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Facts
The assessee, a partnership firm engaged in trading, deposited Rs. 46,06,500/- in cash into its bank account during the demonetization period. The Assessing Officer (AO) added this amount to the assessee's income under Section 69A of the Income Tax Act and taxed it under Section 115BBE. The Commissioner of Income Tax (Appeals) upheld the AO's order.
Held
The Tribunal held that the assessee had provided sufficient details and documentary evidence to explain the source of the cash deposit, including cash sales, debtor realizations, and opening cash balance. The Tribunal noted that the AO had not invoked Section 145(3) and that the books of account were not rejected. The Tribunal also relied on judicial precedents that stated adding an amount already offered to tax would result in double taxation.
Key Issues
Whether the addition of cash deposit made by the assessee during the demonetization period was justified, and whether the levy of tax under Section 115BBE was appropriate.
Sections Cited
69A, 115BBE, 145(3), 143(3), 250
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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SIDDHARTHA NAUTIYAL & 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’) by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’], dated 07.01.2025 for assessment year (AY) 2017-18.
Grounds of appeal
raised by the assessee are as under: “1. Ld. CIT[A], NFAC, Delhi has erred in law and on facts to Confirm A.O.'s addition of Rs.46,06,500/- being cash deposit in RBL bank during demonetization period, ignoring the fact that entire cash is recorded in regular books of account and related sales have already been taxed in A.Y.2017-18. He further ignored the fact that appellant's books are audited and not rejected u/s 145[3[ of the Act. even under an assessment u/s 143[3] of the Act.
2. Ld. CIT[A], NFAC, Delhi has erred in law and on facts to confirm A.O.'s addition u/s 69A of the Act overlooking the statutory provisions of Section 69A can be invoked unless conditions thereof are humi natively fulfilled. He further ignored the fact that /AY.2017-18 Bhagwati Distributors there was neither any sales nor recovery from debtors in old currency notes of Rs.500/-and/or Rs.1000/- during demonetization period.
3. Ld. CIT[A], NFAC, Delhi has erred in law and on facts to confirm A.O.'s action to levy higher rate of tax at 60% u/s 115BBE of the Act ignoring the law that even if addition is sustained, it amounts to appellant's business income which can be taxed under the normal provisions of Income Tax, consequently higher rate of tax cannot be imposed by any stretch of imagination.”
The facts of the case in brief are that the assessee filed his return of income on 30.10.2017 for AY.2017-18, declaring total income of Rs.4,19,068/-. The case was selected for scrutiny under CASS. The assessee is a partnership firm, engaged in the business of trading of cigarette and FMCG. The appellant had deposited cash of Rs.46,06,500/- during demonetization in its account with RBL bank. In reply to the show cause notice, the assessee submitted cash book but did not submit any other details. The AO added the entire cash deposit u/s 69A of the Act and taxed the same u/s 115BBE of the Act.
Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The appellant submitted that the entire cash is recorded in the books of account and the related sales have already been taxed in the subject year. The books of account are audited and provisions of section 145(3) was not invoked by AO before making the addition. The submission of the appellant has been reproduced by CIT(A) at pages 3 to 6 of the appellate order. The CIT(A) did not accept the contention of assessee that the cash was out of sales, which is recorded in the books of account. He observed that no corresponding figure of cash deposit of earlier years was filed before him. The source of cash deposit has not been proved with documentary evidences. Further, AO has relied on /AY.2017-18 Bhagwati Distributors the decision of CIT vs. Sarwan Kumar Sharma where the addition u/s 69A of the Act was confirmed due to failure of the appellant to bring evidence on record. Hence, addition made by the AO was confirmed by CIT(A).
Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorized Representative (ld. AR) filed paper book giving various details and has also relied on various case laws. The ld. AR submitted that assessee is a trader of cigarettes and FMCG of ITC Ltd. and Godrej Consumer Product Ltd. He submitted that cash of Rs.46,06,500/- was deposited in its account No. 409000142343 with RBL Bank. The assessee had furnished all details and evidences as called for by the AO. Such details are in the paper book filed before the Tribunal. The details include copies of ITR and computation for AY.2017-18, tax audit report, audit report under the VAT Act for FY.2016-17, submission before CIT(A), VAT registration certificate, a chart for monthly sales and purchases, cash book monthly summary, monthly chart for cash deposits in the bank, notices issued in assessment proceedings and appellant’s reply, cash book from 08.11.2016 to 31.12.2016, RBL bank statement from 01.11.2016 to 31.12.20163 and bank book from 01.11.2016 to 31.12.2016. The ld. AR submitted that the turnover of the appellant was Rs.16,46,63,942/- which has been accepted by AO. Details of sales, purchases, debtors and expenses etc. were submitted before the AO during the assessment proceedings. The ld. AR took us through the paper book at pages 53 to 61 which includes show cause notice of the AO, reply of the appellant /AY.2017-18 Bhagwati Distributors and various details including the expenditure above Rs.1,00,000/-, cash book, ledger copy of debtors etc. Pages 60 and 61 of the paper book give details of responses to the notices during assessment proceedings u/s 143(3). The ld. AR also submitted that audited accounts, monthly VAT returns, monthly chart of sales and purchases, cash sales and cash deposits in RBL bank were submitted to the CIT(A) during appellate proceedings. The details of monthly sales and purchases are at page 47 of the paper book. He argued that despite all these details, the AO and CIT(A) have observed that no supporting details were filed by the assessee, which is factually not correct. He also argued that the sales and purchases have not been disputed by the AO and CIT(A). In the month of November and December, the appellant had deposited total cash of Rs.3,73,43,500/- out of which the AO has disputed cash deposit of Rs.46,06,500/- only. He further submitted that there was opening cash in hand as on 08.11.2016 of Rs.70,14,680/-. Thus, the appellant had sufficient cash balance to deposit a sum of Rs.46,00,000/- in the bank account. The appellant had deposited the above amount in five installments. He also submitted that the books of account were not rejected and provisions of section 145(3) was not invoked. He also argued that section 69A of the Act is not attracted because all cash deposits in the bank are appearing in the regular books of account maintained by the appellant. He submitted that various payments have been made to ITC Ltd. and Godrej Consumer Product Ltd., which is evident from the bank statement of RBL bank for the relevant period. The ld.
