BIR BABU PANDEY,GOPALGANJ vs. ITO WARD 2(4), SIWAN

Assessment Year: 2017-18 Bir Babu Pandey. pressed by the assessee and partly allowed the appeal of the assessee. The finding of the Ld. CIT(A) is as under: “I have carefully gone through the findings of the AO in the assessment order as well as in the remand report. During the remand proceedings, the appellant has submitted the cash book for the period from 01.11.2016 to 31.12.2016 and the cash flow statement for the period from 01.04.2016 to 31.10.2016. The AO has analyzed the cash deposits in the bank account of the appellant. The AO has observed that the appellant had the average cash balance of Rs. 4 to 5 lakh in his bank account from the period from April to September. However, the total cash balance in the month of October was Rs. 21,49,961/-. The opening balance in the month of November was Rs. 21,49,961/- and the closing balance on 08.11.2016 was Rs. 42,95,408/- out of which the cash deposit of Rs. 14,20,000/- was made on 08.11.2016. Later on, the total cash of Rs. 34,27,000/- was deposited in the bank account of the appellant on 11.11.2016. Further, the cash deposit was once again decreased to the average cash of Rs. 4 to 5 lakh per month. Accordingly, the AO has given the findings that the cash book and the cash flow statement submitted by the appellant is an afterthought. Thus, the appellant has failed to explain the cash deposits even during the remand proceedings. The Ld. AR has objected the findings of the AO recorded in the remand report and submitted that the appellant was following the practice of depositing cash from the sale proceeds in the bank account for months and years. The audited books of the appellant we resubmitted before the AO during the remand proceedings but he did not bring the same on record and arbitrarily made it the ground for rejection. Further, the book profit has been duly accepted by the AO and the sales and purchases of the appellant have not been disputed. Therefore, the addition of the same would result in double taxation of income. The Ld. AR has also submitted the copy of VAT return for the period from 01.04.2016 to 31.03.2017, cash books from 01.11.2016 to 31.12.2016 and extracts of cash flow statement from 01.04.2016 to 31.10.2016. On perusal of the GST returns submitted by the appellant, I find that the appellant has shown the turnover of Rs. 13,75,08,826/- during the FY 2016-17. Further, there is no dispute that the appellant was in regular practice for making cash sales and depositing the same in his bank account. The AO has accepted the book profit of the appellant which also consists of the transactions recorded in the cash book. Further, no evidence of excess stock or any other unexplained investment was found during the survey. The sales were duly reflected in the GST return filed by the appellant. It can also not be denied that the appellant has been able to fully justify the amount of cash deposited during demonetization by furnishing independent corroborative evidence, Непсе, considering all the facts and circumstances of the case, it would be most Page 4 I.T.A. No.: 223/PAT/2024

Assessment Year: 2017-18 Bir Babu Pandey. judicious and fair to restrict the addition to 50%. Accordingly, the AO is directed to restrict the addition to Rs. 17,13,500/- being 50% of Rs. The ledger accounts produced at Ann-L matches with S.No. 01, Ann-N matches with S.No. 02 and Ann-K&M match with S.No. 03, which consists of Sundry Debtors having a debit entry of Rs. 34,98,793.33 in the name of the debtor M/s. Adarsh General Store and a credit entry of Rs. 18,89,343.33 in the name of JVL Rice, a JVL Group of Co. The net debit balance of Rs. 16,09,400/- was accordingly, shown as sundry debtors in the Audited Accounts (Not acknowledged by the AO and straightaway treated as difference). Now, if, we compare the supplier companies' account confirmation with that of audited books of accounts, the resultant figures are as below:- Comparison as on 01.04.2016 S. No. Title of Entry Amount as per Audited Books Of Accounts Amount as per Supplier's Confirmation Difference

Assessment Year: 2017-18 Bir Babu Pandey.

the appeal before this Tribunal.

