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Facts
The assessee, engaged as a Licensed Commission Agent dealing in vegetables, had cash deposits in bank accounts that were questioned by the AO. The AO made an addition of Rs. 15,90,300/- on account of these deposits, which was upheld by the CIT(A). The assessee appealed this decision.
Held
The Tribunal found that the opportunity provided to the assessee to furnish creditworthiness information was insufficient. The matter was restored to the AO for a denovo assessment to provide a reasonable opportunity to the assessee.
Key Issues
Whether the additions made by the AO under Section 68 of the Income Tax Act on account of cash deposits in bank accounts are justified, and whether the assessee was provided with adequate opportunity to present its case.
Sections Cited
250, 143(3), 143(3A), 143(3B), 68, 40A(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, LUCKNOW BENCH “SMC”, LUCKNOW
PER ANADEE NATH MISSHRA, A.M.: 1. The present appeal has been filed by the assessee against the impugned appellate order dated 10.09.2024 passed by the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre (NFAC), Delhi under section 250 of the Income Tax Act, 1961 (“Act”, for short) for the A.Y. 2018-19. The grounds of appeal
of the assessee are as under: -
1. The learned CIT(Appeal) and authorities below have erred in law and on facts in making additions of deposit of Rs.7,00,000/- in the bank account of the assessee and duly accounted in the cash book and books of account of the assessee.
2. The learned CIT(Appeal) and authorities below have erred in law and on facts in making additions of bank deposit of Rs.8,90,300/- in the bank account of the assessee directed by the customers of the assessee.
Such other relief as may be deemed fit in this case.”
In this case, assessment order dated 16/04/2021 was passed by the Assessing Officer (“AO”), u/s 143(3) read with sections 143(3A) & 143(3B) of the Act whereby the assessee’s Page 2 of 5 total income was assessed at Rs.38,75,110/-. In the aforesaid assessment order, an addition amounting to Rs.15,90,300/- was made on account of cash deposit in the bank account. The assessee’s appeal against the aforesaid addition was dismissed by the Ld. CIT(A) vide impugned appellate order dated 10.09.2024. The present appeal has been filed by the assessee against the aforesaid impugned appellate order dated 10.09.2024 of the Ld. CIT(A).
(2.1) At the time of hearing, there was no representation from the side of the appellant assessee. In the absence of any representation from the assessee’s side, the Ld. Departmental Representative for Revenue was heard. He relied on the orders passed by the AO and Ld. CIT(A).
(2.2) For the sake of clarity, the assessee filed a statement of facts before the Ld. CIT(A) are reproduced as under: -
“The appellant is an old assessee and has been engaged in the business as Licensed Commission Agent (from Krishi Utpadan Samiti, Kanpur) for dealing in vegetables mainly potato at Krishi Mandi at Chakkerpur Kanpur. The appellant sale potato on behalf of farmers/suppliers from various places from its office situated at Krishi Mandi, Chkkerpur. The sale is being made through negotiations or auction at Mandi or through various sub-agents at various locations in Uttar Pradesh. Due to the nature of the business of the appellant, majority of sales were made in cash. Since, the appellant is acting as an agent, it is not accounting for purchase and sale of potato in its books but showing only commission earned on such sale as revenue. During the year, the appellant earned commission of Rs. 47,34,791/- and declared total taxable income of Rs. 22,84,810/-. The appellant was maintaining regular books of accounts which were also audited by a chartered accountants and the appellant submitted auditors’ report in form 3CD along with return of income. The case of appellant was selected for scrutiny on account of cash deposits in the bank accounts. The appellant submitted the source of deposits in the bank accounts and submitted cash books, bank books and other records during the assessment proceedings. The learned AO accepted the source of cash deposited in bank accounts considering the nature of the business of the assessee but doubted certain deposits of cash in the bank accounts as these were not routed through the cash book on the specified date of deposits and issued show cause notice to add these deposits as unexplained cash credit u/s 68 of the Act. The appellant submitted a detailed reply to the show cause notice and explained each and every Page 3 of 5 entry of deposits doubted by the AO and submitted evidence to prove the genuineness of the same. It was submitted to the AO that:
1. 1. Except for entry of cash deposit of Rs. 7,00,000/- on 17/11/2017 with SBI, all other deposits in the bank accounts with SBI and BOI were directly made by my agents/ customers directly in the various branches of the respective banks located in the areas where those agents/customers were operating. The appellant submitted details and evidence for each and every deposits questioned by the AO.
