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Facts
The assessee, engaged in the wholesale business of chewing tobacco and related products, deposited cash into bank accounts. The AO made a best judgment assessment under Section 147 r.w.s. 144, adding Rs. 7,27,13,000/- as unexplained money. The assessee contended that the deposits were sale proceeds.
Held
The Tribunal found that the CIT(A) erred in allowing the appeal based on documents not presented to the AO. The Tribunal set aside the CIT(A)'s order and remitted the issue to the AO for de novo consideration.
Key Issues
Whether the CIT(A) was justified in allowing the appeal based on additional evidence without giving the AO an opportunity to examine it, and whether cash deposits can be treated as unexplained money under Section 69A if they represent sale proceeds.
Sections Cited
147, 144, 69A, 148, 46A
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Income Tax Appellate Tribunal, ‘B’ BENCH : BANGALORE
Before: SHRI WASEEM AHMED & SHRI SOUNDARARAJAN K.
ORDER PER SOUNDARARAJAN K., JUDICIAL MEMBER
This is an appeal filed by the revenue challenging the order of the NFAC, Delhi dated 14/06/2024 in respect of the A.Y. 2017-18 and raised the following grounds: “i. That the CIT(A) has erred in facts and in law by deleting the addition made u/s 69A of Rs.7,27,13,000/- ii. That the CIT(A) has erred in facts and in law by not giving an opportunity to the AO under Rule 46A for countering the submissions made by the assessee before the C1T(A) depicting the nature of deposits though the assessee remained non responsive throughout the assessee proceedings. iii. That the C1T(A) has erred in facts and in law by stating that assessee has declared the amount of cash deposits in his return of income and directing the AO to delete the entire addition of Rs. 7,27,13,000/- without any reconciliation though the sales turnover of the assessee as per the Tax audit report was Rs. 5,94,86.810/- and the assessee has claimed to have deposited cash of Rs. 6,74,28,590/- and not Rs. 7,27,13,000/-.”
2. The brief facts of the case are that the assessee is doing the wholesale business of chewing tobacco and other related products. The investigating wing had sent several notices seeking the details for the deposits of cash made into the assessee’s bank account. The assessee also filed his responses and thereafter no further proceedings were initiated by the investigation wing of the department. Subsequently, a notice u/s. 148 was issued and through several notices, details were called for by the AO in respect of the cash deposits made by the assessee. The assessee being an uneducated person, he was not well versed in the computer knowledge and therefore the assessee had not noticed the notices issued by the AO. Therefore the AO had made the assessment u/s. 147 r.w.s. 144 of the Act. As against the said order, the assessee filed an appeal before the Ld.CIT(A) and contended that the cash deposited into his bank accounts are nothing but the sale proceeds received from the customers. Since the assessee had received the most of the payments in cash, the assessee deposited the said cash into his bank account. The assessee also relied on the VAT returns filed before the sales tax authorities and also the tax audit report to confirm that the assessee had sales turnovers and the cash received through the said sales were deposited into his bank accounts. The assessee also enclosed the VAT returns, bank statements before the Ld.CIT(A). Apart from the said documents, the assessee also field the tax audit report and submitted that the addition made u/s. 69A of the Act is not in order.
The Ld.CIT(A) had considered the documents filed by the assessee as well as the tax audit report and satisfied himself that the cash deposited Ld.CIT(A) had allowed the claim of the assessee insofar as the addition made u/s. 69A of the Act. The Ld.CIT(A) had rejected the other grounds raised in respect of the service of the notice. As against the said order of the Ld.CIT(A), the department is in appeal before this Tribunal.
At the time of hearing, the Ld.DR submitted that the assessment is a best judgment assessment made u/s. 144 of the Act in which the assessee had not submitted any details about the deposit of cash into his bank account. All of a sudden, the assessee submitted the documents to show that the cash deposits are nothing but the sale proceeds. The Ld.DR further submitted that the documents submitted before the Ld.CIT(A) is new documents and therefore the said documents could not have been entertained without granting an opportunity to the AO to rebut the same. The Ld.DR further relied on Rule 46A of Income Tax Rules in support of his contention.
The Ld.AR submitted that the documents are not new documents but only the statutory records available with the assessee and therefore the Ld.CIT(A) after considering the said records had satisfied himself that the cash deposits are nothing but the sale proceeds and allowed the appeal.
We have heard the arguments of both sides and perused the materials available on record.
We have perused the assessment order which was made u/s. 147 r.w.s 144 of the Act. Therefore it is seen that the assessee had not appeared before the AO in spite of the various notices sent to him. After the said order has been passed, the assessee before the Ld.CIT(A) had filed the various documents in order to substantiate his claim that the cash deposits are nothing but the sale proceeds. We have also noticed that the assessee had furnished the various documents including the tax audit report before Ld.CIT(A) for the first time that too without filing any application to admit the said additional evidences. In such circumstances, the Ld.CIT(A) had given the following finding while allowing the claim made by the assessee. “6.3 I have carefully considered the facts of the case, the submission of the appellant and evidences on record. At the outset the appellant has submitted that the total debits in bank accounts amounts to Rs. 7,11,21,896 whereas the order u/s 147 of the Act, erroneously states that the cash deposits in bank accounts amount to Rs. 7,27,13,000 during the year while the actual cash deposits made by the appellant in his bank account amounts to Rs.6,74,28,590. It was submitted that the cash received from the customers on account of cash sales made during the year under consideration were deposited into the bank account. The appellant submitted that he is a small trader and the transactions are mostly carried out in cash. I find that the appellant has also been subjected to tax audit and this was available in the records at the disposal of the AO. The AO could have made verification from the VAT returns of the appellant. The following table depicts the nature of the deposits in Axis Bank and Kotak Mahindra Bank.
……. ……. 6.9 In the present case, I find that the appellant has declared the amount of cash deposits in the return of income after duly entering the same in the books of account. Thus, Section 69A of the Act cannot be applied in respect of cash deposits which have been duly recorded in the books of account and have already been considered. as income in the return of income filed by the appellant. The onus was on the AO to prove the cash deposits are not part of sale consideration. It may be noted that the books of accounts of the appellant has also not been rejected. In view of the above facts and discussion, I am of the considered view that the addition of Rs.7.27,13,000 as unexplained money u/s.09A of the Act is not sustainable and is directed to be deleted. The appeal on this ground is thus allowed.”
From the above finding given by the Ld.CIT(A), we came to understand that the Ld.CIT(A) had allowed the appeal based on the documents filed before him. It is an admitted fact that the said documents were not made available before the AO while passing the assessment order. In such circumstances, instead of allowing the appeal filed by the assessee, the Ld.CIT(A) could have remitted the issue to the AO to consider the documents filed by the assessee. Unfortunately, the Ld.CIT(A) had allowed the appeal by accepting the documents filed before him which in our view is not correct. We therefore set aside the order of the Ld.CIT(A) and remit the issue to the file of the AO for denovo consideration and pass orders in accordance with law after hearing the assessee. We also made it clear that the assessee is entitled to produce the records before the AO in support of his claim that the cash deposits are nothing but the sale proceeds obtained by the assessee.
In the result, the appeal filed by the revenue is allowed for statistical purposes.
Order pronounced in the open court on 30th April, 2025.