Assessment Year: 2017-18 Bir Babu Pandey. “On perusal of the cash book from 01.11.2016 to 31.12.2016 it is seen that after depositing the cash into bank a/c on 11.11.16 the day wise cash sales as well as day wise cash balance drastically decreased on an average 4 to 5 lakhs. As discussed above it is clear that the assessee cleverly tried to enhance his cash sale for explaining the source of cash deposited during demonetization period. Hence source of cash deposit remains unexplained in the hands of the assessee.” Subsequently at the CIT-A stage all the above details were examined by the learned CIT-A and CIT-A gave his finding at page 12 of the paper book. The CIT-Appeal has found as below:- “The A.O. has accepted the book profit of the appellant which also consist of transaction recorded in cash book. Further, no evidence of excess stock or any other unexplained investment was found during the survey. The sales were duly reflected in the GST return filed by the appellant. It can also not be denied that the appellant has been able to fully justify the amount of cash deposited during demonetization by furnishing independent corroborative evidence. Hence considering all the above facts & circumstances of the case it would be most judicious & fair to restrict the addition to 50%. Accordingly, the A.O. is directed to restrict the addition to Rs.17,13,500/- being 50% of the Rs.34,27,000/-" In the above finding of the A.O. & learned CIT-A the cash deposit during demonetization period has been accepted completely on the basis of books of a/c and found to be true. Therefore, the arbitrariness exercised by the A.O. in his remand report at page 18 of paper book on the basis of wild guesses & assumptions cannot sustain unless until he proves to the contrary on the basis of corroborative evidence. Further the CIT-A in his finding at page 12 of paper book clearly states that the deposit during demonetization period is fully explained. Then how can learned CIT-A be injudicious in allowing only 50% of the cash deposited during demonetization period as judicious and fair. Once the sources are explained & accepted the question of partly being judicious does not arise and the whole sum of Rs.34,27,000/- should have been allowed instead of 50% of it being Rs.17,13,500/-

Assessment Year: 2017-18 Bir Babu Pandey. unexplained cash credit and added to the total income without examining the books of account and the submissions. Subsequently, at the behest of the CIT-A, when the remand on this point was called by the A.O., A.O. in his remand report at page no. 19 of the paper book narrated a different story and came out with a different figure of Rs. 18,89,393/- as suppressed income and replying to the CIT-A in his remand report. In the hearing before the CIT-Appeal all the details, ledgers, vouchers, as appearing at page 12 of paper book were furnished and examined and the CIT-Appeal on the basis of his finding at page 15 of the paper book held as below:-“The increase in the liability of Rs. 10,94,345/-, in respect of M/s JVL group of companies, has not been disputed by the Ld. AR. The Ld. AR has submitted the ledger accounts of JVL company, copy of the audited balance sheet and the ledger accounts of the JVL group in the books of the appellant. However, the Ld. AR has failed to submit the confirmations from the companies and submitted that the JVL group of companies was under liquidation at the time of scrutiny. Considering the findings of the AO and the submission of the Ld. AR, I find that the appellant has been provided with the sufficient opportunities to explain the increase in the liability with corroborative evidence. However, the appellant failed to come up with documentary evidences to prove his claim. All the evidence submitted by the Ld. AR are related to the appellant and the appellant has not been able to present any confirmation from creditors or any other independent evidence. Accordingly, the addition of Rs. 10,34,345/- is sustained and the ground is dismissed”. However, the facts are completely different and the finding of A.O. and CIT- Appeal are defective and unsustainable on the following facts and the ground:- a) The assessee had an audited Balance Sheet & Profit & Loss which is duly filed on the IT portal with Form 3CB-CD at page 26 of the paper book. b) The detailed trial balance of the assessee's books is given at page 41 to 43 of the paper book. As per the trial balance the opening & closing balances of the JVL Group depicted at page no 42 are as below:- Particulars JVL Foods Balance on 01.04.2016 Debit during the year Credit during the year Balance as on 31.03.2017 Oil & 5,60,924.380 4,95,52,896.00 4,87,57,847.35 2,34,124.27Dr JVL Rice 18,89,393.330 18,89,393.33 Nil Nil Transfer to JVL Group Company JVL Group Of Nil Nil 18,89,393.33 18,89,393.330 Companies Page 8 I.T.A. No.: 223/PAT/2024

