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Facts
The assessee filed an appeal against the order of the CIT(A) which sustained the addition of Rs. 72,10,000/- made by the AO on account of unexplained cash credit during demonetization. The assessee claimed the source of funds to be cash sales and realization of old debtors.
Held
The Tribunal noted that the assessee was provided multiple opportunities but failed to provide sufficient documentary evidence to support the cash deposits. While the lower authorities upheld the addition, the Tribunal restored the matter to the AO for a fresh adjudication after providing one more opportunity to the assessee.
Key Issues
Whether the addition made by the AO on account of unexplained cash credit during demonetization is justified without rejecting the assessee's books of accounts, and whether adequate opportunity was provided to the assessee.
Sections Cited
68, 115BBE, 143(2), 234B, 234C
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Income Tax Appellate Tribunal, JAIPUR BENCHES,”A” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No.1077/JPR/2024
fu/kZkj.k o"kZ@Assessment Years : 2017-18 Sh. Mohan Lal Choudhary cuke The ACIT, Vs. 251-A Dagar Complex, Near Circle-4, Krishi Upaj Mandi VKI Area, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACFPC4049L vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri Anil Kumar Sharma, C.A. jktLo dh vksj ls@ Revenue by : Mrs. Anita Rinesh, JCIT-Sr. DR a lquokbZ dh rkjh[k@ Date of Hearing : 02/01/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 20 /01/2025 vkns'k@ ORDER PER: DR. S. SEETHALAKSHMI, J.M.
This appeal filed by the assessee is directed against order of the ld. CIT(A) dated 18-06-2024, National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment year 2017-18 wherein the assessee has raised the solitary ground of appeal as under.
1. Under the facts and circumstances of the case the ld. CIT(A) is not justified in sustaining the addition of Rs. 7210000/- made to returned income towards cash deposited in to the bank held by the AO as unexplained cash credit u/s 68 liable for higher tax u/s 115BBE of IT Act, 1961.” noticed that the assessee was provided multiple opportunities by the ld.
CIT(A) which were not responded by the assessee and thus the ld. CIT(A) dismissed the appeal of the assessee holding therein that the assessee did not file any details pertaining to his customers, no supporting documents relating to sale and purchase and not filed ledger balances of his customers to prove that any money was receiveable from debtors which was realized during demonization. The narration as made by the ld. CIT(A) in his order is reproduced as under:-
“6. FINDINGS & DECISION I have gone through the assessment order and grounds of appeal. The Ld. AO has carried out addition on account of unexplained cash deposited during demonetization. Aggrieved by the assessment order the appellant has filed multiple ground of appeal which are collectively adjudicated as under. Ground 1 6.1 During demonetization period the appellant had deposited Rs. 72,10,000/- bank account and in order to test the genuineness of the deposits and source thereto the learned AO called for relevant details. 6.2 At the outset the appellant contested that the major source of revenue for the his business of current sale of and realization of past debtors. Appellant also contested that he is proprietor of two ventures i.e. Rahul Agriculture Centre and Rahul Marketing. In Rahul Agriculture Center, the appellant deal with many farmers and thus he receives cash sales proceeds which is deposited into bank. In this regard the appellant filed chart depicting month wise cash deposited, ledger extracts of sales made during demonetization period and copy of invoices raised. 6.3 The Ld. AO has carried out details trend analysis in the assessment order with respect to cash sales of the appellant during AY 2017-18 and 2016-17, GP analysis of these both years and found that overall sales of the appellant has increased but the appellant has not filed sufficient details to prove the genuineness of claim. Further, the appellant had also not filed Address and PAN details of the clients so no cross confirmation was possible. Thus, the Ld. AO did not accept appellant's contention of source of cash being current sale and realization of old debtors. 6.4 During the appellate proceedings, the appellant reiterated his contention and filed chart depicting month wise sale and purchase details in addition to month wise.
The appellant did not file any details pertaining to his other business viz Rahul Marketing. The appellant did not file any details pertaining to his customers, neither the appellant filed any supporting in relation to sale and purchase claimed by him. The appellant also did not file ledger balances of his customers to prove that any money was receivable from debtors which was realised during demonetisation.
