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Facts
The assessee, a wholesale trader, filed his return for AY 2017-18. During demonetization, he deposited Rs. 34,43,760/- in his bank account, out of which Rs. 12,29,000/- was in Specified Bank Notes (SBNs). The Assessing Officer (AO) treated these SBN deposits as unexplained cash credit and added it to the assessee's total income, taxing it under section 115BBE.
Held
The Tribunal held that the assessee had adequately explained the source of the cash deposit of Rs. 12,29,000/- during the demonetization period, considering it was from available cash balance from regular business sales prior to demonetization. The addition made by the AO was found to be unjustified, and the levy of interest under Section 115BBE was also not sustainable as the primary addition was deleted.
Key Issues
Whether cash deposits made during the demonetization period, particularly in SBNs, can be treated as unexplained cash credit if the assessee provides explanations from regular business turnover and cash balance? Whether the levy of interest under Section 115BBE is sustainable when the primary addition is deleted?
Sections Cited
68, 115BBE, 143(3), 69A
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Before: SHRI TR SENTHIL KUMAR & SHRI BIJAYANANDA PRUSETH
आदेश / O R D E R
PER BIJAYANANDA PRUSETH, AM:
This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), dated 10.01.2024 by the National Faceless Appeal Centre, Delhi/ Commissioner of Income-tax (Appeals) [in short, ‘CIT(A)’] for the assessment year (AY) 2017-18, which in turn arises out of assessment order passed by Assessing Officer (in short, ‘AO’) u/s 143(3) of the Act dated 27.12.2019.
Grounds of appeal
raised by the assessee are as under:
1. The learned CIT(A) erred in confirming the addition of Rs.23,29,000/- u/s 69A r.w.s. 115BBE of the Act, treating genuine cash deposits during demonetization as unexplained, without properly appreciating the facts and evidence.
A.Y 17-18 Pareshbhai N Shah 2. On the facts and in circumstances of the case, the learned CIT(A)/NFAC has grossly erred in dismissing the appeal for non-prosecution, despite appellant’s request for adjournment, thereby violating the principles of natural justice.
3. The learned CIT(A) failed to consider that the cash deposits represented business turnover/receipts duly recorded, and not unexplained money, and hence the provisions of section 69A were wrongly invoked.
4. The learned CIT(A) has, in law and n facts, erred by upholding taxation under section 115BBE at 60%, which appears unjustified and excessive due to the absence of a proper finding regarding the ‘unexplained’ nature of the money.
The initiation of penalty proceedings u/s 271AAC is premature and unjustified since no penalty order has been passed.
6. The appellant craves leave to add, amend, alter or withdraw any of the above grounds at the time of hearing.”
Brief facts of the present case are that assessee filed his return of income for AY 2017-18 declaring total income of Rs.2,82,370/-. The case was selected for scrutiny under CASS and notice u/s 143(2) was issued on 22.09.2018. Thereafter, notice u/s 142(1) was issued, but assessee did not respond. Thereafter, a show cause notice was issued on 03.12.2019 wherein non-compliance by the assessee to various notices was indicated. It was also informed that the assessee deposited cash of Rs.34,43,760/- during the demonetization period in his bank account held with Bank of Baroda. If the source of the cash deposit was not explained by the assessee, the same would be treated as cash credit u/s 68 of the Act and added to the total income of the assessee. In response, the assessee filed on-line submission and contended that he is a wholesale trader of Vimal Pan Masalla and Shikari Bidi. The books of account are maintained in regular course of business, which are supported A.Y 17-18 Pareshbhai N Shah by purchase and sale vouchers, expenditure details, cash book, stock register, journal etc. The books of account are audited and copy of the same was submitted to the department. It was further submitted that the assessee is regularly depositing nearly the same amount of cash in his bank account every month out of sale proceeds from his regular business. The assessee makes RTGS to the creditors for further purchases out of the cash deposited in the bank account. Out of total cash deposit of Rs.34,43,760/-, the specified banking note (SBN) was only Rs.12,29,000/-. Hence, no addition is needed. 3.1 The AO considered the submission of the assessee but did not accept the same and observed that cash deposit of Rs.12,29,000/- by way of SBN was from unidentifiable persons. He further observed that Rs.3,00,000/- and Rs.9,29,000/- were deposited in cash on 11.11.2016 and 12.11.2016 and no such big deposits were made upto 08.11.2016. The AO held that assessee failed to justify the source of the above cash deposits with documentary evidences. Therefore, he added Rs.12,29,000/- u/s 68 and taxed the same u/s 115BBE of the Act. The total income was determined at Rs.15,11,370/- as against returned income of Rs.2,82,370/-.
Aggrieved by the addition made by AO, assessee filed appeal before CIT(A). The CIT(A) issued various notices which were not complied with by the assessee. The assessee had taken adjournment once but did not respond to the other notices. Therefore, the CIT(A) dismissed the appeal for non- A.Y 17-18 Pareshbhai N Shah prosecution. He has also dismissed the appeal on merit because the assessee failed to submit ground-wise written submission with supporting evidences.
