhi dated 12.11.2021. The assessee has raised the main grounds as follows:- 1. The orders of the authorities below in so far as they are against the appellant are opposed to law, equity, weight of evidence, probabilities, facts and circumstances of the case.
ITA No.688/Bang/2021 M/s. Navajyothi Trust, Mysuru
Page 2 of 9 2. Without prejudice to the additional grounds raised in the additional grounds of appeal, the learned Commissioner of Income tax [Appeals] / National Faceless Appeal Centre [NFAC for short] is not justified in sustaining the addition of Rs.14,48,000/- in respect of the alleged cash deposits in SBN notes made by the appellant during the demonetization period in its bank account treating the same as unexplained cash credit u/s. 68 rws 115BBE of the Act without appreciating that the actual cash deposits in SBN was only Rs. 6,09,000/-.
2.1 The addition sustained by the Commissioner of Income tax [Appeals] /NFAC is arbitrary, unreasonable and out of pure suspicion and surmise, assumptions and presumptions, conjecture and even in extreme case of disbelief the authorities below ought to have sustained only a sum of Rs.6,90,000/- having regard to the reconciliation furnished by the appellant under the facts and in the circumstances of the appellant's case. 3. Without prejudice to the right to seek waiver before the Hon’ble DG/CCIT, the appellant denies itself liable to be charged to interest u/s. 234-B and 234- C of the Act, which requires to be cancelled under the facts and in the circumstances of the appellant's case. 4. For the above and other grounds that may be urged at the time of hearing of the appeal, your appellant humbly prays that the appeal may be allowed and Justice rendered and the appellant may be awarded costs in prosecuting the appeal and also order for the refund of the institution fees as part of the costs.”
The assessee has raised additional grounds as follows:- 1. “The authorities below are not justified in adding a sum of Rs.14,48,000/- as unexplained cash credits u/s 68 r.w.s 115BBE of the Act, in respect of the cash deposits made in the bank accounts of the appellant during the period of demonetization under the facts and in the circumstances of the appellant’s case. 2. The authorities below failed to appreciate that the SBN were received from the students and deposited into the bank in the usual course of activities of the appellant institution and incorporated in the cash book and consequently, it could not be treated as unexplained cash credit u/s 68 r.w.s. 115BBE of the Act and consequently, the same requires to be deleted as what was received was only deposited in the bank.
ITA No.688/Bang/2021 M/s. Navajyothi Trust, Mysuru
Page 3 of 9 3. For the above and other grounds that may be urged at the time of hearing of the appeal, the appellant prays that the appeal may be allowed and justice rendered.” 4. The assessee has filed a petition for admitting additional grounds stating that all the facts related to this issue are already on record. There is no necessity of investigation of any fresh facts for the purpose of adjudication of the additional grounds and he placed reliance on the judgement of Hon’ble Supreme Court in the case of NTPC Vs. CIT 229 ITR 383, Hon’ble High Court of Karnataka decision in the case of Gundattur Thimmappa & Sons Vs. CIT 70 ITR 70 and in the case of Sankeshwara Pvt. Ltd. 218 Taxman 360.
The Ld. D.R. strongly opposed the admission of additional grounds.
I have heard the rival submissions and perused the materials available on record. In my opinion, the plea of the assessee with regard to admission of additional ground is justified as of the facts related to the additional ground are already on record and there is no necessity of investigation of any fresh facts for the purpose of adjudication. Accordingly, the additional grounds are admitted for adjudication. Since the main grounds and additional grounds are inter-related and the main grounds are the part of the additional grounds, hence, I adjudicate the additional ground only.
Facts of the issue are that it was noticed by AO that assessee made deposit into South Indian Bank, N.R. Mohalla and Federal Bank, Mysuru, totalling amount of Rs.59.26 lakhs. The assessee made a plea that it was within opening cash balance available with the assessee as on 8.11.2016, which has been used to deposit the
ITA No.688/Bang/2021 M/s. Navajyothi Trust, Mysuru
Page 4 of 9 amount into these bank accounts. Out of this, an amount of Rs.14.48 lakhs were Specified Bank Notes (“SBN”), which was demonetized on 8.11.2016 at 8PM. According to him, there was no unexplained money deposited by assessee into bank accounts. However, the A.O. has not accepted with the assessee’s counsel and made addition of Rs.14.48 lakhs though it was argued by assessee that out of above amount only Rs.6.09 lakhs were SBN. The Ld. CIT(A) observed that as per certificate issued by Federal Bank, assessee has deposited Rs.14.48 lakhs SBN and confirmed the addition. Against this assessee is in appeal before me. The Ld. A.R. drew my attention to the crops on cash book for the period of 17.9.2016 to 27.1.2017 of Navajyothi Pre-Primary School and day book for the period of 1.11.2016 to 30.11.2016 of Presentation Public School. He also drew my attention to the copy of day book for the period 1.12.2016 to 31.12.2016 of Presentation Public School. He also drew our attention to the summary of cash receipt during the demonetization period. Thus, he submitted that on combined cash balance appearing in Navajyothi Pre-Primary School and Presentation Public School as on 8.11.2016 was Rs.60,81,720/- and even if presumed that Rs.14.48 lakhs has been deposited into assessee’s bank accounts, it was fully explained that it was the available cash with the assessee and assessee not prevented from depositing available cash with the bank accounts. For this purpose, he relied on the order of the Tribunal in the case of Anantapur Kalpana in ITA No.541/Bang/2021 dated 13.12.2021, wherein held as under:-
“I have heard the rival submissions. Learned Counsel for the assessee submitted that both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. He submitted that the sale
ITA No.688/Bang/2021 M/s. Navajyothi Trust, Mysuru