Mohan Lal Choudhary. vs. ACIT 6.5 It is settled position that the onus is upon the appellant to prove genuineness of each and every transactions entered into. In land mark cases like Kale Khan Mohammad Hanif v CIT[1963] 50 ITR 1 (SC), Roshan Di Hatti v CIT [1977] 107 ITR (SC) it has been held that the law is well settled that the onus of proving the source of a sum of money found to have been received by an appellant, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the appellant and no further burden is on the revenue to show that the income is from any particular source. 6.6 In view of the above, I am of the considerate view that in the appellant has claimed source of cash being sales of goods and realisation from debtors but it has not been supported by documentary evidences such as customer confirmations, stock register, VAT return, sales bills etc. In the event of non furnishing of documentary evidences, the claim of appellant cannot be verified. Therefore, the addition made by learned AO for sum Of Rs. 72,100,000/- under section 69 is upheld. 6.7 Accordingly, the ground of the appeal is disposed on merits and based on Information/documents available on records. Ground 2 6.8 The appellant contested the Ld. AO charged interest Us 234B and 234C. In this regard, it is held that charge of interest is consequential in nature and being upheld according to the addition confirmed in this order. 6.9 Accordingly, the ground 2 of appeal is disposed on merits and based on Information/documents available on records.”
2.2 Being aggrieved by the order of the ld. CIT(A), the assessee preferred this appeal by filing following written submission “1. The assessee is engaged is engaged in the business of wholesale and retail trade of Fertilizers, pesticides and seeds in the name of "M/s Rahul Agriculture Center" and sales goods to customers both in cash and on credit. The assessee is also having a C&F agency in the Name of M/s "RAHUL MARKETING AGENCY".
The assessee is regularly maintaining Books of accounts, Bills, Vouchers etc., getting them audited and filing Audit Report, Financial Statements and Income Tax returns since several years.
3. The assessee during the relevant previous year having Turnover of Rs.75141810/- against that of Rs.50495532/- in preceding year, got his books of accounts audited u/s 44AB of IT Act 1961 and filed return of Income declaring Net Profit of Rs. 1510604/- against that of Rs. 1173640/- in preceding year.
Mohan Lal Choudhary. vs. ACIT 4. The assessee separately declared Net Profit of Rs.1572276/- from C&F Business.
5. The AO having information that the assessee has made certain Cash Deposits in his Bank Account, vide Notice dated 29.09.2018 initiated the Assessment proceedings u/s 143(2) of IT Act 1961.
The assessee vide letter dated 21.10.2019 (PB No.1-6) filed requisite details and documents before the AO during the course of assessment proceedings.
The AO observed that the Assessee during the relevant previous year has made Total Cash Deposits of Rs. of Rs. 5,32,42,600/-out of which Rs. 72,10,000/-pertains to the period of demonetization Le. 09.11.2016 to 31.12.2016.
8. The assessee explained that the source of Cash deposit was Cash Sales and collection form Debtors. 9.The AO doubting the Cash Sales/collection from Debtors made an addition of Rs.7210000/- to returned Income towards Cash Deposited in to the Bank during the Period of Demonetization i.e. 09.11.2016 to 31.12.2016 holding the same as un explained Cash Credit u/s 68 of IT Act 1961 liable for Tax @60% u/s 115BBE of the Act. (Page No.5-7 of Assessment Order) Submission:
1. 1. The assessee is engaged in the business of Fertilizers, pesticides and seeds deals with the farmers and other customers belonging to Villages and Rural Areas.
