INCOME TAX OFFICER , VIJAYAPUR vs. VIKRAM DALICHAND BANDARI , VIJAYAPUR

5.1 The Ld. CIT(A)/NFAC partly allowed the appeal of the assessee on the ground that the assessee made cash sales to the retailors and such sale proceeds were deposited in the bank account maintained with Shri Guru Basava Urban Credit Souhardha Co-operative Bank Ltd., Bijapur and subsequently these sale proceeds were utilized to make payment to the vendors against the purchases made. The assessee submitted the party wise breakup of purchases, corresponding cash sales and bank statement. The ld. CIT(A) was of the view that during the assessment proceedings the AO neither rejected the books of accounts nor doubted the purchases made by the assessee. Since the purchases were accepted, the AO could not disallow the sales CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 6 of 15 merely on the basis that sales were made in cash. The ld. CIT(A) was also of the view that addition of cash deposit u/s 69A of the Act would result in double taxation of the same amount once in the form of business income and again at the rate of 60% u/s 115BBE of the Act. The Ld. CIT(A)/NFAC held that as the assessee proved the business activity with sales invoice, purchase payments and the AO did not found any deficiency in the documentary evidences filed by the assessee and accordingly accepted the contention of the assessee and deleted the addition of Rs.6,84,68,020/- on account of cash deposits made during the year under consideration.

5.2. Further with regard to assessee’s claim that the initiation of action u/s 148 of the Act was illegal and invalid as barred by time, the ld. CIT(A)/NFAC did not find any illegality or invalidity in the action of the initiation of notice u/s 148 of the Act and consequent assessment order passed by the AO and accordingly dismissed this ground of the assessee.

5.3. Aggrieved by the order of ld. CIT(A)/NFAC the revenue has filed the appeal in contesting the deletion of addition made u/s 69A of the Act amounting to Rs. 6,84,68,020/- and the respondent assessee has filed CO 32/B/2024 challenging the validity of notice under section 148.

5.4. The ld. A.R. of the assessee has filed paper book along with case law compilation comprising of total 452 pages along with written synopsis of arguments.

8.1 The ld. AO rejected the claim of the assessee on the ground that the accounts are thoroughly audited by a CA & there is no mention of bank account maintained with Shri Gurbasava Urban Credit Sauhardha Co-op Ltd in the books of A/c and the CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 9 of 15 assessee himself admitted that the unaccounted unrecorded transactions are not brought on record. Further AO held that as the bank account itself shows that there are equal credits and equal debits & there is no balance at the end of the year, the claim made by the assessee does not have any merit in the nature of business transactions. The AO was of the view that the assessee appears to be very clever in accepting & disclosing the additional income which does not grant any immunity to the assessee from the penal provisions and accordingly treated the entire amount of cash transactions amounting to Rs. 6,84,68,020/- as Income from Other Sources and added u/s 69A of the Act as unexplained Money.

8.2 The ld. CIT(A)/NFAC however deleted the impugned addition with the following observations/reasons:-

(i) The assessee submitted the party wise break up of purchases, corresponding cash sales, bank account statements. The AO neither rejected the books of A/c nor doubted the purchases made by the assessee. Since the purchases were accepted, the AO could not disallow the cash sales. (ii) The assessee proved that cash deposited was out of business income/receipts and gross profit is already declared in the return of income filed in response to notice u/s 148; (iii) addition of entire cash deposit u/s 69A of the Act would result in double taxation of the same amount once in the form of business income and again at the rate of 60% u/s 115BBE; (iv) On perusing the assessment orders in similar cases of other traders wherein the cash was also deposited in the same bank account with Sri Gurubasava Urban Credit Souhardha CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 10 of 15 Co-Operative Bank, Bijapur, the AO made addition of Gross Profit of the cash deposits. (v) The AO did not find any deficiency in the documentary evidences filed by the assessee. The assessee accepted to be owner of money, satisfactorily explained the source of money and also offered the profit element for taxation.

8.3 Before leaping further it is worthwhile here to take note of the Section 69A of the I. Tax Act for the purpose of this case which deals with unexplained money read as under:

Unexplained money, etc.

69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.”

8.4 Thus in order to be levied tax u/s. 69A, three conditions are need to be established by the assessing officer-

1) The assessee is found to be the owner of any money, bullion, jewellery or valuable article 2) Such money, bullion, jewellery or valuable article is not recorded in the books of accounts if any maintained by him for any source of income.

CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 11 of 15 3) The assessee offers no explanation about the nature and source of acquisition of money, bullion, jewellery or valuable article or the explanation offered by him in the opinion of the AO satisfactorily.