Page 5 of 9 proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It was also submitted that the assessee was having only one source of income from beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. It was also submitted that the government permitted all to deposit old demonetized notes upto 31.12.2016. Since the amounts deposited were sale proceeds of business and the income from the business have already been taxed, the impugned addition should be deleted. Our attention was also drawn to section 26(2) of the RBI Act, 1934 which provides that government can specify certain notes as not legal tender. It was argued that if there is any violation of the statutory provisions, the consequences will be only under the relevant provisions of RBI Act, 1934 and those violations cannot lead to any addition under section 68 of the Act. The learned Counsel also placed reliance on the following judicial pronouncements rendered on identical facts of the case as that of the assessee. Hon'ble Kolkata Tribunal in the case of CIT Vs. Associated Transport Pvt. Ltd. reported in 84 Taxman 146 wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, therefore, held that there was no reason to treat this amount as income from undisclosed sources and it was not a fit case for treating the said amount as concealed income of the assessee. The revenue moved to Hon'ble Calcutta High Court against the order of the Hon'ble Tribunal and the Hon'ble High Court has confirmed the order of the Tribunal while deleting the penalty; the Hon'ble High Court of Calcutta held as under:
"8. The Tribunal was of the view that the assessee had sufficient cash in hand. In the books of account of the assessee, cash balance was usually more than Rs.81,000/-. There is no reason to treat this amount as income from undisclosed sources. It is not a fit case for treating the amount of Rs.81,000/- as concealed income of the assessee and consequently imposition of penalty was also not justified in this case." 7. Further reliance is placed on the decision of the Hon'ble Vishakapatnam Tribunal in the case of ACIT Vs. Hirapanna Jewelers in ITA No. 253/Viz/2020 wherein, the Hon'ble Tribunal while considering the issue of implication of Sec. 68 of the Act during demonetization held as under:
ITA No.688/Bang/2021 M/s. Navajyothi Trust, Mysuru
Page 6 of 9 9. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. This view is also supported by the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra),Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. 10. The assessee filed cross objections supporting the order of the Id. CIT(A). Since, the appeal of the revenue is dismissed, the cross objection filed by the assessee becomes infructuous, hence, dismissed.
In the result, appeal of the revenue as well as the cross objection of the assessee are dismissed." 8. Learned DR reiterated the stand of the Revenue as reflected in the order of the CIT(A).
I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It is also on record that the assessee was having only one source of income from trading in beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. Hon'ble Kolkata Tribunal in the case of CIT Vs. Associated Transport Pvt. Ltd. reported in 84 Taxman 146 on identical facts took the view
ITA No.688/Bang/2021 M/s. Navajyothi Trust, Mysuru
Page 7 of 9 that when cash sales are admitted and income from sales are declared as income, wherein the Hon'ble Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, that there was no reason to treat the cash deposits as income from undisclosed sources. The Hon'ble Vishakapatnam Tribunal in the case of ACIT Vs. Hirapanna Jewelers in ITA No. 253/Viz/2020 on identical facts held that when cash receipts represent the sales which the assessee has offered for taxation and when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. I am of the view that in the light of the facts and circumstances of the present case, the addition made is not sustainable and the same is directed to be deleted.
In the result, appeal of the assessee is allowed.”
On the other hand, Ld. D.R. submitted that the entries in the cash book/day book of Navajyothi Pre-Primary School and Presentation Public School were not substantiated. As such, the claim of assessee cannot be considered.
I have heard the rival submissions and perused the materials available on record. The main plea of assessee’s counsel is that there was cash available with the assessee in its books of accounts as on 8.11.2016 was at Rs.60,81,720/-, if the cash book of the Navajyothi Pre-Primary School and Presentation Public School were considered collectively. The contention of the Ld. D.R. is that the claim of the assessee with regard to entries in the cash book/day book was not substantiated. In my opinion, whenever assessee makes any entries in the cash book/day book, it should be supported by receipts/vouchers/bills and other supporting documents. In the absence of supporting documents, the claim of assessee cannot be allowed. In the present case, the assessee has produced respective
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Page 8 of 9 cash book/day book before the lower authorities. However, either AO or Ld. CIT(A) have not examined the contents of the day book or cash book. In my opinion, it is appropriate to remit entire issue in dispute to the file of AO for reconsideration with the direction to assessee to produce supporting documents for all the entries to his entry in the cash book/day book. On production of these evidence, the AO has to carry out the necessary enquiry and decide the issue in accordance with law. With this observation, I remit the issue in dispute to the file of AO. It is needless to say that the AO should also required to take note of the order of the Tribunal in the case of Anantapur Kalpana cited (supra).
In the result, the appeal of the assessee is partly allowed for statistical purposes. Order pronounced in the open court on 18th Aug, 2022
Sd/- (Chandra Poojari) Accountant Member
Bangalore, Dated Aug, 2022. VG/SPS
ITA No.688/Bang/2021 M/s. Navajyothi Trust, Mysuru
Page 9 of 9 Copy to:
The Applicant 2. The Respondent 3. The CIT 4. The CIT(A) 5. The DR, ITAT, Bangalore. 6. Guard file By order
Asst. Registrar, ITAT, Bangalore.