2. The most of the Receipts of the assessee remains in cash in the form of Cash Sales and collection from Debtors towards Credit Sales. 3.The Cash Sales and Collection from Debtors towards Credit Sale, Payments and Deposit in to the Bank is duly recorded in Cash Book of the assessee containing all relevant Details.. 4.The assessee during the relevant previous Year has made Total Cash Deposit Rs.53242600/- comprising Rs.7210000/- during the Period of Demonetization as recorded on Page No3 of the Assessment Order. 5.The Cash deposit of Rs.7210000/- during the period of Demonetization comprises Old currency (SBN) of Rs.4510000/- in the denomination of Rs.1000/- and 500/-as follows: particulars SBI A/c No. 10153189860 Other banks 1000 Notes 2165 100 500 Notes 3600 890 Total Amount 3965000/- 545000/-
The Assessee explained the source of Cash Deposited in to the Bank being cash in hand build up from Cash Sales and Collection from Debtors as recorded in Cash Book of the Assessee and submitted: 5.1 The monthly Details of Opening Cash in Hand, Cash Sales, Collection from Debtors, Payment for Exp. Cash Withdrawals and Closing Cash in hand as required by the AO.(PB No.20-21) 5.2 Complete Cash Book containing relevant Details of Cash Sales, Collection from Debtors, Cash Deposited in to the Bank, Payment for Expenses etc. (PB No.22-42) 6. It is apparent from the Cash Book of the assessee that the Cash Deposit in to the Bank during the period of Demonetization has been made out of Opening Cash in hand on the date of Demonetization and subsequent Cash Sales and collection from Debtors towards Credit Sales as follows:
Particulars Amount Opening Cash in hand as on 09.11.2016 as per Cash Book of Rahul 3965441/- Marketing Centre Cash Sales and collection from Debtors during 09.11.2016 to 4538427/- 31.12.2016 Total 8403868/- 7. The assessee was also having opening cash in hand of Rs.1116488/- on the date of demonetization.
The assessee has made Cash Deposits in to the Bank during regular course of his Business and there is no exceptional Cash Deposit during the period of demonetization as compared to preceding Year:
Particulars Relevant A.Y. Preceding A.Y. 2017-18 2016-17 Total Sales as per Profit and Loss Account 75141810/- 50495532- Total Cash Deposited in to the Bank (As 53242600- 38777200/- recorded on Page No.3 of the Assessment Order) % to Total sales 70.86% 76.79% Total Cash Deposited before Demonetization i.e 38392900/- 21669400/- .01.04.2016 to 08.11.2016/Corresponding period of Demonetization % to Total sales 51.09% 42.91% Total Cash Deposited during the period of 7210000/- 10259200/- Demonetization % to Total sales 9.609% 20.32% Total Cash Deposit after Demonetization 7639700/- 6848600/- 01.01.2017 to 31.03.2017 % to Total sales 10.17% 13.56% 8. The assessee also submitted the Sales Bills before the AO for Examination during the course of Assessment proceedings as admitted by the AO. Para-A-4 on Page No.5 of the Assessment Order. 9.The AO without finding any patent and specific defect and without giving any real finding towards non genuineness of Entries in the Cash Book of the Assessee, Sales Bills, Collection from Debtors, just on the basis of general observations has held that the assessee could not provide any satisfactory arguments for amount credited in the Books and invoked Section 68 of IT Act 1961.(Page No.6 of the Assessment Order) 10. The assessee has got his Books of Accounts Audited and submitted the Audit Report as prescribed u/s 44AB of IT Act 1961.(PB No.47-63) along with Audited Balance Sheet, Profit and Loss Account and Schedules thereto containing corresponding figures of preceding Year. (PB No.64-74). 11.The Audit Report Contains the Quantitative Tally of Stock Inward, Outward and Closing Balance. (PB No.63) 12. The assessee is a Registered VAT Dealer and his Sale is subject to VAT as disclosed in relevant Schedule to Audited Balance Sheet and Profit & Loss Account. (PB No.70)
Mohan Lal Choudhary. vs. ACIT 13.The Debtors have been generated against Credit Sales, therefore collection from such debtors is part and parcel of Sales recorded in Books of Accounts.
The entire Sales as recorded in Books of Accounts has been Credited to Audited Profit & Loss Account and offered for levy of Income Tax.
The AO has not found any defect in the Books of Accounts and Trading results based on Sales, Purchases, Opening/Closing Stock have been accepted as it is.
Therefore the AO is not justified in invoking the provisions of Section 68 in respect of the Sales Credited to Profit & Loss Account duly supported by Audited Books of Accounts, Sales Bills, Quantitative Tally certified by Audit Report.
The AO by making relevant Addition of Rs.7210000/- u/s 68 of the Act, towards alleged unverified Sales/collection from Debtors has levied Tax on the Sales which has been already credited to Profit and Loss Account resulting in to Double Taxation of same Income.
