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Facts
The assessee, running a petrol pump, declared a total income of Rs. 7,51,930 for AY 2017-18. The Assessing Officer made an addition of Rs. 6,84,000 for unexplained money, disallowed Rs. 26,357 under Section 80C, and Rs. 64,761 for expenses, assessing total income at Rs. 15,27,000. The CIT(A) dismissed the appeal.
Held
The Tribunal held that the addition of Rs. 6,84,000 was not justified as the assessee had explained the nature and source of the cash received from debtors on 11/11/2016, which was permissible under the gazette notification. The disallowances for Section 80C and expenses were also set aside.
Key Issues
Whether the addition of Rs. 6,84,000 as unexplained money is justified, and whether disallowances under Section 80C and for expenses are valid.
Sections Cited
69A, 80C, 142(1), 271AAC(1), 270A(1), 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: SHRI GAGAN GOYAL, AM& SHRI NARINDER KUMAR, JM
vkns'k@ORDER PER: NARINDER KUMAR, JUDICIAL MEMBER .
On 28.08.2024, Learned CIT(A) dismissed the appeal filed by the assessee, while observing that there was no infirmity in the assessment order dated 23.12.2019 passed by the Assessing Officer, relating to the assessment year 2017-18. 2. Hence, this appeal by the assessee. 3. Argument heard. File perused.
Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO Present appeal is delayed by 42 days 4. At the outset, it may be mentioned here that as per deficiency note recorded by the Registry, present appeal came to be filed 24 days, after prescribed period of limitation. In this regard, the appellant-applicant has filed an application seeking condonation of delay pleading as under:- “1. After the demise of the assessee i.e. Late Prakash Chand Choudhary, all the responsibilities of business as well as family, lied in the hands of his wife i.e. Sandhya Choudhary (legal heir).
Sandhya Choudhary has 2 minor sons and 1 daughter and their responsibility lies with her only. The daughter of the assessee is studying in Delhi and Sandhya Choudhary needs to visit Delhi after Diwali also.
Due to all the above responsibilities alongwith Diwali occasion, Sandhya Choudhary could not approach her Counsel and hence appeal before your goodself could not be filed timely.
As soon as the legal heir of the assessee got to know about available remedy of filing Appeal before your goodself, she took necessary actions for filing the appeal at the earliest. Further, the delay in filing of Appeal is for 47 days only therefore keeping in view the above, the assessee would like to state that Rejection of Condonation Application would cause undue hardship to the assessee. In view of the above facts, you are requested to take a lenient view and kindly condone the delay in filing appeal.”
The application is supported by the affidavit by the appellant- applicant.
Ld. DR for the department has not controverted the averments put forth by the appellant-applicant in the said application.
Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO 7. Having record to all the facts and circumstances and the findings that the appellant-applicant had sufficient cause for non filing of the appeal within prescribed period of limitation, the delay in filing of the appeal is hereby condoned. Discussion on merits 8. Vide assessment order dated 23.12.2019, the Assessing Officer assessed total income of the assessee at Rs. 15,27,000/-, making an addition of Rs. 6,84,000/-, u/s 69A of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), and also disallowing a sum of Rs. 26,357/-, as regards deductions u/s 80C of the Act, and also a sum of Rs. 64,761/-, as regards expenses. Admittedly, case of the assessee was selected for complete scrutiny through CASS, on the issue of “cash deposits during the demonetization period”. The assessee was running a petrol pump of Bharat Petroleum Corporation Ltd. under the name and style M/s Prakash Filling Station. In response to the notice u/s 142(1) of the Act, dated 28.11.2019, when the assessee was asked to furnish certain details and also to produce books of account for physical verification, same were produced. After examining the Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO same, the Assessing Officer framed assessment by observing in the manner as under:- “(i) On perusal of the details filed by the assessee through ITBA it is gathered that the assessee has uploaded two cash books, few entries of which are distinct to each other. The AR of the assessee has been asked to about the reasons for uploading two cash books with proper justification and also to explain as to which cash book is genuine and maintained as per the books of accounts produced. In response to which he has submitted that initially the cash book uploaded was wrongly uploaded to its educational version which has been mistakenly uploaded and not reflect the actual figure of the business and does not have any relation with the business of the assessee that has been uploaded wrongly by his assisting staff and may not be given any cognizance. As soon as he realizes the mistake he uploaded the correct one and due cognizance may be given to this cash book. Accordingly. the cash book produced physically has been examined with the cash book uploaded later and it is gathered that on 09/11/2016 the opening cash balance available with the assessee was 8,36,169/-.