8.5 Thus, in the present case, to invoke deeming provisions u/s 69A of the Act, the assessee should be owner of any physical assets like money, bullion, jewelry or other valuable article, which is not so in the present case. Further, we are of the opinion that the nature & source of the cash deposited in the bank accounts were duly explained before the authorities below by submitting the party wise break up of purchases, corresponding cash sales, bank account statements. The assessee had also produced the month wise purchase & sales transactions as observed by ld. AO in his Assessment Order. The assessee had also furnished the following declaration in his return of income in pursuance to 148 of the Act- Additional Sales Turnover Rs.7,02,66,851/- Additional amount of Purchases Rs.6,84,68,020/- Total Additional Gross Profit (2.56%) Rs. 17,98,831/- Therefore, we are of the opinion that the provisions of section 69A of the Act do not apply in the case of the assessee especially when the AO has not brought any contrary material on record to disproof the claim of the assessee. Merely by stating that assessee appears to be clever in accepting & disclosing the additional income will not give entitlement to AO to apply rigorous provision of section 115BBE of the Act.

Now with regard to the first grounds of appeal of the revenue 8.6 we are of the opinion that the power of the CIT(A) are co-terminus with that of the AO i.e. he can do all that the AO could do. We CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 12 of 15 found the order of ld. CIT(A) to be reasonable and logical on the given state of facts and the grounds raised by the assessee on merits of the case by considering the documents/records produced by the assessee.

8.7 Hon’ble Madras High Court in the case of Arul Murugan and Co. (1982) 51 STC 381 has observed as follows:’

“In a tax appeal, the appellate authority is very much committed to the assessment. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the tax payer’s appeal, even though appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes undeline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself.”

8.8 Therefore, We are of the considered opinion that legislature has conferred very wide powers upon the appellate commissioner once an appeal is preferred to him by the assessee. An appeal is only a rehearing or a retrial. In the absence of any statutory inhibitions or restrictions, the ld. CIT(A) has precisely the same powers, exercisable or in the same manner and to the same extent, as the AO has, in the first instance. Further, u/s 250(4) of the Act, before disposing of any appeal, the ld. CIT(A) is competent to make such further inquiry as he thinks fit or he may direct the AO to make further inquiries and report the result of the same to the Joint Commissioner (A) or the Commissioner (A).

8.9 The assessee on or before the completion of assessment had produced the month wise purchase & sales transactions as observed by ld. AO in his Assessment Order, the same the party CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 13 of 15 wise break up of purchases, corresponding cash sales, bank account statements submitted before the ld. CIT(A)/NFAC cannot be treated as an additional evidence filed before the ld. CIT(A) as these are not filed for the first time before the ld. CIT(A). In our view, the ld. CIT(A) has rightly passed an order by stating the points for determination and the reason for decision by taking into consideration the documents/records/evidences produced by the assessee. We do not find any merits in these grounds raised by the Revenue and accordingly dismiss the same.

8.10 With regard to second grounds of Appeal we are of the opinion that during the course of assessment proceedings, the assessee himself admitted that the unaccounted & unrecorded transactions are not brought on record and was also not in the knowledge of the auditor and accordingly filed the return in response to notice u/s 148 of the act by declaring total income of Rs. 32,07,070/-. The assessee declared gross profit of Rs. 17,98,831 computed at 2.56% on the undisclosed sales of Rs. 7,02,66,851/- in the return of income in addition to income declared as per original return of income. The assessee has adopted the same GP ratio of 2.56% to the undisclosed transactions. The Assessee has also furnished the month wise purchase and sales transactions before the AO. During the course of the assessment proceedings the assessee submitted that he made various sales to retailers in cash and collected all the funds generated from such sales and deposited the amount in the bank account of Shri Gurubasava Urban Credit Souhardha Co-Operative Bank, Bijapur. The funds that were deposited in the bank account were to the extent of the purchases that were made to carry out the sales. The bank subsequently issued certain cheques drawn in favour of various suppliers of goods to the assessee corresponding to the amount of cash deposited in the bank account. Hence, the sales CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 14 of 15 and purchases were not forming part of the books of accounts of the Assessee. Therefore we are of the considered opinion that the assessee has properly explained the nature & source of the transactions. Even if for a moment we presume that it is only a afterthought by the assessee even then the revenue failed to controvert by bringing any material on record. The additions cannot be sustained on surmises.

8.11 We completely agree with the view of the ld. CIT(A)/NFAC in holding that the AO neither rejected the books of A/c nor doubted the purchases made by the assessee. Since the purchases were accepted, the AO could not disallow the cash sales. The assessee proved that cash deposited was out of business income/receipts and gross profit is already declared in the return of income filed in response to notice u/s 148 and therefore the addition of entire cash deposits would result in double taxation of the same amount once in the form of business income and again at the rate of 60% u/s 115BBE and accordingly we dismiss this ground of the appeal of the Revenue.