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Facts
The assessee, engaged in trading motorbikes and petrol/diesel, filed a return and was selected for scrutiny. The AO added cash deposits during demonetization and advances received, treating them as unexplained income. The CIT(A) upheld these additions.
Held
The Tribunal held that the additions made by the AO on account of cash deposits and advances were not sustainable. The AO failed to point out any deficiencies in the assessee's books of accounts and relied solely on a notification which was not directly applicable to the Income Tax Act's assessment.
Key Issues
Whether cash deposits and advances accepted during demonetization period can be treated as unexplained income without proper verification of accounts and applicability of relevant notifications.
Sections Cited
250, 139(1), 68, 115BBE, 145
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCH “B”, JAIPUR
Before: SHRI GAGAN GOYAL & SHRI NARINDER KUMAR
This appeal by assessee is directed against the order of NFAC, Delhi dated 28.09.2024 passed u/s. 250 of the Income Tax Act, 1961 (in short ‘the Act’). The assessee has raised the following grounds of appeal: -
The Ld. CIT (A), NFAC has erred on facts and in law in confirming the addition of Rs.53, 63,756/- u/s. 68 of the Act by treating the cash deposit in the bank account
during demonetization period received against sale of petrol & diesel as unexplained income of the assessee.
2. The Ld. CIT (A), NFAC has erred on facts and in law in confirming the addition of Rs. 16, 02,875/-u/s. 68 of the Act by treating the advance received from various persons as unexplained income of the assessee by not admitting the additional evidence filed by the assessee.
The Ld. CIT (A), NFAC has erred on facts and in law in taxing the alleged unexplained cash deposit in the bank account and alleged unexplained advances u/s. 115BBE @ 60% instead of taxing the same @ 30% by ignoring that section 115BBE substituted by Taxation Laws (Second Amendment Act), 2016 which received the assent of President on 15.12.2016 and made applicable from 01.04.2017 is applicable from AY 2018-19 and not for AY 2017-18.
4. The appellant craves to alter, amend and modify any ground of appeal.
Necessary cost be awarded to the assessee.
The brief facts of the case are that the assessee is engaged in the business of trading of motor bikes in the name and style of M/s. Dhariwal Motors since year 2007 at Bhawani Mandi as an authorised dealer of TVS Motor Bikes. From July 2016 he became an authorised dealer of M/s. Essar Oil Ltd. for purchase and sale of petrol and diesel under the name and style of M/s. Dhariwal Filing Station. The assessee filed his return of income on 31.10.2017 u/s. 139(1) of the Act declaring total income at Rs. 7, 09,230/-. The case of the assessee was selected for complete scrutiny under CASS. During the year under consideration the assessee has deposited Rs. 1, 16, 66,320/- between 09.11.2016 to 30.12.2016. Out of total Rs. 1,16,66,320/-, Rs. 38,63,744/- was the opening cash balance hence an amount of Rs. 53,63,756/- (Rs. 1,11,00,230 – Rs. 38,63,744/-) was added back u/s. 68 r.w.s. 115BBE of the Act relying on the notification issued by the Govt. of India vide dated: 08.11.2016. As per this notification only public sector oil marketing company’s distributors are exempted for accepting demonetized currency, i.e. Specified Bank Notes (SBNs). During the year under consideration other than the issue mentioned (supra), the assessee’s other proprietary concern M/s. Dhariwal Motors dealing in two wheelers also accepted Rs. 16,02,875/- from 95 persons and the same was also treated same way and added back u/s. 68 r.w.s. 115BBE of the Act. The assessee being aggrieved with the same additions as discussed (supra) preferred an appeal before the Ld. CIT (A), who in turn confirmed the order of the AO and dismissed the appeal of the assessee. The assessee being further aggrieved preferred the present appeal before us.
3. We have gone through the order of the AO, order of the Ld. CIT (A) and submissions of the assessee alongwith grounds taken before us. The first addition of Rs. 53,63,756/- was made on account of acceptance of SBNs by the assessee being an authorised dealer of a private oil marketing company relying on the Govt. notification mentioned (supra). We have gone through the order of the AO and the Ld. CIT (A) it is observed that there are no comments on the books of accounts maintained by the assessee, i.e. found to be reliable and no deficiency pointed out either in specific or made out the case for application of the provisions of section 145 of the Act. It is pertinent to mention here that sales made by the assessee were out of the stock available during the demonetization period and there is no question on availability of stock and sales thereon. If one goes by the logic of addition adopted by the AO, it will be tantamount to double addition, i.e. profit element declared in the sales offered for tax and then by virtue of Govt. of India notification again addition u/s. 68 of the Act.