Thereafter, upto 11/11/2016 an amount of Rs.33,64,618/- has been found debited to the cash book from receipts of cash sales and bank withdrawals. Apart from this, an amount of Rs. 6,84,000/- has also been found debited in the cash book on 11/11/2016 from certain persons.
The AR of the assessee has been asked to explain the above cash receipts of Rs. 6,84,000/-as to in which connection the said amount has been received by the assessee. In response, the AR stated that the above amount has been received from the debtors.
In this regard, it is pertinent to mention that the said amount of Rs. 6,84,000/- was received in old currency notes of Rs. 500/- & 1000/- during demonetization period which the assessee was not supposed to receive as per the gazetteenotification issued by the Govt. of India on 8.11.2016. Therefore, the same is liable for addition under sec. 69A of the IT Act, 1961 and to be taxed as per the provisions of sec. 115BBE of the I.T. Act, 1961. Accordingly, the AR of the assessee has been asked to show cause as to why the addition of Rs. 6,84,000/- should not be made on the above lines.
Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO The AR has not offered any satisfactory explanation in this regard. As the AR has not offered any explanation, the sum of Rs. 6,84,000/- is treated as unexplained money under sec. 69A of the I.T. Act, 1961 and is taxed accordingly. The penalty proceedings under sec. 271AAC(1) of the I.T. Act, 1961 is also initiated separately by issuing of penalty notice.
(ii) During the course of asstt. Proceedings, perusal of the records reveals that the assessee has claimed deduction under sec. 80C for Rs. 67757/- consisting of tuition fees of Rs. 62,000/- and LIC premium of Rs. 5757/-. However, the assessee could produce the eligible receipts of tuition fees for Rs. 41,400/- only and no proof of payment of LIC premium of Rs. 5757/- has been furnished. Therefore, in absence of the proper evidence a sum of Rs. 20600/- +5757/- Rs. 26,357/- is to be disallowed and added back to the total income of the assessee.
The AR has been show caused on the above issue for which he has not offered any explanation. In absence of any evidence and proper explanation by the AR of the assessee, the sum of Rs. 26,357/- is hereby disallowed and added back to the total income of the assessee.
Penalty proceedings under sec. 270A(1) of the I.T.Act, 1961 is being issued separately by issuing of penalty notice.
(iii) Further, on examination of the books of accounts and concemed bills and vouchers for expenses, it is gathered that sum of the expenses are not fully vouched and self made, where use of personal nature can not be denied. Accordingly, the AR of the assessee has been asked to show cause as to why the disallowance @ 10% of the following expense should not be made: (a) Pump expenses = Rs. 2,88,506/- = Rs. 28,851/- (b) Travelling expenses = Rs. 2,80,323/- Rs. 28032/- (c) Motor Cycle Expenses Rs. 78,780/- Rs. 7878/- The total disallowance of Rs. 64,761/- on account of above expenses is to be made, the AR of the assessee was show caused to the above disallowances, the AR has not offered any satisfactory explanation. Therefore, the sum of Rs. 64,761/- is to be disallowed and added back to the total income of the assessee.
As the AR of the assessee has not offered any satisfactory explanation, the sum of Rs. 64,761/- is hereby disallowed and added back to the total income of the assessee. Penalty proceedings under under sec. 270A(1) of the I.T.Act, 1961 is being issued separately by issuing of penalty notice.
Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO 4. Subject to the above remarks, the total income of the assesee is recomputed as under :- Income as declared Rs. 7,51,930/- Add: unexplained money u/s 69A as discussed above Rs. 6,84,000/- Add: Disallowance out of Rs. 26,357/- 1. Dep. Deduction claimed under sec. 80C 1. Out of expenses as discussed above Rs. 64,761/- Total assessed income Rs. 15,27,048/- Rounded off Rs. 15,27,000/-
During appellate proceedings, before Learned CIT(A), the assessee- appellant claimed as under:- “Facts of the case-
1. 1. The assessee was running a petrol pump of Bharat Petroleum Corporation Ltd. in the name of M/s Prakash Filling Station, filed the Income Tax Retum for A.Y. 2017-18 on 30/10/2017, declaring total income of Rs. 7,51,930/-.
2. Part of the sales have been made by the assessee on the credit basis during the year and for which assessee regularly received payments from debtors in cash as well as in banking channels. Assessee also received due amount from its debtors prior to demonetisation period.
3. Assessee has made the sales of Rs. 6,84,000/- on 11/11/2016 for which he has received the consideration in old currency notes on the same date i.e. 11/11/2016 as authorised by gazette notification and deposited the same in Bank during demonetization period.
4. Assessee has also submitted confirmation received from the Debtors pertaining to sales of Rs.6,84,000/- to the assessing officer at the time of assessment proceedings about cash received from debtors on 11/11/2016.
5. Assessing Officer has treated the amount of Rs. 6,84,000/- received from debtors and deposited in Bank during demonetization period as unexplained money u/s 69A of the Income Tax Act, 1961 and made an addition of Rs.6,84,000/- to the total income of assessee.
Grounds of the Appeal 1. The Ld. Assessing Officer erred in law as well as on facts of the case by making an addition of Rs. 6,84,000/-, by treating the amount received from Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO debtors and deposited by the assessee during demonetisation period as unexplained money u's 69A of the Income Tax Act, 1961. (i) The assessee was engaged in the business of purchase/sale of petrol, diesel etc and has made sales of Rs. 6,84,000/- on 11/11/2016 for which the assessee has received the consideration in old currency notes on the same date i.e. 11/11/2016. (ii) As per the clause (e) of the notification no. S.O. 3408(E) issued by the Ministry of Finance (Department of Economic Affairs), dated 8th November, 2016, the Central Government declared that "the specified bank notes shall not be ceased to be a legal tender with effect from the 9th November 2016 until the 11th November, 2016 for the purchase of petrol, diesel and gas at the stations operating under the authorization of Public Sector oil Marketing Companies" The assessee is enclosing the copy of said notification herewith. (iii) As the assessee was engaged in the business of purchase/sale of petrol, diesel etc. i.e. business covered by the above mentioned Gazette Notification therefore the assessee could receive the amount in old currency till the date of 11th day of November, 2016 according to the notification. (iv) The details of Rs.6,84,000/- received from debtor in old currency are as follows: Name of Debtor Date of sale Date of amount Amount (in Rs.) received Nandbhawar Singh 11.11.2016 11.11.2016 1,09,000/- Gyan Chand jain 11.11.2016 11.11.2016 90,000/- Gopal Kumawat 11.11.2016 11.11.2016 1,00,000/- Hari Ram Bhairwa 11.11.2016 11.11.2016 95,000/- Bachraj Jat 11.11.2016 11.11.2016 80,000/- Mahaveer 11.11.2016 11.11.2016 1,20,000/- Hamuman Kumawat 11.11.2016 11.11.2016 90,000/- Total 6,84,000/- The confirmation from all the above debtors is also attached herewith which makes nature and source of Rs. 6,84,000/- very clear.
(v) It is noted both the events i.e. transaction of sale as well as receipt for such sale has been done on 11/11/2016 only i.e. within the permissible period as mentioned in gazette notification. The assessee has not received any amount in cash from his customers for any sales made prior to the demonetisation period.
Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO (vi) However, the Ld. Assessing Officer has mentioned in Assessment Order that "the said amount of Rs. 6,84,000/- was received in old currency notes of Rs. 500/- & 1000/- during demonetization period which the assessee was not supposed to receive as per the gazette notification issued by the Govt. of India on 8.11.2016. Therefore, the same is liable for addition under sec. 69A of the IT Act, 1961"
(vii) Sir, as discussed above that the assessee was duly eligible to accept old currency notes on 11/11/2016 as per Gazette Notification hence the contention of Ld. Assessing Officer that the assessee was not supposed to receive such amount is not correct. The Ld. Assessing Officer has not rejected the Books of Accounts of the assessee. Since, the Ld. Assessing Officer has made an addition u/s 69A on the basis of this contention only. therefore, the basis of addition u/s 69A is not correct, the addition is supposed to be deleted. Hence you are requested to kindly delete the addition of Rs.6,84,000/- u/s 69A, made by Ld. Assessing Officer. However, if your goodself is not agreeable with our views, we would like to submit as under:
(viii) Sir, as per the Section 69A of the Income Tax Act, 1961, if the assessee provides no explanation about the nature and source of the acquisition or the explanation offered by him is not satisfactory then the value of such articles is deemed to be the income of the assessee.
However, in this case assessee has submitted the debtor's confirmation received to the assessing officer from which the nature and source of money received by the assessee is clearly explained. Moreover, the Ld. Assessing Officer has not made any negative comment on the Source of Rs.6,84,000/- and infact he has clearly mentioned in Assessment Order that basis of addition u/s 69A is that the assessee was not supposed to accept Rs.6,84,000/- in old currency, which in itself indicates that the Ld. Assessing Officer was not having any problem with source of Rs.6,64,000/-, except the permissibility of the same. Since the nature and source of Rs.6,84,000/- is very clear which is supported by documentary evidence therefore the Ld. Assessing Officer cannot make any addition u/s 69A of the Income Tax Act, 1901. Hence the addition of Rs.6,84,000/-made u/s 69A is required to be deleted.
(ix) As it is very clear from the above facts that the assessee was eligible to accept cash in old currency notes on 11/11/2016. But if your goodself is not agreeable with our view then the assessee would like to mention that even if the Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO assessee was not supposed to accept cash in old currency notes then also if the assessee has very well explained the nature and source of Rs.6,84,000/- then addition u/s 69A of the Income Tax Act, 1961 cannot be made because one can accept old currency notes or not, has no relevance with Income Tax Proceedings. So, in any case the addition of Rs.6,84,000/- made u/s 69A, by Ld. Assessing Officer is not correct. Conclusion: Keeping in consideration the facts of the case, though the assessee was permitted to accept SBN, still the question whether the assessee was eligible to accept old notes of Rs.6,84,000/- or not on 11/11/2016 has no relevance with Income Tax Proceedings. In both the cases, the addition u/s 69A cannot be done as the nature and source of such cash is very well explained supported by documentary evidences.
You are requested to kindly delete the addition of Rs.6,84,000/- made by Ld. Assessing Officer u/s 69A and provide due relief to the assessee.”
Before Learned CIT(A), the claim of the assessee, as noticed above, was that he made sales of Rs. 6,84,000/- on 11.11.2016, and by way of consideration, he received old currency notes on the same date. The appellant claimed there that notification dated 08.11.2016 permitted use of old currency for purchase of petrol, diesel and gas at the stations operating under the authorization of Public Sector oil Marketing Companies. In the course of arguments, Ld. DR has not controverted that notification dated 08.11.2016 permitted use of old currency for purchase of petrol, diesel and gas at the stations operating under the authorization of Public Sector oil Marketing Companies.
Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO 11. It is true that the assessee also claimed before the Assessing Officer, that said amount was received from sundry debtors on 11.11.2016 itself. When the sale and receipt of cash were of the same date and reflected in the cash sales, Learned CIT(A) expressed that on close examination of loan confirmations, it was observed that the “assessee was not having address and PAN of sundry debtors”; that “only in two cases copy of Aadhar Card was enclosed”; that in most of the cases there was one prior transaction in the month of June, 2016, which was found to have settled in one or two days. Accordingly, Learned CIT(A) held that the assessee-appellant had not been able to prove that the amount of Rs. 6,84,000/- was received from these sundry debtors, whose loan confirmations were submitted by the appellant.
Ld. AR of the appellant submitted that the department has not disputed version of the assessee-appellant that sale and receipt of cash were of the same day i.e. 11.11.2016. As noticed above, appellant has tabulated the amount received by the assessee on 11.11.2016 from the persons named therein. Total of the amount received from said persons tallies with the figure of Rs. 6,84,000/-.
Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO 13. Ld. DR for the department has not disputed that in the accounts of books, sales, and receipt of cash against the said sales were shown on the same date i.e. 11.11.2016. Ld. DR has submitted that he stands by the reasons and observations recorded by authorities below, and that the appeal be dismissed.
As is available from the impugned order, the plea put forth by the assessee regarding sales and receipt of cash against said sales, is that said sale transactions were of 11.11.2016. This fact has not been disputed by the department. The authorities below have expressed doubt about the explanation put forth by the appellant as to why said amount was shown under the head “sundry debtors”. Admittedly, books of accounts of the assessee were not rejected by the Assessing Officer. No doubt, when as per books of accounts, sales were of 11.11.2016 and the cash was received against said sales, there was actually no need of making any separate and additional entry depicting income under the head “sundry debtors”. But, having regard to the material or details furnished by the assessee in the assessment proceedings, the Assessing Officer should have felt satisfied with the income of Rs. 6,84,000/-on 11.11.2016, Prakash Chand Choudhary Thr. L/H Sandhya Choudhary vs. ITO especially when there was nothing from the side of the Assessing Officer that any material available with him spoke against the assessee. Result 15. In view of the above discussion and for the reasons recorded above, we find that this is a fit case where the assessment order passed by the Assessing Officer, and the impugned order passed by Learned CIT(A) deserve to be set aside. Consequently, this appeal is allowed and the assessment order passed by the Assessing Officer, and the impugned order passed by Learned CIT(A) are hereby set aside.
File be consigned to the record room after the needful is done by the office. Order pronounced in the open court on 26/03/2025.
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