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Facts
The assessee, a travel agent, declared income of Rs. 17,84,250/- for AY 2017-18. The Assessing Officer (AO) added Rs. 35,64,800/- as unexplained cash credit under section 69A and also added Rs. 14,689/- for excess standard deduction. The total income was determined at Rs. 53,63,740/-.
Held
The Tribunal partly allowed the appeal. For Ground No. 1, the addition of Rs. 35,64,800/- was restricted to 20% to avoid revenue leakage. For Ground No. 2, the levy of tax under section 115BBE was disallowed as the section was not retrospective, and the addition was to be taxed at the normal rate.
Key Issues
Whether the cash deposits made during the demonetization period are unexplained and taxable under Section 69A and 115BBE of the Income Tax Act, 1961.
Sections Cited
69A, 115BBE
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Before: SHRI PAWAN SINGH & 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 25.06.2024 by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment year (AY) 2017-18.
The grounds of appeal raised by the assessee are as under: “1) The learned CIT(A) grossly erred in confirming addition of Rs.35,64,800/- as unexplained cash credit u/s. 69A of the Act which were received as turnover in the business of tours and travels prior to demonetization period as discussed in para 6.9 of the assessment order. 2) The learned CIT(A) grossly erred in confirming application of provisions of section 69A and section 115BBE of the Act though the amount were received as part of sales in the course of running business of tours and travels. 3) The appellant reserves right to add, alter and withdraw any grounds of appeal.”
/AY.2017-18 Ravi Shankar Hari Malpani 3. Brief facts of the case are that the assessee filed his return of income for AY.2017-18 on 30.10.2017, declaring total income of Rs.17,84,250/-. The case of assessee was selected for limited scrutiny under CASS for the following reasons: (i) cash deposits during the year and (ii) sales turnover / receipt. Various notices along with questionnaire were issued and served on the assessee. The assessee was engaged in the business of travel agent and tour operator in the name of M/s Kashish Holidays. During the year under consideration, the assessee had deposited a total cash of Rs.7,20,14,191/- in three different banks accounts. The Assessing Officer (in short, ‘AO’) issued show cause notice dated 19.12.2019, requesting the assessee to explain the source of cash deposit and difference in turnover as per service tax record and profit and loss account. The assessee submitted reply which is at para 4.3 of the assessment order. The AO observed that the assessee has deposited cash of Rs.47,32,300/- during demonetization period. The cash in hand as on 09.11.2016 was Rs.11,67,500/-, therefore remaining cash deposit of Rs.35,64,800/- was added u/s 69A of the Act because assessee failed to explain the source of said cash and he failed to substantiate the same with cogent reasons and documentary evidence. The AO also added Rs.14,689/- being excess standard deduction claimed from income from house property. The total income was determined at Rs.53,63,740/- against returned income of Rs.17,84,250/-.
Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The grounds of appeal
and submission of the appellant are extracted at pages 2 /AY.2017-18 Ravi Shankar Hari Malpani to 5 of the appellate order. The CIT(A) has also reproduced the assessment order at pages 5 to 13 of the appellate order. The findings of the CIT(A) are at pages 14 to 17 of the appellate order. The ld. AR submitted that there was huge cash on hand on 31.05.2016 for Rs.31,33,548/-, which decreased and increased in the subsequent months from July, 2016 to October, 2016. The assessee had also deposited huge cash of Rs.1,01,43,050/- in the bank account in Oct, 2016 before the demonetization period. The assessee had received cash of Rs.46,42,878/- in the first week of November, 2016 due to high bookings in the pre-Diwali period. The CIT(A) observed that the burden was on the assessee to establish the source of cash deposits in order to fall outside the scope of unaccounted cash. There are two things to be proven that either the appellant had cash balance in SBNs prior to demonetization or he had accepted SBNs after announcement of demonetization in his regular course of business. The appellant has failed to submit any evidence to prove his claim. Further, the appellant has not submitted month-wise cash sales / cash deposits in FY.2015-16 and 2016-17. Therefore, it is not possible to analyse the pattern of cash collection deposits in FY.2016-17 as compared to the preceding years also. The CIT(A) relied on the decision of Smt. Srilekha Banerjee and Others vs. CIT, Bihar & Orissa, reported in 1964 AIR 697, dated 27.03.1963,
49. ITR 112 (SC) and held that the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source. The appellant has not discharged his primary onus to explain satisfactorily with supporting /AY.2017-18 Ravi Shankar Hari Malpani evidence about the nature and source of cash deposited of Rs.35,64,800/-, which is out of business receipts of the assessee generated during the year under consideration. The CIT(A) has confirmed the addition made by AO and treated the same as deemed income u/s 69A taxable u/s 115BBE of the Act. Hence, the CIT(A) dismissed the appeal of the assessee.
5. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. The learned Authorised Representative (ld. AR) of the assessee submitted that the assessee is engaged in the business of travel agent and tour operator in the name of M/s Kashish Holidays. The very nature of business is such that assessee used to receipt cash clients for various tours and vacations. The ld. AR submitted that even in group tour, cash is collected by main person of the group and deposited for further payment to different agencies. He, therefore, argued that it is quite obvious to hold cash on hand at any point of time, more particularly prior to Diwali. The ld. AR submitted that many people gave advances in cash because major tours are around Diwali period. This is the main reason for substantial amount of cash on hand. The ld. AR submitted that the appellant had filed a chart of position of cash month-wise which is at page 6 of the assessment order. There was huge cash on hand on 31.05.2016 for Rs.31,33,548/- which increased/decreased in the subsequent months i.e. from July, 2016 to October, 2016. The appellant had also deposited huge amount of Rs.1,01,43,050/- in October, 2016 i.e., before the demonetization period. Hence, there is nothing unnatural in the monthly details of cash receipts / cash payment / cash deposit in /AY.2017-18 Ravi Shankar Hari Malpani the bank account.The ld. AR further submitted that appellant had received cash for Rs.46,42,878/- on account of booking advance for travel and vacation in the first week of November, 2016 due to pre-Diwali period. The ld. AR submitted that the AO did not find anything otherwise in reference to chart of cash receipts and cash payments month to month from April, 2016 to 8th November, 2016. He also submitted that the AO has not rejected the book results and, therefore, no addition ought to be made merely on surmises and conjectures or mere by stating that there is no satisfactory explanation. The cash deposit in bank is in the range of Rs.61,49,055/- in May, 2016 to Rs.1,01,43,050/- in October, 2016. Hence, deposit of cash for Rs.47,32,300/- (partly in new notes for Rs. 4,20,000/-) in the month of November/December, 2016 (09.11.2016 to 31.12.2016) is quite normal. 5.1 The ld. AR in the alternative, submitted that even if some part of cash is not explained to the satisfaction of the AO, then also entire cash sales ought not to be taxed as income; rather profit embedded in such cash sales ought to be taxed to avoid possible leakage of income. He relied on the following decisions: (i) Amrita Gem (P) Ltd vs. ITO (ITA No. 181/SRT/2023) and (ii) Kediam Gem (P.) Ltd. vs. ITO (ITA No. 756/SRT/2023).
On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) of the revenue supported the order of lower authorities. He submitted that the AO has added the cash deposited during the demonetization period because assessee could not satisfactorily explain the nature and source of the /AY.2017-18 Ravi Shankar Hari Malpani said deposit. He further stated that the SBN notes were deposited on different dates and not on a single day. He argued that the order of lower authorities may be upheld.
