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Income Tax Appellate Tribunal, KOLKATA ‘B’ BENCH, KOLKATA
Before: Sri Manish Borad & Sri Sonjoy Sarma
order
: May 17th, 2022 ORDER
Per Manish Borad, Accountant Member:
1. This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2014-15 is directed against the order of ld. Pr. Commissioner of Income-tax-12, Kolkata [in short ld. “PCIT”] dated 20.03.2019 which is arising out of the assessment order framed u/s 143(3) of the Income Tax Act, 1961 (in short the “Act”) dated 22.11.2016.
The assessee is in appeal before the Tribunal raising the following grounds: “
1) That the order passed u/s 263 by the Ld. CIT is arbitrary, illegal, bad in law and without jurisdiction. 2) That the Ld. CIT failed to appreciate the fact that the AO passed the order after proper scrutiny and after examining all the issues and applying his mind to the issues and thereby erred in setting aside the assessment order by invoking section 263 of the IT Act 1961. 3) That the Ld. CIT erred in setting aside the assessment order even without holding that the assessment so passed is erroneous and prejudicial to the interest of revenue and thus was wrong in initiating the proceedings u/s 263 of the I T Act 1961. 4) That the Ld. CIT erred in completely ignoring the enquiry already made by the ld. AO by resorting to notices u/s 133(6) of the IT Act 1961 and based his conclusion that AO should resort to enquiry u/s 133(6) of the IT Act 1961 which demonstrate I.T.A. No.: 1135/Kol/2019 Assessment Year: 2014-15 Prem Ratan Chandak. that the Ld. CIT was predetermined to set aside the assessment order and hence the entire proceedings u/s. 263 are bad in law. 5) That the appellant craves leave to submit additional grounds of appeal, if any, at or before the time of hearing and/or alter, modify reframe any grounds of appeal at or before the time of hearing.”
3. When the case was called for, none appeared on behalf of the assessee. A perusal of the order sheet shows that there is no appearance of the assessee on the date of hearing fixed on 17.12.2019, 13.07.2020, 26.08.2020, 14.02.2022 and 22.03.2022. However, notice was sent by RPAD and was received back unserved. It seems that the assessee is not interested in pursuing the appeal. We, therefore, decide to adjudicate the issues raised in this appeal with the assistance of the ld. D/R and the records available before us.
Brief facts of the case as called out from the records are that the assessee was engaged in business. Income of Rs. 4,06,392/- was declared in the return of income filed on 30.11.2014. As per assessment order, the assessee maintains two trading business sole proprietorship concerns under the name of Shree Maheswari Trading Co. and Radiant Agencies. Assessment was completed at the returned income.
Subsequently, ld. PCIT on examining the assessment records observed that the issue of source of cash deposit in bank remained to be examined by the ld. Assessing Officer (in short ld. “AO”). The following show cause notice was issued to the assessee:
"From the assessment order as well as records & information available an record for the A.Y. 2014-15, it has been noticed that the following aspects of the return of income/computation of income were not properly looked into by the A.O. concerned:- On perusal of the records, it was observed that the type of the scrutiny was 'Limited’ and the reason was 'Cash deposit in the savings bank account(s) is more than the turnover. From the records, it was seen that the assesses has two proprietorship concerns viz. Shree Maheswari Trading Company’ and 'Radiant Agencies' and the total turnovers shown by the assessee were Rs. 62,11,178/- & Rs. 46,88,924/- respectively as can be seen from audited Trading and P&L accounts. On perusal of ITS-details, it was seen that there was total cash deposit of Rs. 78,00,560/- during the year in two of the bank accounts of the assessee, namely account no. 16588 maintained with IDBI Bank, Jarsuguda and account no. 43838 with IDBI Bank, Sambalpur as reported in AIR information. During the course of assessment I.T.A. No.: 1135/Kol/2019 Assessment Year: 2014-15 Prem Ratan Chandak. proceedings the assessee was asked about the source of such cash deposits which are as follows: IDBI 