5. Aggrieved by the order of CIT(A), the appellant has filed present appeal before the Tribunal. The Ld. AR for the assessee filed written submission and a paper book containing various details including copies of audit report, month- wise cash ledger, month-wise bank book, cash ledger, details of cash withdrawals, details of cash deposits of November, 2016 and written submission before the AO. He submitted that the appeal was dismissed ex parte despite appellant’s compliance record. Due to change of the consultant, the appellant did not receive the notices issued by the CIT(A). In support, he has enclosed a screen shot wherein the view assigned form of the CA was deactivated. He, therefore, submitted that the appellant could not attend for bona fide reasons. In any case, all the details had been submitted to the AO which was before the CIT(A). Therefore, the CIT(A) should not have dismissed the appeal of the appellant. 5.1 The Ld. AR further submitted that the books of account are regularly maintained by the assessee and are duly audited u/s 44AB of the Act. During demonetization, cash of Rs.12,29,000/- (SBN) were deposited in the bank account. This was out of the available cash balance including cash sales before demonetization period. The assessee has been regularly depositing cash for day-to-day sale throughout the year. The total turnover of the year was Rs.5,01,70,254/- and month-wise sales are about Rs.40 to 45 lakhs (page-46 of A.Y 17-18 Pareshbhai N Shah the PB). The deposit of Rs.12,29,000/- in November, 2016 is far below the monthly average and is consistent with business activities. The appellant had also deposited cash of Rs.29.07 lakhs last year during November, 2015. He further submitted that even prior to the scrutiny, the Department has called for the details of cash deposited during demonetization period, which was duly replied to and being satisfied, the AO did not issue further query. The AO has also not invoked Sec. 145(3) to reject the books of account. He also submitted that once the books are accepted, the source of cash receipts therein cannot be treated as unexplained cash deposit. The Ld. AR relied on the decisions of Hon’ble jurisdictional High Court in case of (i) DCIT vs. Rohini Builders 256 ITR 360 (Guj) (ii) CIT vs. Prdeep Shantilal Patel 221 Taxman 436 (Guj); (iii) CIT vs. Smt. Harshila Chordia 298 ITR 349 (Raj); (iv) ITO vs. Pooja Prints Pvt. Ld. (ITAT Mumbai) and (v) S.M.I.L.E Microfinance Ltd. vs. ACIT in WP (MD) No.2078 of 2020 & 1742 of 2020 dated 19.11.2024 (Mad.).
On the other hand, Ld. SR-DR for the revenue relied on the orders of lower authorities.
We have heard both parties and perused the materials available on record. We have also deliberated on the decisions relied upon by the Ld. AR. The appellant is a wholesale trader of Vimal Pan Masalla and Shikari Bidi. There is no dispute regarding the fact that the appellant had deposited cash of Rs.34,43,760/- during the demonetization period including cash of Rs.12,29,000/- by way of SBN in bank account. The total turnover of the A.Y 17-18 Pareshbhai N Shah appellant in the subject year was Rs.5,01,70,254/-. He has been consistently depositing cash in the range of Rs.40-45 lakhs per month from the cash sales of his regular business in his bank account maintained with Bank of Baroda. The appellant makes RTGS to the suppliers/creditors for further purchases out of the cash deposited in the bank account. The AO has added only the cash deposit by way of SBN of Rs.12,29,000/- out of the total cash deposit of Rs.34,43,760/-. When the turnover and cash deposit of the appellant for the whole year has been accepted, there was no need to make separate addition towards the deposit by way of SBN without bringing any evidence on record that the said amount was from a source other than the regular business of the assessee. The appellant is engaged in wholesale trade of Vimal Pan Masalla and Bidi and deals with large number of buyers. Once the sales recorded in the books and the turnover are accepted, separate addition cannot be made by bifurcating the deposits into regular currency and SBN. The SBN was legal tender prior to demonetization and the appellant has deposited the said amount, which was received on account of cash sales prior to the demonetization period. The Hon’ble jurisdictional High Court in case of CIT vs. Vishal Exports Overseas Ltd., Tax Appeal No.2471 of 2009 dated 03.07.2012 upheld the finding of the Tribunal that when the assessee had already offered sales realization and such income is accepted by the AO, addition of the same amount once again u/s 68 of the Act would tantamount to double taxation of same income. The Mumbai Tribunal in case of R.S. Diamond India Pvt. Ltd. vs. A.Y 17-18 Pareshbhai N Shah ACIT, 145 taxmann.com 545 (Mum-Trib) held that where the assessee deposited cash during demonetization period, since deposit was made from cash balance available in the books of account, there was no question of treating same as unexplained cash credit.
7.1 In view of the above factual and legal positions, we find that the appellant has been able to explain properly the source of the cash deposit of Rs.12,29,000/- during the demonetization period. Hence, the order of CIT(A) is set aside and the AO is directed to delete the impugned addition. The ground raised by the appellant is, accordingly, allowed.
Next ground pertains to levy of interest at enhance rate u/s 115BBE of the Act. Section 115BBE of the Act applies only where total income of an assessee includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D of the Act. Since we have been deleted u/s 68 of the Act, the consequential levy u/s 155BBE of the Act does not survive. This ground raised by appellant is allowed.
In the result, appeal of the assessee is allowed for statistical purposes.