BADAMIDEVI PARASMALJI,CHENNAI vs. INCOME TAX OFFICER, CHENNAI

This appeal by the assessee is arising out of the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi in order No.ITBA/NFAC/S/250/2024-25/1065954734(1) dated 24.06.2024. The assessment was framed by the Income Tax Officer, Non Corporate Ward 4(5), Chennai for the assessment year 2017-18 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’), vide order dated 26.11.2019.

The registry has noted delay of 56 days in filing the appeal. Considering the period of delay and reasons deposed in the affidavit given by assessee, we find it sufficient cause, hence condone the delay and admit the appeal for adjudication.

The assessee is an individual and filed her return of income for the Asst. year 2017-18 admitting income of Rs.6,34,390/-, the case was selected under Limited Scrutiny in CASS for verification of cash deposits made during demonetization period. A notice u/s 143(2) of the Act dt.21.9.2018 was issued and served on the assessee. Subsequently, notice u/s 142(1) dt. 13.5.2019 was issued to the assessee calling for the nature and source of the cash deposits during demonetization period along with documentary evidence. The ld. Assessing Officer found that in the assessment year 2017-18, the assessee had made cash deposits in demonetized currency of Rs.11,41,000/- in the bank account of M/s. Foto House, of which the assessee is the proprietrix and Rs.2,50,000/- in her savings bank account. The ld. Assessing Officer obtained a copy of the bank statement from Indian bank held in the name of the assessee and in the name of M/s.Foto House. Since there was no response to the notices issued, a letter dt 22.6.2019 was issued to the assessee to furnish the details called for. In response, the assessee vide letter dt. 14.8.2019 stated that deposits made during the demonetization period are through opening cash in hand from the proprietorship concern which was discontinued in F.Yr.2015- 16". The assessee also submitted the capital account, statement of affairs and computation of income for the year ended 31.3.2017 and year ended 31.3.2016.

The ld. CIT(A) confirmed the action of the Assessing Officer. Aggrieved, assessee is in appeal before us.

Before us, the ld.AR has filed cash flow (cash book) from 01.04.2016 to 31.03.2017 of individual and M/s Foto House. The ld. AR argued that the assessee had deposited cash to the tune of Rs.13,91,000/- out of the closing balance of cash till the date of deposit. He further stated that the closing cash balances were already charged to income tax in the form of sales. In support of claim, the appellant has filed cash book from 01.04.2016 to 31.03.2017 of individual and M/s Foto House. However, the AO completely neglected the cash balances of the proprietary concern.

Per contra, the ld.DR has vehemently relied upon the impugned order and prayed for the dismissal of the appeal.

We have heard the rival submissions and perused the cash book and orders of the lower authorities. It is not in dispute that the assessee operated a proprietary concern in the name and style of M/s Foto House and the financial records of the firm and the individual were maintained separately. It is the plea of the assessee that the balances of loans payable (loans-liability), loans receivables (loans & Advances) and fixed assets as mentioned in the audited financial statements were appropriately transferred to proprietor’s personal accounts & creditors, cash and bank balances were continued in the books of accounts of the business in order to enable a clearer picture of receipts and payments directly associated with the business activities. However, the AO only considered the balances in the financials of individual and completely ignored the cash balances of the proprietary concern.