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Facts
The assessee, a dealer in readymade goods, filed her return of income for AY 2017-18 showing a taxable income of Rs.13,39,370/- on a turnover of Rs.3,95,09,907/-. The case was selected for scrutiny, and the AO made additions of Rs.29,77,500/- for cash deposits during demonetization and Rs.13,972/- for delayed PF & ESI remittance.
Held
The Tribunal held that the addition for cash deposits was not sustainable as the sales proceeds were reflected in the books of accounts, offered to tax, and supported by evidence, thus avoiding double taxation. The ground regarding PF & ESI remittance was dismissed as not pressed.
Key Issues
Whether cash deposits made during the demonetization period, sourced from business sales reflected in books of accounts, can be added to income. Whether the disallowance of PF & ESI remittance paid after the due date but before filing the return is sustainable.
Sections Cited
143(3), 142(1), 44AB, 36(1)(va), 250, 69A
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Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI
Before: SHRI GEORGE GEORGE K, HON’BLE & SHRI S.R. RAGHUNATHA, HON’BLE
आदेश /O R D E R
PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER:
This appeal filed by the assessee is directed against the order passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), dated 25.04.2024 and pertains to assessment year 2017-18.
The following grounds of appeal are raised by the assessee: a) The order of Ld.CIT(A), NFAC, is erroneous in confirming the addition made for entire Cash deposit of Rs.29,77,500/- during the demonetization period which is a :-2-: ITA. No: 3109/Chny/2024 factual error committed by Assessing Officer and against the law. b) The ld.CIT(A) has erred in confirming the disallowance of P.F remittance basing on the various case laws quoted in the order U/s.250 of the Act
At the outset, we find that there is a delay of 163 days in appeal filed by the assessee, for which petition for condonation of delay along with reasons for delay has been filed. After considering the petition filed by the assessee and also hearing both the parties, we find that the assessee was suffering severe knee pain and could not move and hence there is a reasonable cause for the assessee in not filing appeal on or before the due date prescribed under the law and thus, in the interests of justice, we condone delay in filing of appeal and admit appeal filed by the assessee for adjudication.
The brief facts of the case are that the assessee is an individual and a dealer of Readymade Goods and other Cloth varieties on Retail basis. For the Asst.Year 2017-18 she filed her Return of Income on 15.12.2017 admitting a Taxable Income of Rs.13,39,370/- with a turnover of Rs.3,95,09,907/-. During the relevant assessment year the books of accounts of the assessee was duly audited by a Chartered Accountant u/s.44AB of the Act.
The case was selected for scrutiny under CASS and statutory notices were issued to assessee and requested to furnish the details of source of cash deposits made in the bank accounts during the demonetisation period. The AO found that the assessee had deposited :-3-: ITA. No: 3109/Chny/2024 Rs.29,77,500/- during the demonetisation period into her bank account, out of which Rs.15,19,500/- was SBNs. The AO also noticed in the audit report filed by the assessee that an amount of Rs.13,972/- recovered from the employees towards contribution to PF & ESI was paid after the due date as per the relevant Acts. Since, the assessee did not file any further details, the AO passed an order u/s.143(3) of the Act dated 28.12.2019 by making the following addition: i] Addition made for deposit of demonetized currencies Amounted to Rs.29,77,500/- ii] Addition made for disallowance of Provident Fund remittance of Rs.13,972/- u/s.36(1)(va) of the Act. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), NFAC.
The assessee submitted that the proper books of accounts has been maintained and the same was audited by a chartered accountant u/s.44AB of the Act and submitted to the department along with the return of income filed. The AO in his assessment order has made addition of SBNs cash deposit of Rs.15,19,500/- and also other currencies of Rs.14,58,000/- deposited during the demonetisation period. Further the assessee submitted that the AO has not rejected the books of accounts and has accepted the returned income for making the additions u/s.143(3) of the Act. The books of accounts and turnover of assessee has been accepted by the TNVAT department also. This issue has been decided in favour of the :-4-: ITA. No: 3109/Chny/2024 assessee at Hon’ble Vishakapatnam Tribunal in Hirapanna Jewellers (TS-361-ITAT-2021(VIZ)) and deleted the additions made on account of cash deposit as unexplained. Further, the assessee also stated that as per the Specified Bank Notes (cessation of Liabilities) Act 2017 dated 28.02.2017, the appointed day means 31st Dec 2016 and hence the SBNs were ceased to be accepted only from 31.12.2016 and hence the SBNs deposited is also a legal tender.