16588, JHARSUGUDA Details of deposits 31.03.2014 Particulars Amount (Rs.) Debtors 2,23,000/ - Bank interest 652/- Out of cash withdrawn from Union Bank of India No. 28064 8,94,6O6/- Out of cash withdrawn from IDBI A/c No. 16588 1,27,000/ - Out of cash withdrawn from State Bank 6006 1,41,000/- Out of cash withdrawn from IDBI A/c No. 43838 7,20,000/- Proprietor (Mr. PR Chandak) 70,000/- Total 21,75,652/- Similarly, the break-up of source of cash deposit in IDBI account no. 43838, Sambalpur was as follows: IDBI 43838, SAMBALPUR Details of deposits 31.03.2014 Particulars Amount Cash (Collection from Debtors of SMTC) 49,23,560/- Out of cash withdrawn from State Bank of India 6006 6,92,000/- Out of cash withdrawn from Union Bank A/c No. 28064 60,000/- Proprietor (Mr. PR Chandak) 8,15,000/- Bank interest 325/- Total 64,90,885/- From the above details of cash deposits the following facts are discernible:- (a) As per the explanation of the assessee, major source of these deposits was the corresponding cash withdrawal from the respective bank accounts from time to time. There was a frequent withdrawal of cash from different bank accounts which was subsequently deposited in the bank accounts. However, no explanation was found on record as to what was the purpose of such frequent withdrawal There is no plausible reason available on record as to justify the frequent withdrawal of cash from one account and deposits of the same in the other accounts. Further; why any businessman would keep on withdrawing cash from his bank accounts simply for the sake of depositing the same on later dates. (b) It was seen that cash of Rs. 26,34,000/- was withdrawn from different bank accounts and deposited in the above mentioned two IDBI bank accounts. was observed here also that there was frequent withdrawal of cash from different batik accounts which was subsequently deposited in the IDBI bank accounts. However, from the records, it was not clear as to what was the source of cash in such bank accounts from which the withdrawal was made? (c) The source of cash deposit of Rs.8,85,000/- was stated to be of the Proprietor (Mr. PR Chandak). But the audited balance sheet as on 31.03.2014 submitted by the assessee, did not justify the source of such cash deposits since there was cash withdrawal of Rs. 4,00,000/- only (Radiant Agencies) during the year under I.T.A. No.: 1135/Kol/2019 Assessment Year: 2014-15 Prem Ratan Chandak. consideration. Hence, the sources of cash deposit of Rs. 8,85,000/- remained unexplained. Further, there was capital introduction of Rs. 5,50,000/- (Shree Maheswari Trading Company) whose source was not clear. (d) Besides the above, the source of cash deposit of Rs. 49,23,560/- was claimed to be collection from. debtors of SMTC but no details were available on record in this respect to substantiate the source. Similarly, Rs. 2,23,000/- was claimed to be received from debtors but no details of debtors were available on record to justify the same. (e) Finally, the source of cash deposit of Rs. 977/- was explained to be bank interest. But it was not clear as to how the assesses received bank interest in cash. Complete absence of the examination/verification regarding the above aspects has rendered the assessment erroneous and prejudicial to the interest of the revenue which deserves to be revised u/s 263 of the IT. Act 1961. In this regard, I request you to appear either personally or through authorised representative before the undersigned 05.12.2018 at 12.30 and any document/evidence/ books of accounts/ explanation to show why the action u/s 263 of the I.T. Act 1961 does not lie in this case on the aforesaid ground. Failure in your part will lead the undersigned to decide the case on merit without giving any further opportunity of hearing.”
During the revisionary proceedings the assessee filed detailed reply and stated that the ld. AO has made necessary enquiries but ld. PCIT was not satisfied and he directed the AO to make necessary investigation on the above issue of source of cash deposit in bank account and pass a fresh assessment order recomputing the assessee’s income.
Aggrieved, the assessee is in appeal before this Tribunal. There is no appearance on behalf of the assessee. Ld. D/R supported the order of the ld. PCIT.