Assessment Year: 2017-18 Bir Babu Pandey. JVL Agro 13,25,625.000 53,01,241.00 Industries(M) 39,77,566.10 1,950.100 On the summation of the above ledgers the balance of JVL Group as on 31.03.2017 shall be as below:- Particulars Credit Balance JVL Debit balance Net balance appearing in JVL Group Of Group Balance Sheet 18,89,393.33/- Companies JVL Oil & Foods 2,34,124.24/- Industries (Nf) NIL NIL Cr1,950.10/- as on B/s JVL Agro NIL NIL Industries (Mf) The above JVL Group of companies statement enclosed at page 28 to 40 of paper book as Annexure-F also shows a debit balance of Rs.16,55,269.06/- comprising of JVL Rice Mill, JVL Agro Industries balances. The same balance of Rs. 16,55, 269. 39 - is appearing in the Balance Sheet at page 26 of the paper book & thus there is no difference. Similarly in case of JVL Agro Industries (M) which is in fact JVL Groups of Companies -Mustard account the companies statement at page 28 of the paper book gives a debit balance of 1,950.10/- as against the audited B/s at page 26 of paper book balance Rs. 1,950.10/-. Therefore, it is true & evident that there is no mismatch of account balances of JVL Group of companies as per companies statement as well as JVL group of companies statement enclosed. Therefore, the arbitrary addition of Rs. 10,94, 345/- sustained by the CIT-A is completely incorrect & is not at all sustainable.”

We have considered the submissions made. It was submitted by the Ld. AR that the assessee is a FMCG dealer having turnover of around ₹13,75,08,826/-. During the demonetization period cash was deposited in the bank and as the assessee deals mostly in cash for business transactions. It was the Ld. CIT(A), the GST returns were filed and the cash balance available was shown at ₹42,95,408/- as on 07.11.2016 and deposits of Rs. 14,20,000/- on 08.11.2016 and subsequently were made in the bank account. Our attention was drawn to page 8 of the Ld. CIT(A)'s order which is at page 12 of the paper book. The Ld. CIT(A) upheld the disallowance to the extent of 50% and granted relief for ₹17,13,500/-. It was submitted that the cash book was produced during the remand proceeding as well. As regards the balance of JVL Group being treated as undisclosed, the closing balance as Page 9 I.T.A. No.: 223/PAT/2024

Assessment Year: 2017-18 Bir Babu Pandey. on31.03.2016 and the closing balance on 31.03.2017 were considered by the Ld. AO and the difference has been added without examining anything else in this regard. It is submitted that the books of account of the assessee were audited and the confirmation of the suppliers, the ledger copy etc. were filed and the closing balance is less than the opening balance in the case of JVL Group of Companies. Since JVL Group was under liquidation, the confirmation at the time of audit was not available and therefore the auditor had made the note. The assessee submitted that the Ld. AO could have verified with the liquidator these details. The Ld. AR requested that the addition confirmed on account of cash deposit may be deleted and as regards the difference in JVL account, the matter may be sent back to the Ld. AO for verification who may request the liquidator to file the confirmation as JVL is under liquidation. The Ld. DR did not oppose this request of the Ld. AR.

Assessment Year: 2017-18 Bir Babu Pandey. other hand he has confirmed 50% of the cash deposited during the demonetization period. Once the Ld. CIT(A) had accepted that the assessee had sales of about ₹13.75 Crore during the year and was carrying on cash transactions, the money from which was deposited in the bank account, there was no justification for sustaining 50% of the amount without giving any basis for upholding the addition of 50%. Hence, ground no. 1 relating to addition of ₹17,16,500/- is allowed and the Ld. AO is directed to delete the same. Hence, Ground No. 2 is allowed.