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Facts
The assessee, engaged in the business of dealing in steel, declared income on 31.10.2017. The case was selected for scrutiny due to large cash deposits during the demonetization period and an abnormal increase in sales with a decrease in profitability.
Held
The Tribunal noted that the assessee could not produce sufficient documentary evidence for cash deposits made during demonetization. The Tribunal remitted the issue back to the AO to examine how the cash deposits were utilized and directed the assessee to provide documentary evidence.
Key Issues
Whether the cash deposits made during the demonetization period are to be treated as income of the assessee without proper substantiation and whether the lower authorities properly examined the issue in light of CBDT instructions.
Sections Cited
143(2), 69A, 115BBE, 144
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI SOUNDARARAJAN K
Per Laxmi Prasad Sahu, Accountant Member :
This is an appeal filed by the assessee against CIT(A)’s order vide DIN & Order No: ITBA/NFAC/S/250/2024-25/1071120469(1)dated 11.12.2024.
Briefly stated the facts of the case are that the assessee is an individual engaged in the business of dealing with steal in the name and style of Sambhav Steels and Infra Solutions situated at No.194, Jagajyothi Layout, Nagadevanahalli, Bangalore – 560 056, filed its filed return of income on 31.10.2017 declaring income of Rs.11,49,180/-. The case was selected for scrutiny for examining the large cash deposited made during the demonetization period and abnormal increase in sales with decrease in profitability compared to previous years.
According notices under section 143(2) of the Act dated 10.08.2018 and 28.09.2018 were issued and served to the assesee. Subsequently, other statutory notices were issued to the assessee. From the information, it was noticed that there was abnormal increase in cash deposits made during the demonetization period and corresponding to the previous Financial Years and month wise cash deposits were also compared and it is not matching with the corresponding period. The assessee was asked the source of cash accepted / received in cash towards loan / advances or any agreement to sell the property or gift received or any services provided and various other questions were also put forth but the assessee was unable to explain. Therefore, it was presumed that the cash deposited in his bank account that it is the income of the assessee because possession is a burden and given rise to inference of ownership, to show cause how the moony was deposited in bank account is not income. In this regard, the AO relied on the judgment of the Hon’ble Apex Court in the case of CTI Vs. Devi Prasad Vishwanath Prasad (1969) 72 ITR 194 (SC), CIT Vs. P. Mohankala and Others (2007) 291 ITR 278 (SC). But there was no response from the assessee’s side. Accordingly, as per the details available, the assessee had maintained bank accounts in ICICI Bank No23505500029 and HDFC Bank account No.50200002334026 and total cash deposited was Rs.1,09,97,850/-. Accordingly, the entire cash deposited during this period was considered as income under section 69A of the Act and applied section 115BBE of the Act and completed the assessment under section 144 of the Act.
Aggrieved from the above Order, assessee filed appeal before the CIT(A). During the appellate proceedings, several notices were issued by the learned CIT(A) on the email id provided. In this regard, assessee replied on 30.08.2023 against the notice dated 23.08.2023 and no further submissions were made. Therefore, considering the submissions of the assessee, the learned CIT(A) dismissed the appeal of the assessee.
Aggrieved from the above Order, assessee filed appeal before the Tribunal.
The learned Counsel reiterated the submissions made before the learned CIT(A) and submitted that the books of accounts were got audited by the Chartered Accountant and there is no any qualification in the audited report by the Tax Auditor. Accordingly, the assessee filed return of income and the Revenue authorities have not rejected / pointed out any mistake in the books of accounts maintained by the assessee. Therefore, books result should be accepted and she requested that during the assessment proceedings, the assessee could not furnish complete evidence and she relied on the judgment of the Co-ordinate Bench in the case of B. K. Ranjana Vs. ITO reported in (2025) 170 taxmann.com 335 (Bangalore Tribunal) in Order dated 19.12.2024.
On the other hand, learned DR relied on the Order of authorities and submitted that assessee was given several opportunities to establish the sales / cash received during the demonetization period recorded in the books of accounts but the assessee was unable to prove the same with cogent materials and there was fluctuation in the figures for the corresponding years from the previous years and the AO has not examined the case of the assessee in the light of the CBDT instructions issued by the CBDT time to time and Govt. of India and RBI regarding cash deposits during the demonetization period for the cash received. The assessee did not represent his case, the Ao passed order u/s 144 of the Act. Therefore, the lower authorities have rightly added the cash deposits made during the demonetization period under section 69A of the Act and objected for giving further advance to the assessee. The arguments advanced by the ld. AR are erroneous since the assessment was completed u/s 144 of the Act. If the assessee was unable to produce the documents before the AO, he could have produced the same before the learned CIT(A).
Considering the rival submissions, we noted that the assessee’s case was selected for scrutiny and regarding examination of the cash deposits made during the demonetization period, the assessee could not produce the sufficient documentary evidence during the course of assessment proceedings with regard to the cash deposits in the 2 banks amounting to Rs.1,09,97,850/- in Specified Bank Notes (SBNs). Here in the case on hand, the learned Counsel has only submitted her arguments that the books of accounts are audited and the AO has not rejected the books of accounts. This argument cannot be accepted because during the assessment proceedings, the assessee has not produced any evidence which is clear from the Order of the AO. Therefore, the judgment relied on by the learned Counsel is not applicable to the present facts of the case. We have also gone through the Order of the lower authorities and we noted that Revenue authorities have not examined the issue in light of the CBDT instructions issued from time to time, Govt of India and RBI. Considering the facts of the case we are remitting this issue to the file of the JAO and decide the issue as per law after giving reasonable opportunity of being heard . We further direct the AO to examine how the assessee has utilized the cash deposits during the demonetization period. Whether the assessee has utilized the same amount for his business purpose or otherwise. The assessee is directed to prove the cash deposits with documentary evidence to substantiate his claim and not to seek unnecessary adjudication for early disposal of the case. In case of failure no second leniency shall be granted to the assessee.
In the result, appeal filed by the assessee is allowed for statistical purpose.