/AY.2017-18 Bhagwati Distributors AR relied on the decisions of hon’ble jurisdictional High Court of Gujarat in case of CIT vs. Vishal Exports Overseas Limited, Tax Appeal No.247 of 2009 and decisions of ITAT in cases of Neema Praful Sawlani vs. ITO, and Mr. Atish Singla vs. ITO, ITA No.1185/Del/2021.
On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the orders of lower authorities. He submitted that the appellant did not produce any evidence either before AO or CIT(A). Submission of the cash book is not enough to prove genuineness of cash deposits in the bank account.
We have heard rival submission of both the parties and perused the material available on record. We have also deliberated on the decision relied upon by both parties. There is no dispute regarding the cash deposit of Rs.46,06,500/- in the bank account of the assessee during demonetization period. The AO made the addition on the ground that the assessee did not explain the source of cash deposit during demonetization period. The CIT(A) upheld action of the AO by observing that the appellant has not proved the source of cash deposit with documentary evidences. The ld. AR submitted that complete details were submitted before the AO and the CIT(A). The AO has brushed aside the submission of the assessee and made the addition, which was confirmed by the CIT(A) without appreciating the details and evidences given during assessment and appellate proceedings. He submitted that the total turnover of the assessee was Rs.16,46,63,942/- and the assessee had /AY.2017-18 Bhagwati Distributors adequate cash in hand at all times during the year to make deposit in the bank account. He further submitted that the decision in case of Sarwan Kumar Sharma (supra) is not applicable because facts of the appellant are different. In the said case, the assessee had not maintained books of account. The assessee pleaded for estimation of income on turnover by working out peak credit. The Hon’ble Court refused for estimation at 8% of the turnover. However, facts of the appellant are different because the appellant is engaged in the business of cigarettes and FMCG for ITC Ltd. and Godrej Consumer Product Ltd and has maintained regular books of account. The cash deposit by the assessee was part of its turnover. Each and every entry of cash deposit is recorded in the books of account. After considering the facts discussed above, we find that the appellant has duly explained the source of the cash deposit in the bank account. As stated earlier, the cash in hand as on 08.11.2016 was Rs.70,14,680/-. Even in the bank account, the appellant had balance of Rs.96,43,972/- as on 08.11.2016. The appellant had submitted a chart of cash sales, cash recovery from debtors and cash deposited in the RBL bank during FY.2016-17 (AY.2017-18), which is as under:
Month Cash Received Cash Received Cash Deposited in RBL From Cash Sale From Debtor Party Bank CC Account Apr - 16 11411832 5S17066 18045500 May - 16 9910052 3699577 13415000 Jun-16 9525570 3688628 12763500 Jul-16 12084811 3532441 16402000 Aug-16 13948054 5948301 17684000 /AY.2017-18 Bhagwati Distributors Sep-16 11123803 5706595 15384500 Oct-16 11443963 6656609 17213500 Nov-16 10535376 2901693 15593500 Dec-16 16582103 4178131 21850000 Jan-17 493 1428551 0 Feb-17 0 899530 0 Mar-17 56100 1015997 965500 Total 106622157 45173119 149317000 It is seen from the above table that there was cash receipt of Rs.2,71,17,479/- (1,05,35,376 + 1,65,82,103) from cash sales in November and December, 2016. The assessee had also received cash from debtors Rs.70,79,525/- (29,01,693 + 41,78,131). The assessee had deposited cash of Rs.3,73,43,500/- out of which the AO has disputed only Rs.46,06,500/-. In case of the assessee, there is no dispute about the purchases from various reputed parties, such as ITC Ltd. and Godrej Consumer Product Ltd. Once the purchases are accepted, the corresponding sales cannot be disturbed without any conclusive evidence. The assessee has explained that the cash deposit was out of cash sales, debtor’s realization in cash and opening cash in hand. In any case, the amount of deposit was rather small as compared to the cash available with the assessee. In view of these facts, it is clear that the appellant has explained the source of cash deposit with proper details and evidences. 7.1 We also find that the decision relied upon by the ld. AR also supports the case of the appellant. The Hon’ble jurisdictional High Court in case of Vishal Exports Overseas Ltd. (supra) held that once the income is shown in the return of income and books of account, the addition of the same amount would result in double taxation. In view of above facts and the decision cited /AY.2017-18 Bhagwati Distributors supra, the order of CIT(A) is set aside and the AO is directed to delete the addition. The ground No.1 raised by the assessee is allowed.
The next issue pertains to levy of tax u/s 115BBE of the Act. Since the appeal has been allowed and addition is deleted, the ground No.2 is become academic in nature and does not require adjudication.
In the result, appeal of the assessee is allowed. Order is pronounced under provision of Rule 34 of ITAT Rules, 1963 on 09/05/2025