A pragmatic view must be taken by the AO, as during the demonetization period, no doubt public was spending in SBNs as far as possible and railway tickets, petrol pumps and medicine shops were the main destinations as the same are in exempted categories. If the assessee denies accepting the SBNs, certainly he will lose the business, and the customers will go to the neighbouring filing stations. This was not the agenda of demonetization; the agenda was well defined and circulated amongst the public also. As far as violation of the notification issued by the Department of Economic Affairs, Ministry of Finance, Govt. of India, dated: 08.11.2016 is concerned, it is no where concerned with the Income Tax affairs and the max the AO may report the same to the regional office of the Reserve Bank of India (R.B.I.) for appropriate action, if any.
5. The assessee being governed by the strict rules and regulation for dealing with highly inflammable items and duly registered with the State Govt.’s District Supply Officer, Jhalawar (Copy of Registration Attached), it can be reasonable assumed that other than the State VAT Deptt. And Income Tax Deptt., the assessee is subject to verification of stock, purchase, sales etc. by the office of the District Supply Officer also. In addition to this, usually in any district the filing stations are the main source of organised VAT collection and subject to strict scrutiny by the VAT Deptt. It is astonished that wherever we dealt with the matter pertaining to demonetization period, the AO always tried to put results in doubts by virtue of fluctuation in sales, opening cash balance etc. But, here in this matter no such working has been done by the AO, which may justify the addition based on factual working done by him. Here he simply relied on the notification mentioned (supra) and made the additions without pointing out any deficiency or error in the books of accounts maintained by the assessee. In view of the above, the order of the AO is found to be non-sustainable ion the eyes of law, hence ground no. 1 raised by the assessee is allowed and the AO is directed to delete the addition of Rs. 53, 63,756/- made u/s. 68 r.w.s. 115BBE of the Act.
Next ground of appeal pertains to the addition of Rs. 16, 02,875/- again made u/s. 68 r.w.s. 115BBE of the Act on account of accepting advances by his two-wheeler dealership unit. It is observed that this unit of the assessee dealing with sale and service of TVS brand motor bikes had cash in hand amounting to Rs. 9,99,573/- as on 30.09.2016 and cash in hand as on 08.11.2016 was Rs. 23,13,078/- The assessee claimed that this amount is advance received from the customers upto 08.11.2016. The assessee produced booking orders for purchase, books of accounts and invoice etc. for verification. It is further observed that there is no remarks made by the AO on documents produced by the assessee, rather his only objection on this issue was that no sales bill has been produced by the assessee against receipt of this amount by the assessee from 95 people amounting to Rs. 16,02,875/-. It is beyond anyone’s understanding that when the full amount has not been received and only partial amount has been received by the assessee, how he can issue sales bill to the customers. Secondly, it is also observed that the amounts received from these 95 persons was ranging between 5,000/- to 19,000/- and no motor bike is available in this price range, so it is certainly an advance only. No delivery of vehicle has been made alongwith partial payment of goods, how it can be fall in the category of sales and consequentially liable for issuance of sales bill, which can be produced for the verification of the AO.
7. For proper identification of the customers from whom the assessee received advance, he filed affidavits of these persons, copies of Aadhar Card, Booking Order and ledger accounts before the Ld. CIT (A) and he was duty bound to entertain the same complying with the Rule 46A of the Rules. But, instead of that he simply refused to accept the same, which is again against the principles of natural justice and established norms and procedures laid down by the law. Copies of the same produced before us and we have gone through the same and found the same to be in order. In view of this, orders of the authorities below are set aside and the ground no. 2 raised by the assessee is allowed with a direction to the AO deletion of addition of Rs. 16, 02,875/- made u/s. 68 r.w.s. 115BBE of the Act.
8. In view of the above, ground nos. 3, 4 and 5 became infructuous hence need no adjudication, hence the same are dismissed.
In the result the appeal of the assessee is allowed.
The Order is pronounced in the open court on the 17th Day of April 2025.