9. Regarding deposits of Rs. 7,00,000/- on 17/11/2017, it was submitted that the proprietor of the firm had taken the aforesaid amount on 17/10/2017 for getting it deposited in the bank account of the firm but due the same could not be deposited as he suffered from viral fever and the money remained with him. The same was deposited by him in the bank account of the firm on 17/11/2017. The appellant had again submitted the copy of cash book for the relevant period and explained that the amount shown in the cash book as deposited with bank on 17/10/2017 was not appearing in the bank statement as the same was not deposited on that date but was deposited on 17/11/2017. Thus the source of deposit in the bank account was available cash balance as per cash book which had been duly accepted by the learned AO and hence the same could not be added to the income u/s 68 of the Act. The learned AO had rejected the submissions and evidences of the appellant on frivolous grounds. The learned AO the evidence and explanation regarding deposits of cash in the bank accounts of appellant directly by the customers/agent of the appellant at the outstation branches of the bank stating that the appellant had himself admitted in its earlier reply that the source of cash deposit in the bank account is on account of sale proceeds which were collected by it and deposited in the bank account. The learned AO failed to appreciate that the other deposits in outstation bank accounts were also on account of the sale proceeds which had been directly deposited by the agents/customers in the appellant’s bank accounts at outstation location. The appellant had submitted copy of customers/agents ledger accounts wherein the sale of goods as well as the aforesaid receipts was duly accounted for. It is also pertinent to note that in all the alleged cases of cash deposits, the same Were deposited in the outstation branches directly by the customers/agents and accordingly the same were not routed through the cash book maintained by the appellant as the same were not received by it but those had been 8counted for through bank vouchers whereby the same were debited to the bank accounts and credited to the customers accounts. The fact that the deposits were made at outstation branches where the customers/agents of the appellant located also proved the genuineness of the transaction. The learned AO failed to appreciate that the facts in the present case and rejected the explanation of the appellant on irrelevant ground of disallowance in the hand of agents/customers u/d 40A (3) of the Act and due to non submission of confirmed copy of account with PAN. It is also pertinent to note that the learned AO had accepted the deposits of cash of Rs. 7,61,14,500/- out of total cash deposits in the bank accounts of Rs. 7,77,04,830/- as genuine deposits out of sale proceeds as all these entries were routed through cash book and cash contra voucher but rejected the explanation of deposits of Rs. 8,90,300/- to be from sale proceeds merely Page 4 of 5 on the grounds that those were not routed through cash book or cash contra voucher but accounted for through bank vouchers. Further, the learned AO had rejected the explanation offered by the appellant in respect of deposit of Rs. 7,00,000/- in the bank account by just observing that the cash book maintained by the appellant is not reliable whereas he himself had accepted all other entries appearing in the cash book. The addition of Rs. 15,90,300/- in respect of certain entries of deposits in bank accounts u/s 68 of the Act is totally unjustified and liable to be deleted.” (3) We have heard the Ld. CIT-DR for Revenue. We have perused the materials available on records. We find that the Assessing Officer as well as Ld. CIT(A) was rejected the claim due to non-furnishing of information by the assessee. It is brought to our my notice that the time provided in the summons was too short and this was not reasonable opportunity for providing creditworthiness of the person from whom the aforesaid cash was taken by the assessee. It is also notice that the issue in dispute regarding the aforesaid addition of Rs.15,90,300/- should be set aside to the file of the Assessing Officer with a direction to pass fresh assessment order in accordance with law after providing reasonable opportunity to the assessee.
(3.1) In view of the foregoing, and as representative of Ld. DR is in agreement with this, in the specific facts and circumstances of the present case; the impugned order dated 10.09.2024 of the Ld. CIT(A) is set aside and the issue regarding addition of Rs.15,90,300/- is restored back to the file of the Assessing Officer with a direction pass denovo assessment order in accordance with law after providing reasonable opportunity to the assessee. All grounds of appeal are treated as disposed of in accordance with the aforesaid direction.