JITENDRA KUMAR TAHILRAMANI,JAIPUR vs. ITO WARD-2, JAIPUR., JAIPUR

ITA 928/JPR/2024Status: DisposedITAT Jaipur21 January 2025AY 2017-18Bench: SHRI RATHOD KAMLESH JAYANTBHAI (Accountant Member), SHRI NARINDER KUMAR (Judicial Member)1 pages

AI SummaryAllowed

Facts

The assessee challenged the order of the CIT(A) which confirmed the addition of Rs. 37,95,560/- made by the AO as unexplained cash deposits under Section 68 of the Income Tax Act, 1961, for Assessment Year 2017-18. The assessee claimed these deposits were from cash sales made during the demonetization period and had been duly recorded in their books of account.

Held

The Tribunal noted that the assessee had provided all necessary details regarding cash sales, and the AO had accepted part of these sales as genuine. The Tribunal found no cogent reason to reject the entire sales and treat them as unexplained cash deposits. The Tribunal also observed that the AO had not rejected the books of account. Therefore, the addition made by the AO was deleted.

Key Issues

Whether cash sales recorded in books of account, during the demonetization period, can be considered as unexplained cash deposits and added under Section 68 of the Income Tax Act, despite part of the sales being accepted as genuine by the AO.

Sections Cited

143(3), 68, 115BBE, 145(3), 133(6), 131, 145, 234B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR

Before: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 928/JP/2024

Hearing: 09/01/2025Pronounced: 21/01/2025

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” JAIPUR Jh jkBkSM+ deys'k t;UrHkkbZ] ys[kk lnL; ,o Jh ujsUnz dqekj] U;kf;d lnL; ds le{k BEFORE: SHRI RATHOD KAMLESH JAYANTBHAI, AM & SHRI NARINDER KUMAR, JM vk;dj vihy la-@ITA No. 928/JP/2024 fu/kZkj.k o"kZ@Assessment Year : 2017-18 cuke Jitendra Kumar Tahilramani ITO, Vs. Shop No. 45, Ghee Walon Ka Ward-2, Rasta Johari Bazar, Jaipur Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAGPT 4166 N vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Rohan Sogani, CA jktLo dh vksj ls@Revenue by: Sh. Gautam Singh Choudhary, JCIT-DR (Th. V.C.) lquokbZ dh rkjh[k@Date of Hearing : 09/01/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 21/01/2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM

By way of the present appeal the above named assessee challenges the order of National Faceless Appeal Centre, Delhi [ for short ‘CIT(A)/ NFAC’ ] dated 06/10/2023 for assessment year 2017-18. The said order of the ld. CIT(A) arose because the assessee challenged the order of assessment passed u/s. 143(3) of the Income Tax Act [ for short Act ] by ITO, Ward 2(1), Jaipur [ for short AO ] before him.

210 days in filing the appeal by the assessee for which the ld. AR of the assessee filed an affidavit stating the reasons for delay and prayed for condonation of delay, the content of the affidavit reads as under :-

“I, JITENDRA KUMAR TAHILRAMANI, aged 51 years, residing at 24, Khatipura Road, Vaishali Nagar, Jaipur, 302021 do hereby declare on oath as under: -

1. 1. That I am aged 52 years, engaged in jewellery business in Jaipur.

2. That I have given my email address on the portal of the Income Tax Department. However, being not convers ant with technology, I normally do not check my emails. All my correspondences are through my mobile phone or in physical manner only. I seldom use my email ID.

“5.0 Decision: 5.1 Ground no. 1: Vide this ground of appeal, appellant has stated that AO has grossly erred on law as well as on facts while making addition of Rs. 3795560/-as unexplained cash deposit into the Bank account u/s 68 r.w.s 115BBE of the IT Act 1961. 5.2 I have duly considered the facts of the case, findings of the AO in his assessment order and reply along with documentary evidence supported by judicial pronouncement and case laws cited during the appellate proceedings. From the perusal of assessment order it is seen that appellant is engaged in selling of jewellery during the year under consideration. The appellant has deposited an amount of cash of Rs. 5000000/- during the period of demonetization in his bank account. Based on these information AO has sought explanation along with documentary evidence to justify the source of cash deposited in his bank account during the assessment proceedings. The AO has analysed the information and explanations given by the appellant during the assessment proceedings in details in his assessment order. AO has also made comparative analysis of the sale proceeds and cash deposit month wise in his assessment order. Considering that appellant is a businessman engaged in jewellery business where cash/ cheque sales are norms of the business, has given his detailed analysis of the sale proceeds corresponding to cash deposit in his bank account. The AO has noted that since the appellant is engaged in regular business of jewellery and hence cash deposited during the demonization period, being a peculiar period must be inclusive of his genuine sales proceeds. Accordingly in order to ascertain the cash earned on account of genuine cash sale, the AO has taken into account cash sale shown during October and till 8th November 2015, at this period of year 2015 and 2016 covered most of big festivals/ auspicious occasions like Dipawali, Merriages etc. during these months. Further AO has also given weightage on account of overall inflation, changes in price of Gold & diamond etc. at the rate of 5%. The AO Jitendra Kumar TahilramanI vs. ITO has given his finding that sale shown 2015 during October was Rs. 2313210/- and from 1st November to 8th November 2016 was Rs. 256354/- totalling Rs. 2369564. Hence AO has concluded that in this way cash earned by the appellant out of genuine cash sale is worked out at Rs. 2428042/- after giving weightage 5% over last year turn over shown during this period. Based on his cash sale over the last 2 years, the appellant has concluded that an amount of Rs. 3795560/- is held to be undisclosed income available with appellant in the form of cash prior to demonetization period and the same has been added to the total income u/s 68 of IT Act.