Further, the assessee stated an amount of Rs.13,972/- recovered from the employees towards contribution to PF & ESI was paid after the due dates as per the relevant Acts, however paid before filing the return of income and needs to be deleted.
On perusal of the submissions of the assessee, the ld.CIT(A) passed an order dated 25.04.2024 stating that the assessee has mentioned that the source is from the credit sales and also the turnover has been accepted by the TN VAT department but not furnished any of the evidence including the stock, purchases and sales details and confirmed the additions made by the AO by holding as under:
“10.0) The contention of the appellant is not acceptable for the following reasons: 10.1) The AO in his assessment order has sought the details of total cash deposits made during the year including the cash deposits during demonetization period. This could be very well evidenced in para 2 of the assessment order, wherein the AO has requested to furnish details of source of cash deposits made in the bank accounts of the assessee, during the period of demonetization and during the year, with evidences. Hence, the contention of the appellant that the AO committed factual error by :-5-: ITA. No: 3109/Chny/2024 making the discussion about the “SBN Currencies” but proceeded to make addition of “entire Cash deposited” during demonetization period commencing from 09.11.2016 to 31.12.2016 is not correct. 10.2) The appellant has submitted that when the returned Turnover has been accepted under the VAT proceedings of the Local Tamil Nadu VAT Act there cannot be any addition for the deposit of demonetized currencies. However, the appellant has not furnished any evidence in the form of proceedings of VAT, details of sales effected, nature of sales effected in course of appellate proceedings. Mere submission of the information without evidence would not prove the appellant’s claim as true. In absence of Copy of VAT Order, the claim of the appellant remains unverified. 10.3) The appellant has relied on the Judgement of Hon’ble ITAT, Visakhapatnam in the case of Hirapanna Jewellers in for the AY 2017-18, dated 12.05.2021. This case solely relied on cash sales and also the fact that such cash sales were included in its books of accounts and also offered for tax. However, in the instant case, the appellant simply submitted that the source for deposits were on account of credit sales. If the deposits were on account of credit sales, from which date the same remained unpaid and when was the amount received from the customers. No details whatsoever were furnished with regard to credit sales. Further, the appellant has not also not furnished any details with regard to opening stock, purchases made, sales effected and closing stock for the year ending 31.03.2016. In view of the same, the contention of the appellant that the deposits were made out of credit sales but without any corroborative evidence cannot be accepted and this ground is dismissed.” Aggrieved by the order of the ld.CIT(A) the assessee challenged the same before us.
The ld.AR submitted that the proper books of accounts have been maintained and the same was audited by a chartered accountant u/s.44AB of the Act and submitted to the department along with the return of income filed has not been considered by both the AO and ld.CIT(A). The AO in his assessment order has made an addition of SBNs cash deposit of Rs.15,19,500/- and also other currencies of Rs.14,58,000/- deposited during the demonetisation period. Further the ld.AR argued that the AO has not rejected the books of accounts and has accepted the returned income for making the additions :-6-: ITA. No: 3109/Chny/2024 u/s.143(3) of the Act. The ld.AR also submitted that the books of accounts and turnover of assessee has been accepted by the TNVAT department also. In support of his arguments the assessee filed a paper book having 42 pages consisting of Reply filed before AO, Cash deposit slips during the demonetisation period, Cash deposit and Cash sales – Comparison chart, Reply filed before CIT(A), Audited Financials, Audit report u/s.44AB and the Specified Bank Notes (cessation of Liabilities) Act, 2017.
Further, the ld.AR advanced the argument by stating that the issue of cash deposit of SBNs has been decided in favour of the assessee at Hon’ble Vishakapatnam Tribunal in Hirapanna Jewellers (TS- 361-ITAT-2021(VIZ)) and deleted the additions as these deposits are made out of business receipts. Further, the ld. AR also stated that as per the Specified Bank Notes (Cessation of Liabilities) Act 2017 dated 28.02.2017, the appointed day means 31st Dec 2016 and hence the SBNs were ceased to be accepted only from 31.12.2016 and hence the SBNs collected and deposited is also a legal tender.
Further, the ld. AR stated that an amount of Rs.13,972/- recovered from the employees towards contribution to PF & ESI was paid after the due dates as per the relevant Acts, however paid before filing the return of income and needs to be deleted.
:-7-: ITA. No: 3109/Chny/2024 9. Per contra, the ld.DR relied on the orders of the lower authorities and prayed for confirming the same as there is no infirmity in the order of the ld.CIT(A).
