GOPAL KRISHAN,VILL AMTRAR vs. INCOME TAX OFFICER , WARD-DHARMSHALA
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the assessee had consistently followed the business model of collecting money from small depositors and transferring it to the bank for several years, and the department had accepted this modus operandi in the past. Since no new material was presented to justify a deviation, the addition was not justified.
What were the facts?
The Assessee, acting as a Business Correspondent for Punjab National Bank, filed his return for AY 2017-18. The AO, after issuing notices and receiving limited response, made ex-parte additions for demonetization deposits and other deposits, treating them as unexplained cash credits. The CIT(A) upheld the addition for demonetization deposits but deleted the other addition.
What were the issues?
Whether the addition of Rs. 10,59,980/- made by the AO under Section 69A as unexplained cash credits for demonetization deposits is justified, given the assessee's role as a Business Correspondent and the department's past acceptance of the modus operandi.
Which sections of the Income-tax Act were involved?
Section 143(2),Section 142(1),Section 144,Section 69A,Section 115BBE,Section 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH “B”,
Before: SHRI. RAJPAL YADAV, VP &SHRI. KRINWANT SAHAY, AM
Order
PER KRINWANT SAHAY, AM:
This is an appeal field by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 06/09/2023 pertaining to A.Y. 2017-18.
In the present appeal, Assessee has raised following grounds:
1. The CIT(A) has erred in law and in facts in confirming the assessment order passed by the AO assessing the total income at Rs. 13,56,070/-as against returned income of Rs. 2,96,090/-
2. That the CIT(A) erred in confirming the action of the AO based upon surmises and conjecture without there being any evidence contrary to the contention of the assessee which is duly supported by documents.
2 3. That the CIT(A) has erred in confirming the addition of Rs. 10,59,980/- being cash deposited in bank account without appreciating that the said cash was part of the cash deposits made by the general public during demonetization, accepted by the assessee in the capacity of the Bank Business Correspondent/Facilitator, which were further duly transferred from the assessee's bank account to each depositors account by the Punjab National Bank.
Briefly the facts of the case are that The Assessee, Shri Gopal Krishan, filed his return for AY 2017-18 declaring an income of Rs. 2,96,090/-. The case was selected for scrutiny, and the Assessing Officer (AO) issued multiple notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961, seeking explanations for cash deposits totaling Rs.10,59,980/- during the demonetization period and Rs. 41,46,547/- in other deposits. The Assessee failed to respond to these notices. Thereafter, the AO completed the assessment ex-parte under Section 144, making two additions: (i) Rs. 10,59,980/- under Section 69A as unexplained cash credits during demonetization, and (ii) Rs. 1,18,565/- by applying a 10% profit rate on the remaining deposits.
Against the order of the Ld. AO the assessee went in appeal before the Ld. CIT(A). The CIT(A) upheld the addition of Rs. 10,59,980/- under Section 69A, noting the Assessee’s non- compliance and failure to substantiate the source. However, the CIT(A) deleted the Rs. 1,18,565/- addition, holding that the AO provided no rationale for applying the 10% profit rate. The appeal was partly allowed.
3 5. Against the order of the Ld. CIT(A) the assessee is in appeal before us.
During the course of hearing the assessee submitted that he deposits during demonetization amounting to Rs. 10,59,980/- and other transactions amounting to Rs. 41,46,547/- pertained to his role as a Business Correspondent for Punjab National Bank (PNB).The deposits were made on behalf of clients and immediately transferred to their accounts, hence not his income.
Per contra, the Ld. DR relied on the order of the lower authorities.
We have heard the rival contentions and perused the material available on the record. 8.1. Ground Nos. 1 and 2 are general in nature, therefore, do not require adjudication. Accordingly, the same are dismissed.
Ground No. 3 is against the confirmation of addition of Rs. 10,59,980/- being cash deposited in bank account.
We have considered the findings recorded by the Ld. AO in the assessment order, as well as those of the Ld. CIT(A) in the appellate order. 10.1 During the course of the proceedings before us, the learned Counsel for the assessee submitted a statement of fact on this issue, which is reproduced below: The Appellant is a Business Correspondents Agent (BCA) for Punjab National Bank. The Appellant filed his Income Tax Return for FY 2017-18, declaring Income of Rs., 2,96,090/- on 26/08/2019. The Appellant’s case was selected for scrutiny 4 and notice under section 143(2) of Income Tax Act, 1961 was generated through an online system of the Income Tax Department. Notice u/s 142(1) of the IT Act, 1961 along with the detailed questionnaire was issued on 19.08.2019. Again notice u/s 142(1) of the IT Act, 1961 along with the detailed questionnaire was issued on dated 10.10.2019. After a series of Show Cause Notices and limited response from the Appellant the AO issued the Assessment Order ex-parte on 18/12/2019. The AO in the Assessment Order held that the deposited money of Rs. 10,59,980/- being cash deposits during the demonetization period, is added to taxable income of the assessee as un-explained cash credits. The addition was made as per provisions of section 69A of Income Tax Act, 1961 and was added to the taxable income subject to tax as provisions of section 115BBE of IT Act, 1961 (Para 2 of Assessment Order), Another addition of Rs. 1,18,565/- was made by the AO which has been deleted by the Order u/s 250 of Income Tax Act, 1961. Being aggrieved by the findings of the AO the Appellant filed an Appeal with the Commissioner of Income Tax (Appeals), NFAC, Delhi. The Appellant’s written submission for the proceedings before the Ld. Commissioner (Appeals) are annexed herewith and market as Annexure-3. The Ld. CIT(A) passed the impugned order and upheld the ex-parte decision of the Ld. AO which is the subject matter of the instant Appeal.
10.2 We find that the assessee is engaged in the business of acting as a Bank Business Correspondent/Facilitator. In this line of business, the assessee collects money from small depositors and deposits it into a bank account, subsequently transferring the amount to the lead bank after deducting a certain percentage as commission, as permitted by the bank. As submitted by the learned Counsel for the assessee that this business model has been followed by the assessee for several years, and the Department has consistently accepted both the assessee’s reported income and the modus operandi—i.e, collecting money from small depositors, depositing it into the bank account, and eventually transferring it to the lead bank.
10.3 We observe that the order passed by the Ld. AO in this case is an ex parte order, and the Ld. CIT(A) has relied upon the same while deciding the issue against the assessee. After hearing the arguments 5 of the Ld. Counsel for the Assessee during the proceedings before us, and upon perusal of the statement of facts, we find that the assessee has been engaged in this line of business for several years, and the Department has consistently accepted the modus operandi followed by the assessee during the year under consideration. No new material has been brought on record either by the AO or by the Ld. CIT(A) to justify any deviation from the past practice accepted by the Department. Therefore, there is no justification for disturbing the settled position. Accordingly, the assessee’s appeal on this issue is allowed.
In the result, appeal of the Assessee is partly allowed. Order pronounced in the open Court on 11/04/2025.
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