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Income Tax Appellate Tribunal, MUMBAI BENCH “H”, MUMBAI
ORDER PER GAGAN GOYAL, A.M: This appeal by the assessee is directed against the order of National Faceless Appeal Centre, Delhi [hereinafter referred to as [‘NFAC’] dated 26.11.2021 passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as [‘the Act’] for the Assessment Year (AY) 2017-18. The assessee has raised the following grounds of appeal: “1. On the facts and circumstances of the case in law, the Learned Assessing Officer erred in directing addition of Rs. 9, 72,500/- u/s 69C r.w.s.115BBE of the Income Tax Act, 1961.
2. The assessment was completed for the A.Y 2017-18 u/s 143 (3) on 02-12-2019 showing the tax liability along with interest of Rs. 2,14,42,806/- & issued notice separately levying penalty u/s 271AAC.
3. The learned assessing officer considered the payment of credit card by cash as a unexplained expenditure u/s 69C of the Income Tax Act, 1961 and made the addition of Rs.9,72,500/-.
4. The appellant preferred an appeal before the Commissioner of Income Tax where the order ofthe Assistant commissioner was further upheld.
5. The appellant is an individual of 49 years of age. The total income of the assessee earns consist of Business income and other sources. The assessee has made cash payment towards credit card due to the tune of Rs.9.72,500/- and the learned AO made addition treating this expenditure as unexplained expenditure U/s69C. Over the year assessee has been withdrawing certain amounts and keeping it aside to meet various contingencies. The cash collected over the years, already forming part of the withdrawals for each year amounted to Rs.17,49,571/- Below is the cash summary, Particulars Amount in Rs. Opening balance of cash in hand as on 01-04-2016 9,12,800
Add: Withdrawals made during the FY 2016-17 (up to 2,10,000 Oct. 2016) Opening balance of cash in hand as on 01-04-2015 from 3,57,250 personal account Add: Withdrawals made from personal account during FY 2,69,521 2016-17 Total 17,49,571
Following are the details of payment made towards credit card for AY 2017-18, we have already provided you the Citi bank credit card statement and the bifurcation is as follows: Credit Card: Citi Bank Total payments: Rs. 15,23,577 Mode of payment Particulars/Nature Amount By Net Banking Drawings 5,23,077 By Cash Out of pocket 9,72,500 Auto Credit Cashback from bank 28,000 *Drawings amount is the same as highlighted in the Capital A/c As per Section 69C-Unexplained expenditure, of The Income Tax Act, where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. [Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.] But as far as our case is concerned, assessee has already disclosed in the Books of Accounts/provided allthe relevant information to the relevant authorities pertaining to cash payment of Credit card purchases amounting Rs. 9,72,500 then in that case the question of treating the same u/s 69C as unexplainedexpenditure, does not arise. We have relied on below case laws, 1. As explained in case law of Mehta Parikh & Co. v. CIT [1956] 30 ITR 181 (SC)., it was held that, when assessee submitted books of account showing relevant entries showing payment being made to them which resulted in cash in its books and also submitted affidavits of payers, Revenue authorities cannot hold that it was not possible that all payments after a particular date were being made in multiples of Rs. 1000. No addition can be sustained based on pure surmise.
It was possible that even in a cash balance of a very large amount there may be no high denomination notes at all. Equally it was possible that even, in a cash balance of a small amount almost the entire cash balance may be made up only of high denomination notes. When both the possibilities were there, it could not be said that those or any of them represented the income of the assessee from some undisclosed source. Gur Prasad Hari Das vs. CIT [1963] 47 ITR 634 (All.) 3. Assessee produced details of withdrawals for past 7 years, and claimed the amount encashed on demonetization as to be out of savings from such withdrawals, such an explanation cannot be rejected by AO. -Sri Sri Nilkantha Narayan Singh vs. CIT [1951] 20 ITR 8 (Pat) On the facts and circumstances of the case and in law the Learned Assessing Officer has erred directing addition of Rs. 9,72,500/- u/s 69C r. w. s 115BBE of the Income Tax Act, 1961. The order under appeal is not only bad in law and invalid, but also against the principles of natural law, equity and justice. The Appellant craves leave to amend, alter, add or delete all or any of the grounds of appeal
.”