We have heard rival contentions and perused the records placed before us. Through this appeal the assessee has challenged the order u/s 263 of the Act being arbitrary, illegal, bad in law and without jurisdiction. From going through the show cause notice, we find that the bone of contention as observed by the ld. PCIT is regarding the source of cash deposit in savings bank account which are alleged to be more than the assessee’s business turnover. As observed in the impugned order, ITS details shows that there was total cash deposit of Rs. 78,00,560/- during the year in two bank accounts held in IDBI Bank bearing Nos. 16588 & 43838. We, further find I.T.A. No.: 1135/Kol/2019 Assessment Year: 2014-15 Prem Ratan Chandak. that during the course of revisionary proceedings, the assessee gave following details of the cash deposit and the source thereof: - “a) Frequent withdrawal of cash from different Bank Accounts: - As explained, collections from debtors were received through various salesmen who deposit the same into the different Bank Accounts for the convenience of accounting. Afterwards, these sums were withdrawn on lump sum basis as per requirement and deposited into other account, i.e., IDBI Account. From IDBI Account, these were transferred to the main account of the firm, IDBI 0815, from where payments to the vendors were made. As per the bank rule and practice, bank was imposing charges for depositing the cash into the current account beyond the limits allowed. So, more accounts, were opened to deposit cash into these accounts and money was transferred to the other account from where payments to vendor to be made. Due to the scarcity of money, I had to withdraw the funds available by way of collection from various debtors made by my Salesman, debtors and deposit the same into my IDBI Account. Moreover, the banks also favourably consider such transaction while processing application for credit facility. Rs.1,27,000/was the contra entry, means money was withdrawn from this account and deposited into this account. Rs. 8,94,000/was deposited out of cash withdrawal from Union Bank of India (Radiant agencies) for transfer to other bank accounts for making payment to the vendors and to avoid the bank charges. Rs.7,20,000/deposited into IDBI account no 16588 out a withdrawal from IDBI Account 43838 Rs.1,41,000/withdrawn from State Bank of India account to meet the emergency requirements of fund. b) Cash Deposit of Rs. 26,34,000 into IDBI account no. 16588 and IDBI Account 43838: - Out of the above sum you will find that Rs. 7,20,0007 deposited into IDBI account no 16588 out of withdrawal from IDBI Account 43838 which was collections from debtors of Shree Maheshwari Trading Company. Rs.8,94,000/+ Rs.60,000/were withdrawn from Union Bank of India. Due to scarcity of fund and requirement of payment to be made to the vendors, cash were withdrawn from Union Bank of India. The source of deposit in Union Bank of India was collection from debtors of Radiant Agencies. Rs. 6,92,000/was withdrawn from account with SBI where deposits were made from customers and kept to meet the emergency requirement of funds. Rs.1,27,000/-The source of fund in IDBI bank has already been explained in above. Rs. 1,41,000/-In the SBI account, collection from debtors were received and it also contained transactions from other bank accounts. c) Source of Deposit Rs. 8 85 000/-: - I.T.A. No.: 1135/Kol/2019 Assessment Year: 2014-15 Prem Ratan Chandak.
The above sum does not represent any cash deposit. It represents Rs. 8,15,000/- deposited into IDBI A/c 43838 out of IDBI A/c No. 16588 by way of clearing transfer and Rs 70,000/deposited into [DBI A/e 16588 from IDBI A/e No. 43838 by way of clearing, transfer. There was no cash transfer in the above two accounts but it represents interbank transfer from one to other account. As per following details: - 1.
