RAJESHBHAI KANTILAL POPAT,SURAT vs. INCOME TAX OFFICER, WARD-2(2)(1), SURAT

This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as “NFAC/Ld.CIT(A)] dated 02.02.2024 for assessment year (AY) 2017-18, which in turn arises out of assessment order passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as `the Act') 18.12.2019. The assessee has raised following grounds of appeal: “(1) The Id. CIT(A) has erred in law and on facts in confirming the action of the Id. AO of making addition u/s 69A of the Act to the tune of Rs.77,13,800/-. (2) The Id CIT(A) has erred in law and on facts in confirming the action of the Id. AO of charging tax u/s 115BBE of the Act on the above addition of Rs.77,13,800/-. (3) Each ground of appeal is independent and without prejudice to the other ground / grounds of appeal. (4) The appellant craves leave to add, amend, alter, modify, substitute, delete, change or vary as all or any of the ground or grounds of appeal.

Rival submissions of both the parties have been heard and record perused. The Ld. Authorized Representative (Ld.AR) of the assessee submits that though case of assessee was selected for “scrutiny” on account of cash deposit during demonetization period. However, the addition is not based on account of deposit of 500/- denomination note rather on account of cash deposits in two bank accounts with account No.00210120033476 and account No.00230110053845 with The Varachha Co-op. Bank Ltd. During assessment, Assessing Officer was of the view that assessee is maintaining three bank accounts, out of which cash credit entries in account No.*****3845 and *****3476 have not been debited from cash book which indicates that these two bank accounts are undisclosed bank accounts. The Assessing Officer prepared a summary of total cash deposit in those bank accounts aggregating Rs.77,13,800/-. The Assessing Officer on the basis of his observation, issued show cause notice. The assessee furnished detailed reply. The assessee explained that he is engaged in the business of trading of cattle food and one of the bank account was in the name of R.K.Patel Food Pvt. Ltd. Matangi Cotton Industries, Nilkanth Cotton Industries, which is proprietary concern of assessee, wherein majority of cash deposit and subsequent transfer of purchase of goods were made. The said account is current account and deposit shown in the said current account represents cash sales and debit in the payment against purchase. The assessee furnished complete details with regard to both the bank accounts. The accounts of assessee are audited. The debit entry clearly reflects that such debit entry was in favour of R.K./Patel Food Pvt. Ltd. Matangi Cotton Industries, Nilkanth Cotton Industries, which is one of the primary food for cattle. During assessment, assessee furnished certain purchase bills and submitted before Assessing Officer. The Assessing Office rejected the contention of assessee and made addition of entire amounts in cash credit in both the bank accounts without giving any benefit of purchase. Majority of amount were debited on account of purchases. It is settled law that gross sales which is deposited in the form of cash income never be the profit of assessee without giving the Assessing Officer erred in adding entire cash as income of assessee without giving benefit of purchase. The Hon'ble juri ictional High Court and co-ordinate Bench of this Tribunal in a series of decisions have already allowed that gross sales cannot be considered as “income