2. Brief facts of the case are that the assessee is a proprietor of M/s. Shivom Logistics engaged in the business of goods transport agency services filed his return of income on 26.10.2017 declaring net taxable income at Rs. 5,34,10,630/-. The case was selected under CASS for limited scrutiny purposes to verify “large cash payments made for credit card purchases. Notice u/s 142(1) along with questionnaire were issued to the assesseeCalling for details and documents.
3. In response to this notice and a specific query about large cash payments made for credit card assessee stated that for over the years assessee has been in habit of withdrawing certain amounts and keeping it aside to meet various contingencies that may come up in his day-to-day life.Assessee also submitted his details of turnover, net profit and income returned as under. A.Y Turnover(Rs Total Net Profit Income Returned 2014-15 48,36,54,556 1,46,83,095 1,48,25,942 2015-16 700968235 19586067 19477604
2016-17 770510319 31896431 31905938 2017-18 834212297 53470378 53595072 2018-19 763123194 38242990 38303993 2019-20 542556478 20351594 23055576 2020-21 466794784 91146496 96126130 2021-22 498867278 89055398 95317380 it is apparent that the financial position of the assessee with reference to his turnover, net profit and income returned proves him to be an assessee in the category high net worth individual (HNI). It is further observed from the order of AO that whatever be the information required by AO assessee has submitted online. Looking at the turnover of the assessee it is also confirmed that assessee’s case is covered under the compulsory tax audit provisions u/s 44AB.
Assessee has submitted before us a position of cash in hand in his business book of which he is a proprietor and personal books also as under. Particulars Amount in Rs. Opening balance of cash in hand as on 01-04-2016 9,12,800 Add: Withdrawals made during the FY 2016-17 (upto Oct. 2,10,000 2016) Opening balance of cash in hand as on 01-04-2015 from 3,57,250 personal account Add: Withdrawals made from personal account during FY 2,69,521 2016-17 Total 17,49,571 Being an auditable assessee amount of Rs. 11,22,800/- (Rs. 9,12,800/-+Rs. 2,10,000/-) can never be under challenge as the same are duly reflected in assessee’s business book which were duly audited secondly department also can’t challenge the worth and liquidity position of the assessee.
The addition made by AO without any adverse comment on the cash-book of the assessee (business cash book and personal cash book), additions made will be counted in the category of guess work and without application of mind. Further the order of Ld. CIT(A) is also absurd may he observed “ It is intriguing to note that why the appellant has an easy and convenient mode of payment to pay his credit card bills in the form of net banking, why would he get into a cumbersome mode of withdrawing cash from the bank account by physically going or sending a person to bank branch and then again go physically to the City Bank Branch to pay credit bills”. This opinion of Ld. CIT(A) would have considered appropriate, in case AO had examined the cash book of the assessee and furnished specific remarks about the cash book.
The power of Ld. CIT(A)is coterminous with that of AO, but an AO can do or his supposed to do, can be done by Ld. CIT(A) also. Being superior authority, his duty is to improve upon the assessment order passed by the AO considering the facts of the case and applicable law. Sec. 69C falls under income from other sources and in the category of deeming provision.
Without establishing conclusively, a section like 69C falling under the head Income from Other Sources and that is to, a deeming section, no adverse inference can be drawn against the assessee. We found the order of AO and Ld. CIT(A) are based on conjunction and surmises.
We found both the order violating principle of natural justice hence absurd in nature. We set aside the orders of authorities below and direct to delete the addition made u/s 69C with consequential reliefs.
In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 4th day of October, 2022.