From 16588 To 43838 Rs.80,000 on 4-7-13 2. From 16588 To 43838 Rs.1,00,000 on 17-7-13 3. From 16588 To 43838 Rs. 15,000 on 8-8-13 4. From 16588 To 43838 Rs.45,000 on 17-8-13 5. From 16588 To 43838 Rs.1,50,000 on 16-9-13 6. From 16588 To 43838 Rs. 1,00,000 on 24-9-13 7. From 16588 To 43838 Rs.75,000 on 29-11-13 8. From 16588 To 43838 Rs.1,50,000 on 27-3-14 9. From 16588 To 43838 Rs. 1,00,000 on 28-3-14 10. From 43838 To 16588 Rs.70,000 on 31-3-14 It can be verified from statement attached. The withdrawal from Radiant Agencies was utilized for introduction into Shree Maheshwari Trading Company. d) Source of cash deposit of Rs. 49,23,560 & 2,23,000: - As already explained that sales vary from Rs. 100 and above and most of the payment were received in cash and deposited into Bunk. Out of the above sum, payment of Rs. 1,41,160/was received directly from debtors by Account Payee Cheque, Bank Draft, RTGS, etc. and balance was from debtors of Shree Maheshwari Trading Company mostly. The sales of Shree Maheshwari Trading Company were as under: - Sales: 54, 18,477,85/- Output VAT: 7,92,699.98/- Total 62,11,177.83/- Which was much more than the collection of Rs. 2,23,000/- + 49,23,560/-and it was also well justified. e) Interest: - Rs. 997/- also does not represent any cash deposit but interest on SB account of Rs. 652/- + Rs 325/- Please also note that due to the nature of scrutiny being limited, the Learned Assessing Officer did not accept the other details and explanation of transactions into other bank accounts from where the transaction into these two accounts were made. All the transactions were well explained to the Learned Assessing Officer who also verified and examined them thoroughly with details, evidences and books Page 6 of 8 I.T.A. No.: 1135/Kol/2019 Assessment Year: 2014-15 Prem Ratan Chandak. of accounts and since nothing wrong or improper or adverse was found, he accepted and completed the assessment. There was no existence of erroneous into the assessment made and since no income had escaped assessment or excess or wrong deduction was claimed or sales was understated or expenses claimed wrongly, no prejudicial to the interest of revenue was committed. I, therefore request you to please not to initiate any proceedings u/s 263, and drop the same and oblige.
9. We, further find that in the body of assessment order it shows that ld. AO has dealt with the said issue observing as follows:
“3. During the year under consideration, the assessee maintained two trading business under the name of Shree Maheswari Trading Co. and Radiant agencies.
4. During the year under consideration it was observed that assessee made huge cash deposits at IDBI bank limited. Letter u/s 133(6) of the Act was issued to the bank for requisition « statement of details. Reply received from the bank appears that assessee maintained twa account and total cash deposit worth Rs. 21,25,000/- and Rs.56,75,560/- respectively. During course of proceedings the total deposit have been reconciled and found to be in order.”
From going through the above facts, we find merit in the grounds raised by the assessee and note that the source of cash deposit in the bank account held with IDBI has been examined by the ld. AO and after being satisfied with the details has accepted the source of cash deposits. Even before ld. PCIT, the assessee has given complete details about the frequent withdrawal of cash from different bank accounts and the source of cash deposit in both the bank accounts held with IDBI Bank. Ld. PCIT failed to find any error in the details filed by the assessee. The finding of the ld. PCIT seems to be general even after the assessee has given the complete details and the source of cash deposit. It makes sense that the ld. AO was obligatory to conduct enquiries into the source of deposits by issuing notice u/s 133(6) of the Act. We do not find any merit in such finding of ld. PCIT because ld. AO issued notice u/s 133(6) of the Act, called information from the bank, perused the audited financial statements of both the sole proprietorship concerns and after being satisfied that since the assessee sells the goods to retailers in the small villages, towns and markets of Sambalpur, Jharsuguda, Rourkela, Cuttack etc., the source of cash deposit is from sale of goods and in some cases from withdrawal of cash from one bank account and deposit into another.
I.T.A. No.: 1135/Kol/2019 Assessment Year: 2014-15 Prem Ratan Chandak.
We, therefore, under the given facts and circumstances of the case, are of the considered view that ld. PCIT erred in assuming jurisdiction u/s 263 of the Act and since proper enquiry have been conducted for the issue raised in the show cause notice and a permissible view has been taken by the ld. AO, the entire proceedings u/s 263 of the Act are bad in law. We, therefore, quash the impugned order passed by ld. PCIT and restore the order of the ld. AO passed u/s 143(3) of the Act dated 22.11.2016. Hence, all the grounds raised
by the assessee are allowed.
12. In the result, the appeal filed by the assessee is allowed. Kolkata, the 17th May, 2022. Sd/- Sd/- [Sonjoy Sarma] [Manish Borad] Judicial Member Accountant Member Dated: 17.05.2022 Bidhan (P.S.) Copy of the order forwarded to:
1. Prem Ratan Chandak, 9/12, 1st Floor, Lal Bazar Street, Kolkata-700 001. 2. PCIT-12, Kolkata. 3. CIT(A) 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata.