Loading judgment…
Facts
The assessee, dealing in petrol and diesel, had cash deposits during demonetization. The AO treated these deposits as unexplained income and made additions, also invoking Section 115BBE. The CIT(A) confirmed the additions.
Held
The Tribunal noted that the assessee provided sales registers and other documents showing the cash was from sales. The AO had not brought any contrary evidence, and the rejection of books under Section 145(3) precluded a separate addition under Section 68. The Tribunal followed a prior decision covering this issue.
Key Issues
Whether cash deposits made during demonetization, supported by sales records, can be treated as unexplained income when books of account were rejected under Section 145(3)?
Sections Cited
145(3), 115BBE, 68, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES, ‘’A” JAIPUR
Before: SHRI SANDEEP GOSAIN, JM & SHRI GAGAN GOYAL, AM vk;dj vihy la-@ITA No.1467/JP/2024
ORDER PER: SANDEEP GOSAIN, JM This appeal filed by the assessee is directed against the order of the ld. CIT(A) dated 29-05-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2017-18 raising therein following grounds appeal. ‘’That the action of the AO in doing addition while passing the assessment order is bad in law, perverse and against the facts and law. Further action of ld. CIT(A) in so far as confirming addition as made by AO is absolutely illegal and unjustified in SHRI BHAVUK SEHGAL VS DCIT,CIRCLE-2, AJMER the facts and circumstances of the case and ven without issuing hearing of notice.
That the AO has grossly erred in doing addition of Rs36,58,000/- of cash deposited in his bank account during demonetization period whereas same is arising out of sale of diesel/petrol and thus AO has grossly erred in appreciating facts of the case by wrongly treating the same as unexplained cash and which may please be deleted.
3. That the AO has grossly erred in determination of tax @ 60% by applying the provisions of Section 115BBE for the assessment year 2017-18 whereas substantial provision of Section 115BBE has come into statute book w.e.f. 1-04-2017 i.e. after getting assent from the President. Thus the AO without having any application of mind has imposed tax at higher rate and which may please be deleted.
That the action of ld. CIT(A) is perverse so far as mechanically confirming addition as made out by the AO which may please be declared as illegal. 2.1 At the outset of the hearing of the appeal, it is noticed that there is delay of 129 days in filing the appeal by the assessee for which the assessee has filed an application for condonation of delay with following prayer. ‘’The appeal was decided by NFAC on dated 29-05-2024 and was sent on online portal. That no notice was issued by the NFAC before passing the appeal order. That the accountant has not seen online portal as soon as he came to know this fact the appellant has complied with all the notices during assessment proceedings. That affidavit of Accountant is also enclosed.
SHRI BHAVUK SEHGAL VS DCIT,CIRCLE-2, AJMER 2.2 On the other hand, the ld. DR objected to such inordinate delay and submitted that the Court may decide the issue as deemed fit and proper in the case. 2.3 We have heard both the parties and perused the materials available on record. The Bench noticed that there is delay of 129 days in filing the appeal by the assessee and the submissions as advanced by the assessee to condone the delay has no merit which shows that the assessee was not serious in pursuing the order passed by the ld.CIT(A). Thus the delay so made is not condoned. However, the Bench feels to decide case of the assessee on merit. 3.1 Apropos Grounds of appeal of the assessee, it is noticed that the ld. CIT(A) has dismissed the appeal of the assessee by observing at para 1 to 3 of his order. ‘’1. Ground No.1 to 7 objects to adding Rs.3658000/- being Cash deposits u/s 68 rws 115BBE. The credit entry shown in the cash book of assesse for contra entry to his bank account deposits is not the same money that was deposited in his bank account. It means his books of accounts are faulty as what have been shown on debit side are sale proceeds in non-SBN (as assessee was not in exempted category and as a law abiding citizen he would not have accepted SBNs) whereas what is shown on credit side as contra entry is the SBN. Thus the books of accounts of the assessee are inaccurate and hereby rejected u/s 145(3) of the Act. On 08.11.2016, the assessee had a closing cash in hand of Rs. 1,69,452/-therefore, this is the maximum amount that he could have deposited in SBNs. As such benefit of Rs. 169000/-is given out of total SBN deposit of Rs.3827000/- to the assessee and the remaining amount of Rs.3658000/-deposited in the bank account of the assessee remain unexplained and is added to the total income of the assesse u/s 69A as unexplained money.
SHRI BHAVUK SEHGAL VS DCIT,CIRCLE-2, AJMER 2. It is pertinent to mention here that alternatively if the contention of the assessee is accepted that he accepted SBNs from his customers despite not being included in the exempted category by the RBI then it means that the books of accounts of the assessee are inaccurate and unreliable for the reasons mentioned in the foregoing paragraph number 3.6 of the assessment order and therefore the books of accounts of the assessee again deserves rejection u/s 145(3). Under section 68 of the Act, the onus is on the assessee to satisfactorily explain the cash credits. In the present case going by the contention of the assessee, it would be correct to say that he has not been able to satisfactorily discharge his onus. Therefore the source of old demonetised currency deposited in the bank account of the assessee between 10.11.2016 and 03.12.2016 remains unexplained even in this version given by the assessee. As such the unexplained amount of Rs.3658000/- is to be added to the total income of the assessee u/s 68 as unexplained cash credits.
Assessee's ground on 234B is consequential in nature and does not require any separate adjudication.
4. The appeal filed by the assessee is dismissed.’’ 3.2 During the course of hearing, the ld. AR of the assessee submitted that the ld. CIT(A) was not justified in confirming the addition of Rs.34,83,500/- in the hands of the assessee. He submitted that during the period of demonetization a notification was issued bearing No. 2774 dated 24-11-2016 wherein exemptions were given for purchase of petrol, diesel and gas at the station operating under the authorization of Public Sector Oil Marketing Companies. Thus this money was collected from sale of petroleum products from the customers. He submitted that during the assessment proceedings the assessee had submitted the stock register of SHRI BHAVUK SEHGAL VS DCIT,CIRCLE-2, AJMER High Speed Diesel and Petrol which were maintained during this period. The ld. AR further submitted that the assessee had also purchase and sale register, monthly summary of the sales, cash book and all other queries raised by the AO and no discrepancy was noticed by the AO. However, despite of submissions of all these documents, the AO erred in doing addition into total income of Rs.36,58,000/- without any basis and without bringing any contrary evidence on record and treated the amount of Rs.36,58,000/- as unexplained credit u/s 68of the Act. He further submitted that there is no iota of evidence brought on record by the AO to treat the same as unexplained and further invoked the provision of Section 115BBE of the Act. He further submitted that the ld. CIT(A) has confirmed the action of the AO without taking into consideration details advanced by the assessee before the AO while assessment proceeding. Hence, the addition so made by the AO and confirmed by the ld.CIT(A) deserves to be deleted. 3.3 On the other hand, the ld DR supported the order of the ld. CIT(A). 3.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the assessee e-filed the return of income for the assessment year 2017-18 declaring total income of Rs.34,83,500/- on 29-10- 2017. The assessee is a proprietor of M/s. Ajmer Fuels who deals in sale of petrol and diesel of Reliance Industries Ltd. The case of the assessee was selected for SHRI BHAVUK SEHGAL VS DCIT,CIRCLE-2, AJMER scrutiny through CASS. It is noted that the AO made an addition of Rs.36,58,000/- in the hands of the assessee by observing as under:- ‘’3.7 Since the Gazette Notification was very clear about the entities that were given exemption, thus in reality as a law abiding citizen the assessee made sales in Non-SBN currency. However, he deposited SBNs in his bank account and is now trying to justify this through his cash book. In reality, the entries shown in the cash book which are backed by the sales register, stock summary and purchase bills are not the same money that was deposited in the bank. The assessee has instead deposited his unaccounted income in his bank accounts and has now tried to cover up by stating that the cash deposits is out of the sales made in old demonetized currency. Therefore, the source of cash deposit of Rs.38,27,000/- in the bank account of the assessee in SBNs remains unexplained.