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The fact with regard to the impugned dispute are that the assessee has deposited a sum in specified bank notes and other currencies to the tune of Rs.29,77,500/- (SBNs are Rs.15,19,500/-) during demonetization period to the bank account. It is admitted from the records that the assessee is engaged in Trader in Textiles, readymade Garments. The case was selected for scrutiny to verify the source for cash deposited and called for certain details. The assessee deposited cash of Rs.29,77,500/-, after announcement of demonetization by Government of India on 08.11.2016. The assessee deposited cash out of sale proceeds of readymade garments and textiles collected from its customers and from sundry debtors. In response to notice u/s.142(1) of the Act, the assessee had furnished before the AO the audited financials, Audit report u/s.44AB of the Act, bank statements for the financial year 2015-16 & 2016-17, ledger copies of unsecured loan, Trade creditors ledgers, Overdraft Account statement of bank, cash deposit challans of demonetisation period, Other ledgers accounts and also turnover shown in the TNVAT act. The assessee has maintained proper books of accounts which are subjected to tax :-8-: ITA. No: 3109/Chny/2024 audit u/s. 44AB of the Act. The assessee also submitted the month wise abstract of cash deposit and cash sales for the F.Y. 2015-16 and 2016-17, showing no abnormality in the cash deposits compared to the increased turnover. These books of accounts, statements and other documents furnished by the assessee before the lower authorities, which have not been disputed nor rejected. The books of accounts of the assessee have been accepted by the lower authorities while framing the assessment and not rejected by pointing out any defects.
On perusal of the records and facts and circumstances of the case, we are of the considered opinion that when the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation, which is impermissible in law. The cash sales made by the assessee have been credited in the books of accounts and the same form part of the assessee’s cash book. On these facts, it could be very well said that the assessee’s claim was backed up by relevant evidences. Thus, the assessee has discharged the burden of proving the source of the cash/SBN deposited in the bank and the Assessing Officer failed to rebut the same. The cash deposit of Rs.29,77,500/-, relied upon by the Assessing Officer to take an adverse view is not backed up by relevant evidence/material and therefore the action of AO and the ld.CIT(A) cannot be :-9-: ITA. No: 3109/Chny/2024 countenanced. It is trite law that no addition could be made merely on the basis of suspicion, conjectures and surmises. Moreover, since cash generated out of sales has been credited in the books of accounts, the provisions of section 69A could not be invoked in the present case. The assessee’s reliance on the coordinate bench decision in the case Hirapanna Jewellers (TS-361-ITAT-2021(VIZ)) which is identical to the present facts are taken into consideration.
Further, the coordinate bench decision in the case of Smt. Durga Devi Mundhra vs. ITO in dated 25.04.2024 is applicable to the present case on hand, wherein the Tribunal held as under: “6. We are of the considered opinion that when the sale has been reflected in the books of accounts and offered to tax, adding the same again would amount to double taxation which is impermissible in law. The cash sales proceeds have been credited in the books of accounts and the same form part of assessee's cash book. On these facts, it could very well be said that the assessee's claim was backed up by sufficient documentary evidences. The allegation of Ld. AO is that such abnormal sales could not be achieved by the assessee immediately upon announcement of demonetization by the Government. However, such allegations are bereft of any concrete evidence on record. It is trite law that no addition could be made merely on the basis of suspicion, conjectures and surmises. In the present case, the assessee has duly discharged the burden of establishing the source of cash deposit and the onus was on Ld. AO to disprove the same. However, except for mere allegation and few statistics, there is nothing on record to support the conclusions drawn by Ld. AO that the cash deposited by the assessee was her unaccounted money. There is no finding by Ld. AO that any particular sales affected by the assessee exceeded threshold limit which cast an additional obligation on the assessee to obtain requisite particulars from the customers. Since cash generated out of sales has been credited in the books of accounts, the provisions of Sec.69A could not be invoked in the present case. Therefore, on the given facts, the impugned :-10-: ITA. No: 3109/Chny/2024 additions are not sustainable. By deleting the same, we allow corresponding grounds raised by the assessee.” Therefore, on the given facts and circumstances, the impugned additions are not sustainable in the eyes of law and hence, we are of the considered view that the action of the ld.CIT(A) in confirming the addition cannot be accepted and hence we delete the addition of Rs.29,77,500/- by allowing the related ground of the assessee.
Further, in respect of the addition of Rs.13,972/- recovered from the employees towards contribution to PF & ESI and was paid after the due date as per the relevant Acts, the ld.AR has not pressed this ground and hence this ground is dismissed as not pressed.