This Hon. Bench almost in identical facts in the case of Mahesh Kumar Gupta v.ACIT, after considering a catena of judicial pronouncement on the issue, has held: "9.8 Respectfully following the consistent view and after considering the factual matrix of the cash on hand in our considered view the addition made cannot sustain and therefore, we vacate the addition of Rs. 80,00,000/- made under section 68 of the Act as the same cannot be made without rejecting the books of account of the assessee regularly maintained by the assessee and the said cash deposited is duly supported by the entries passed in the books of account and part of the sale accepted by the AO."
Therefore Your Honour is requested to delete the relevant addition of Rs.7210000/-and restore the returned Income.”
With a view to settling the dispute in question, the ld. AR of the assessee has filed the following documents/ papers S. No. Paper/document Page No. 1. Letter submitted on 21.10.2019 before the AO during the 1-6 course of Assessment proceedings. 2. Written Submission dated 14.10.2021 before ld. CIT(A) 7-19
Monthly Cash Sale and Deposit Details for the relevant F.Y.6- 20-21 17 and preceding F.Y.2015-16.
Cash Book for the period 01.10.2016 to 31.03.2017 22-42 5. Return of Income along with Computation of Total Income 43-46 for the relevant A.Y.2017-18. 6. Audit Report in Form No.3CD for relevant A.Υ.2017-18. 47-63 7. Audited Balance Sheet and Profit & Loss Account for the 64-74 relevant F.Y.2016-17 containing corresponding figures of preceding year. 8. Bank Certificate of Cash Deposited in to the Bank 75-77 2.3. During the course of hearing, the ld. AR for the assessee prayed that the Ld. CIT(A) and the AO have passed ex-parte order and the assessee was not provided adequate opportunity of being heard. Thus, the assessee may be provided one more opportunity to advance his arguments/submissions before the AO in the interest of equity and justice.
2.4. On the other hand, the ld. DR supported the orders of the lower authorities.
2.5 We have heard both the parties and perused the materials available on record. The bench noted from the order of ld. CIT(A) that the appeal of the assessee was dismissed by the ld. CIT (A) for want of non- prosecution of the appeal and also non-submission of any documents countering the order of the AO. It is also noteworthy to mention that the Mohan Lal Choudhary. vs. ACIT assessee did not respond to the questionnaire sent by the AO to the assessee vide notice issued on 5-10-2019 and 4-11-2019 fixing the case of hearing. We also noted from the assessment order that the assessee has not filed any desired documents as mentioned by the AO in his order and thus he observed that provisions of Section 68 are attracted with following narration.
‘’2. When the sales as mentioned in A above are not genuine, the recovery is also considered as bogus. Considering the above facts, it is clear that the assessee could not provide any satisfactory arguments for amount credited in the books. Therefore, provision of Section 68 are attracted herein.’’ Hence, for want of desired details/information, the AO made an addition of Rs.72,10,000/- in the hands of the assessee considering it as unexplained cash credit u/s 68 of the Act. Similarly, the ld. CIT(A) has confirmed the action of the AO as no counter reply/ evidences were produced against the order of the AO before him. The Bench noticed from the entire gamut of the case that the assessee had submitted the details before the AO like monthly details of opening cash in hand, cash sales, collection from debtors, payment for expenses, cash withdrawals and closing cash in hand as per paper book pages 20 & 21 and further he submitted the complete cash book containing relevant details of cash sales, collection from debtors, cash deposited into the bank, and payment Mohan Lal Choudhary. vs. ACIT for expenses as per paper book pages 22 to 42 are not properly taken care of. Thus, it is noted that the assessee is ex-parte before the AO and also before the ld. CIT(A) and he could not put forth his defence. However, it was the bounded duty of the assessee to appear before the statutory authorities as and when called for. It is noticed that various opportunities were provided to the assessee for settling the issue but the assessee remained lethargic and unserious in pursuing his case. . However, we are of the view that lis between the parties has to be decided on merits so that nobody’s rights could be scuttled down without providing opportunity of being heard to the assessee. Hence, the matter is restored to the file of the AO to decide it afresh by providing one more opportunity of hearing and the AO is directed to consider the written submission while disposing of the case of the assessee, (supra) and the assessee will not seek any adjournment on frivolous ground and remain cooperative during the course of proceedings. Thus the appeal of the assessee is allowed for statistical purposes.
2.6 Before parting, we may make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by AO independently in accordance with law.
Order pronounced in the open Court on 20/01/2025.