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Facts
The assessee, a Vodafone recharge coupon distributor, filed an income of Rs. 3,83,620 for AY 2017-18. The AO made an addition of Rs. 9,60,733 on account of unexplained cash deposits in Specified Bank Notes (SBNs) after demonetization, disbelieving the assessee's explanation regarding sales.
Held
The Tribunal acknowledged that the CIT(A) passed an ex-parte order due to the assessee's non-response. However, considering the nature of the business and the volume of cash deposits, the Tribunal deemed it appropriate to reduce the addition to Rs. 1 lakh to plug any revenue leakage, rather than confirming the entire addition made by the AO.
Key Issues
Whether the addition made by the AO under Section 68 and 115BBE for unexplained cash deposits is justified, and if the CIT(A) order passed ex-parte is sustainable.
Sections Cited
250, 143(3), 68, 115BBE, 234A, 234B, 234C, 143(2)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE KAND
आदेश /O R D E R
PER GEORGE GEORGE K, VICE PRESIDENT:
This appeal at the instance of the assessee is directed against the order of Addl/JCIT(A)-12, Delhi dated 15.01.2025, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2017-18.
2. The grounds raised
read as follows:
1. For that, the Order of the Commissioner of Income Tax (Appeals) is without jurisdiction, is contrary to the case's law, facts, and circumstances, and in any case, is opposed to the principles of equity, natural justice, and fair play.
2. For that, the Commissioner of Income Tax (Appeals) failed to appreciate that the Assessing Officer's order is without jurisdiction.
3. For that assessment completed, u/s 143(3) is bad in law.
4. For that the Commissioner of Income Tax (Appeals) erred in confirming the additions of a sum of Rs.9,60,733/- as unexplained Income under Section 68 of the Income Tax Act.
For that. the Commissioner of Income Tax (Appeals) failed to appreciate that Sec.68 is not invocable in the Appellant's case under the facts and circumstances.
For that. the Commissioner of Income-tax (Appeals) failed to appreciate that Sec 115BBE is not invocable in the case of the appellant under the facts and circumstances 7. For that, the Commissioner of Income Tax (Appeals) failed to give sufficient opportunity to the Appellant.
8. For that the Commissioner of Income Tax (Appeals) erred in confirming the above additions merely out of conjectures, surmises, and suspicions.
For that, the appellant objects to the levy of interest u/s 234A, 234B, and 234C. 10.The above grounds are taken without prejudice to one another. For these grounds and such other grounds that may be urged before or during the hearing of the appeal, it is most humbly prayed that this Hon'ble Income Tax Appellate Tribunal may be pleased to a. Quash the order of assessment and/or b. Delete the addition made under Section 68 of the Income Tax Act. 1961, and/or c. Pass such other order as this Hon'ble Income Tax Appellate Tribunal may deem fit.
Brief facts of the case are as follows: The assessee is an individual engaged in the business of distributorship for Vodafone recharge coupons in the district of Pudukkottai. The assessee supplies to the various retail outlet shop prepaid SIM card / e-charge of SIM cards. For the assessment year 2017-18, the return of income was filed on 13.10.2017 declaring total income of Rs.3,83,620/-. The assessment was selected for scrutiny and notice u/s.143(2) of the Act was issued on 24.09.2018. During the course of assessment, the assessee was directed to explain the source of cash deposit in Specified Bank Notes (SBNs) (demonetized currency) amounting to Rs.11,80,100/-. With regard to cash deposit in SBNs, the assessee stated the opening cash balance as on 08.11.2016 was Rs.4,20,635/- and sales effected after the announcement of demonetization were Rs.9,60,733/-. It was stated that opening cash balance as on 08.11.2016 and sales effected after announcement of demonetization, together constituted the source for deposit of SBNs. The AO however disbelieved the claim of assessee of sales effected after the announcement of demonetization i.e., on 08.11.2016 between 8 PM to 12 AM. The AO’s reasoning for disbelieving the assessee’s explanation is reproduced below for ready reference:- “1. On perusal of details, it is noticed that the assessee has made average sales per day around of Rs.2 to 2.25 lakhs, which was already made on 08/11/2016. Further, it is improbable that after announcement of demonetization the assessee flooded with the customers that too after 8 PM in the small town of area.
Further, the assessee has not submitted any plausible evidence in support of his claim.
3. Further, the assessee has not submitted the stock register for having sufficient stock as on 08/11/2016.
Further, the assessee has deposited cash in SBN in the HDFC bank during the month of December, 2016 despite SBN was available with him on 08/11/2016 itself, which is against the Human probability”
4. Aggrieved by the order of assessment making addition u/s.68 of the Act, the assessee preferred appeal before the First Appellate Authority. Two hearing notices were issued from the office of the First Appellate Authority. Since the assessee did not respond to the same, the CIT(A) passed ex-parte order dismissing the appeal of the assessee.
5. Aggrieved by the order of the CIT(A), the assessee has filed the present appeal before the Tribunal. The Ld.AR stated that assessee is a wholesale dealer of Vodafone prepaid SIM cards and recharge in e-mode in the district of Pudukkottai. It was submitted that it is a customary practice that assessee receives large volume of cash and same was deposited in the various bank accounts. It was stated that the sales were made after the announcement of demonetization constituting average three days sales. It was stated by the Ld.AR that sale of prepaid top-up was exempted sale where the old currency of Rs.500 was accepted during the period of demonetization upto 24.12.2016 as per the Government notification. The Ld.AR has placed on record the audited P & L account, balance sheet, return of income, etc. The Ld.AR submitted that in order to put an end to the litigation, addition of 8% of cash deposits in SBNs may be added since the same are out of business of the assessee.
6. The Ld.DR strongly supported the orders of the AO and the CIT(A).
We have heard rival submissions and perused the material on record. The CIT(A) has passed an ex-parte order since the assessee did not respond to the hearing notices. In ordinary course, the matter ought to have been remitted to the CIT(A) for the assessee to provide the details so that the CIT(A) can dispose off the same after considering the evidences placed on record. However considering the smallness of addition made, we deem it appropriate to put a quietus to the issue. The assessee is admittedly a distributor for Vodafone prepaid SIM cards in the district of Pudukkottai. It is a customary practice that large volume of cash has been deposited every day through sales transaction and collection from trade debtors. The total cash deposits during the relevant assessment year admitted by the AO is to the tune of Rs.1,16,73,006/-. Out of the said cash deposit, the deposits in SBNs is to the tune of Rs.11,80,100/-. The AO has disbelieved the sales effected after announcement of demonetization i.e., on 08.11.2016 between 8 PM to 12 AM. The sale of prepaid top-up cards were exempted sales where old currency of Rs.500/- was accepted during the period of demonetization upto 24.12.2016 as per the Government notification. The assessee has placed on record the audited P & L account and balance sheet. The assessee has also placed on record the amounts recovered from the retail traders in cash. On perusal of the financials, we are of the view that the amount of cash deposits are primarily from the business of the assessee. However, to plug any leakage of revenue, we are of the considered view an addition of Rs.1 lakh would suffice on the facts of the instant case. Accordingly, we confirm the addition of Rs.1,00,000/- and delete the addition of Rs.8,60,733/- made by the AO u/s.68 r.w.s. 115BBE of the Act. It is ordered accordingly.
In the result, the appeal filed by the assessee is partly-allowed.
Order pronounced in the open court on 24th April, 2025 at Chennai.