“The Income-tax Officer found that the appellant’s food grains licence at Nawgachia had been cancelled for the accounting year for its failure to keep proper stock accounts and that the appellant was prosecuted under the Defence of India Rules but had been acquitted having been given the benefit of doubt. The Income-tax Officer also had regard to the fact that the appellant was a speculator and that as a speculator the appellant could easily have earned amounts fair in excess of the value of the high denomination notes encashed. He considered that even in the disclosed volume of business in the year under consideration in the head office and in the branches, there was possibility of his earning a considerable sum as against which it showed a net loss of about Rs. 46,000. The Income- tax Officer also noticed that notwithstanding the fact that the period was very favourable to food grains dealers, the appellant had declared a loss for the assessment year 1944-45 up to 1946-47, though it had the benefit of a large capital on hand. The Income-tax Officer Jitendra Kumar TahilramanI vs. ITO further took into consideration the circumstances that Nawgachia and Dhulian were very important business centres and Sahibganj the principal place of business had gained sufficient notoriety for smuggling foodgrains and other commodities to Bengal by country boats. Dhulian which was just on the Bengal-Behar border was also reported to be a great receiving centre for such commodities. Having regard to all these circumstances, the Income-tax Officer rejected the appellant’s explanation that the high denomination notes formed part of its cash balances and treated the sum of Rs. 2,91,000 as the appellant’s secreted profits from business and included it in its total income and assessed the appellant for the said assessment year on the income of Rs. 1,39,117. Dealing with the excess profits tax assessment, he also held that the said income was derived from the business of the appellant and hence it was liable to excess profits tax also.” 2.19. Ld. AO invoked provision of Section 68 in respect of sales. Section 68 deems non- income to be income. In the instant case, the credits by way of sales were already offered for tax. Hence, Section 68 per se cannot be invoked. Provisions of Section 68 can only be invoked in cases where an assessee is unable to explain the source of a particular receipt to the satisfaction of the Assessing Officer. These provisions have no application in case where an amount already disclosed by the assessee as his income, while filing the Return of Income on which no further addition has been made by the ld. AO, during the course of assessment proceedings.

But the situation would not be same when the assessee has produced all the records that was required by the AO. The bench notes that before the ld. CIT(A), the assessee made a submission to explain as to why the provision of section 145(3) could not be invoked in the case of the assessee. The assessee submitted that AO cannot reject the books of accounts and apply the provisions of section 145(3) of the Act unless any material record has been brought on record to hold that books are not reliable, when those are maintained, and audited by an independent Chartered Accountant. In the audit report, no adverse observations were before rejection of book results, as required under law. Even the ld. CIT(A) has simply supported finding of the ld. AO without dealing with said contention of the assessee. Therefore, in such circumstances and facts of the case, the Assessing Officer was not justified in rejecting the books of account by invoking the provisions of section 145(3) of the Act, and the additions made by the Assessing Officer are liable to deleted. To drive home to this contention, we get support from the decision of our jurisdictional High Court rendered in the case of Commissioner of Income Tax v. Ceramic Industries [ 88 taxmann.com 520 (Rajasthan) ] wherein our Hon’ble High Court has held that ; 7. Taking into consideration the tribunal has observed as under:— We have perused the facts of the case. The ld. AR Mr. H.M. Singhvi argued that assessee has produced all the books of account, vouchers and the assessee's accounts are audited and all the production is subject to Excise Duty and not even a single unit of production can go out of the factory without recording the same in the Excise Registers which are regularly and continuously verified by the excise Department and are under their control. The AO has not pointed out any defect in the purchases, sales, opening stock and closing stock and as explained before the AO and the ld. CIT(A) that M/s. Bharat Potteries Ltd. i.e. a sister concern is manufacturing more of maximum stoneware crockery and the assessee is manufacturing more of bone china crockery and the difference in yield and the wastage and the gross profit had been explained vide our letter dated 26.03.2004 before the AO and similarly the output/input ratio has also been explained before the AO through the same letter and the AO has not commented upon the same and has not found out any difect in our explanation. The assessee has also filed before the AO following documents/publications to support the wastage declared by the assessee is reasonable and according to the standard practice adopted in the country as under:- 1. C.G.C.R.I., Khurja (PB No.13 to 1)