The credit entry shown in the cash book of assesse for contra entry to his bank account deposits is not the same money that was deposited in his bank account. It means his books of accounts are faulty as what have been shown on debit side are sale proceeds in non-SBN (as assessee was not in exempted category and as a law abiding citizen he would not have accepted SBNs) whereas what is shown on credit side as contra entry is the SBN. Thus the books of accounts of the assessee are inaccurate and hereby rejected u/s 145(3) of the Act. On 08.11.2016, the assessee had a closing cash in hand of Rs. 1,69,452/- therefore, this is the maximum amount that he could have deposited in SBNs. As such benefit of Rs. 169000/-is given out of total SBN SHRI BHAVUK SEHGAL VS DCIT,CIRCLE-2, AJMER deposit of Rs.3827000/- to the assessee and the remaining amount of Rs.3658000/-deposited in the bank account of the assessee remain unexplained and is added to the total income of the assesse u/s 69A as unexplained money.
It is pertinent to mention here that alternatively if the contention of the assessee is accepted that he accepted SBNs from his customers despite not being included in the exempted category by the RBI then it means that the books of accounts of the assessee are inaccurate and unreliable for the reasons mentioned in the foregoing paragraph number 3.6 of the assessment order and therefore the books of accounts of the assessee again deserves rejection u/s 145(3). Under section 68 of the Act, the onus is on the assessee to satisfactorily explain the cash credits. In the present case going by the contention of the assessee, it would be correct to say that he has not been able to satisfactorily discharge his onus. Therefore the source of old demonetised currency deposited in the bank account of the assessee between 10.11.2016 and 03.12.2016 remains unexplained even in this version given by the assessee. As such the unexplained amount of Rs.3658000/- is to be added to the total income of the assessee u/s 68 as unexplained cash credits.’’ It is also noted that the ld. CIT(A) has stamped on the action of the AO. The Bench noticed from the records that the assessee had submitted the stock register of High Speed Diesel and Petrol before the AO and also submitted the purchase SHRI BHAVUK SEHGAL VS DCIT,CIRCLE-2, AJMER and sale register besides monthly summary of the sales, cash book etc. wherein the AO did not find any discrepancy and thus made the addition into total income during the demonetization period i.e. 9-11-2016 to 31-12-2016 of cash deposited amounting to Rs.36,58,000/- arising out of sale of Diesel and Petrol in its regular course of business. We also noticed that the AO had not brought on record any contrary evidence to treat the same as unexplained amount of Rs.36,58,500/- u/s 68 of the Act. It was submitted by the ld. AR of the assessee that the lower authorities applied the provision of Section 145(3) and submitted that when the books of account are rejected then the addition u/s 68 of the Act cannot be made, giving the reference of Hon’ble Rajasthan High Court in the case of CIT vs G.K. Contractors, 19 DTR 305. We noticed that this issue raised by the assessee is covered by the order of ITA in (A.Y. 2008-09 dated 04-08-2016) in the case of M/s. Elcon Drug & Formulations Ltd. vs ITO wherein the Bench observed as under:- ‘’5.3 We have heard rival contentions and perused the material available on record. We find that the advances are in the nature of trade advances. The AO has already rejected the books of account and made the addition on account of suppressed sales. The Hon’ble Jurisdictional High Court in the case of G K Contractor has held that when estimated profit is considered after rejecting assessee’s books of accounts by invoking the provision of Section 145(3) of the Act, no separate addition can be made even u/s 68 of the Act, even thought the assesee has failed to discharge the onus of proof in explaining the amount shown in the books of accounts as ‘’Market Outstanding’’.
Since, the issue raised by the assessee is fully covered by the decision of ITAT, Jaipur Bench (supra), therefore, respectfully following the same, we allow this appeal of the assessee. 3.0 In the result, the appeal of the assessee is allowed . Order pronounced under Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963 by placing the details on the notice board.