2. Publication of Articles in while wares (P.B. No.18) 3. Photocopy of Hand book of Ceramics-Volume 2 (Editor S. Kumar) showing typical composition of Bone china. 4. Photocopy of the Chapter 5 of stoneware in the books published by the Institute of Materials (P.B. No.21 to 22). In the report of CGCRI, Khurja, (refer P.B. No.17), the waste worked out to 28.31% to 38.7% interest he bone china crockery and in the case of stoneware crockery it worked out to 24% to 34.8% We agree with the arguments of the ld. AR that the main objection raised by the AO was that input/output ratio in various months has the inconsistency which has been duly explained by the assessee vide letter dated 26.03.2004 and the second objection by the AO was that the sister concern M/s. Bharat Potteries Ltd. has declared more yield and more gross profit, has also been explained by the assessee vide the same letter dated 26.03.2004. Therefore, the inconsistency in the input/out ratio in various months the reasons for which has been explained by the assessee, cannot be the basis for rejection of books of account. The yield and gross profit rate declared by the assessee can also not be the basis for rejection of books of account since M/s. Bharat Potteries Ltd. is manufacturing maximum of stoneware crockery and for many other reasons which were explained by the assessee vide its letter dated 26.03.04 which was ignored by the AO and the AO has not pointed out any specific defects in the purchases, sales, opening stock and closing stock of the assessee and the AO has not brought on record any cogent material to prove that the assessee has sold the under- production out of the books of account. Therefore, in such circumstances and facts of the case, the AO is not justified in rejecting the books of account by invoking Provisions of Section 145(3) of the Act and the additions made by the AO are liable to the deleted. The objection of the ld. DR that the ld. CIT(A) has not relied upon the CGCRI Report, Calcutta, the ld. AR has pointed out that the in the same report it has been mentioned that the said organization is not involved production practice and the are not sure to what extent their opinion will be useful for the purpose of the assessee and in such circumstances and facts of the case, the report of CGCRI, Calcutta alone cannot be the basis for rejection of books of account and making an estimation of wastage and the ld. CIT(A) was not justified in ignoring other material which was placed before him as mentioned hereinbefore. Therefore, the ld. CIT9A) was not justified in sustaining the applicability of Section 145(3) of the Act and addition of Rs. 11,15,087/-. Thus Ground No.1 of the assessee is allowed and the solitary ground of the Revenue is dismissed. 8. In our considered opinion the argument which has been canvassed by Mr. Mathur that the stone average loss as 29.4 should not be 30.1 as per Khurja is also 23.1.

AO has not made any independent inquiry. He considered part of the sales as genuine and on the same set of records, part of the sales were not considered as genuine. This pick & chose approach was not correct on same set of evidence. Once ld. AO accepted part of the sales as genuine, why not the other part, on the same set of evidence placed on record. The bench notes that to drive home to this contention ld. AR of the assessee relied upon the decision of our own Jurisdictional Hon’ble Rajasthan High Court in the case of Smt. Harshila Chordia Vs. ITO [ 298 ITR 349 ] wherein it has held that; Jitendra Kumar TahilramanI vs. ITO So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise. We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them. Question No. 2 relates to the directions given by the Tribunal for adjustment of Rs. 6,98,000 found in paragraph 36 to be part of unexplained cash credits in the books of account of the assessee by the comparative reading of audited and unaudited books of account. However, we find that wh0e a categorical finding has been reached in paragraph Nos. 36 and 23, the Tribunal has curiously found that while repayment of the aforesaid amount after December 31, 1991, would not affect the peak of cash credit but this amount is liable to be considered while considering the assessee's explanation by the Assessing Officer to whom the issue about the receipt of cash money from the customers and the delivery of the vehicles against such receipts has been remanded back. In our opinion, the two findings are contradictory in terms, if Rs. 6,98,000 could form the part of consideration received from the customers and paid to the dealer M/s. Ganesh Automobiles, it could not form the part of the unexplained cash credit. Therefore, the finding in respect of Rs. 6,98,000 should necessarily depend upon the outcome of the consideration to be made by the Income-tax Officer in pursuance of the directions issued by the Tribunal and cannot be outrightly rejected at this stage and to that extent the order of the Tribunal is set aside and ultimate decision in that respect would depend on the consideration by the Income-tax Officer about the issue relating to the unexplained cash credit in the light of the Tribunal's order. Until then no additions in respect of Rs. 6,98,000 or lesser amount can be sustained. Accordingly, while we set aside the Tribunal's order to the extent it sustains the addition of Rs. 40,13,000, we modify the directions of the Tribunal relating to addition Rs. 6,98,000 as part of the cash credit and hold that it should also be part of consideration by the Income-tax Officer in respect of other unexplained cash credits unembellished by any observation made in that regard. No costs.