We have heard both the parties and perused the materials available on record. We have also carefully perused the decisions relied upon by the ld. AR. In Ground No.1, assessee has contested addition of Rs.35,64,800/- u/s 69A of the Act, being cash deposited in the bank account during demonetization period. It was submitted that assessee is engaged in the business of travel agent and tour operator where receipt of cash from the customers is normal. He submitted that cash sales/cash receipt were Rs.27,89,121/-, Rs.80,26,120/-, Rs.59,82,233/-, Rs.72,34,529/-, Rs.60,76,574/-, Rs.87,99,559/-, Rs.1,13,22,403/- and Rs.46,42,878/- in the months of April, 2016 to 8th November, 2016. The amounts of cash deposited in the bank account were Rs.43,56,800/-, Rs.61,49,055/-, Rs.88,02,840/-, Rs.83,89,000/-, Rs.76,24,500/-, Rs.85,89,350/-, Rs,1,01,43,050/- and Rs.35,45,100/- respectively during the same period. Hence, the cash deposit during November, 2016 cannot be said to be abnormal and unexplained. He has relied on the decision of the ITAT, Surat Bench in the case of Amrita Gems Pvt. Ltd. (supra) and Kediam Gem Pvt. Ltd. (supra), where 10% of profit was estimated on cash credit during demonetization period. We find from the assessment order that the assessee had deposited cash of Rs.47,32,300/- out of which cash in hand as on 09.11.2016 and amount deposited in new currency were allowed and remaining amount of Rs.35,64,800/- was added u/s 69A of the Act. The ld. AR has /AY.2017-18 Ravi Shankar Hari Malpani strongly argued against separate addition of the cash deposit during demonetization period. We are not fully convinced about the argument of the ld. AR. The assessee is engaged in the business of travel agent and tour operator but he has deposited the SBN on different dates from 10.11.2016 to 12.11.2016 as tabulated at page 7 and 8 of the assessment order. If the assessee had the old SBN before demonetization period, he would have deposited the same on a single day and not on different dates. It is an undisputed fact that the assessee has not given details of the depositors of the impugned cash during demonetization period. He has not correlated the deposit with bookings of tickets/hotels etc. There is no one-to-one nexus between the depositors and the services provided by the assessee. Therefore, the argument of the ld. AR cannot be totally accepted. The Co-ordinate Bench of Surat in the case of Amrita Gems Pvt. Ltd. (supra) has held that to avoid possibility of revenue leakage, disallowance of 10% of cash generated during demonetization period would meet the ends of justice. In the present case, there are cash deposits during demonetization period as well as remaining period of the year. Hence, we direct the AO to restrict the addition to 20% of the cash deposit of Rs.35,64,800/- to avoid possibility of revenue leakage and delete the remaining amount. Accordingly, this ground is partly allowed.
In the result, the ground No.1 is partly allowed.
The ground No.2 pertains to levy of tax u/s 115BBE of the Act. The ld. AR has submitted that the CIT(A) wrongly confirmed application of the aforesaid /AY.2017-18 Ravi Shankar Hari Malpani provisions though the amounts were received as part of sales in the course of running the business of tours and travels. He submitted that assessee has no other business except tours and travels. Hence, the source of cash deposit was explained and therefore, question of making addition u/s. 69A does not arise. The provisions of section 115BBE are applicable only when there is no source of receipts. The ld. AR relied upon the following decisions: (i) DCIT vs. Ramnarayn Birla (ITA No.482/JP/2015), (ii) ACIT vs. Sanjay Bairathi Gems Ltd (ITA No.157/JP/2017), (iii) Fashion World vs. ACIT (ITA No. 1634 / Ahd/2006) and (iv) Dagina Jewellers (ITA No.30/SRT/2022).
On the other hand, ld. Sr. DR for the revenue supported the order of lower authorities.
We have heard both the parties and perused the material available on record. We have also deliberated upon the case laws relied upon by the ld. AR. The provisions of section 115BBE of the Act was enacted on 15.12.2016 and hence cannot be applied for the year under consideration. The ld. AR has relied on various decisions which are placed in the paper book. We find that the Division Bench of this Tribunal in cases of Samir Shantilal Mehta vs. ACIT, in Arjunsinh Harisinih Thakor vs. ITO, in Jitendra Nemichand Gupta vs. ITO, in ITA No.211/SRT/2021 and Sanjaybhai Mansukhbhai Patel vs. DCIT, in ITA No.869/SRT/2023; the Indore Bench in DCIT vs. Punjab Retail Pvt. Ltd., in ITA No.677/Ind/2019 and the Jabalpur Bench in ACIT vs. Sandesh Kumar Jain, in ITA No.41/Jab/2020 held that applicability of amended /AY.2017-18 Ravi Shankar Hari Malpani provision of Section 115BBE of the Act is not retrospective. There is no reason not to follow above decisions. Thus, the AO is directed to tax the addition at normal rate of tax and applicable surcharges and cess, if any. The the assessee is, accordingly, allowed relief against taxing the addition at higher rate u/s 115BE of the Act. This ground is allowed.
In the result, ground No.2 is allowed.
In the combined result, appeal of the assessee is partly allowed. Order is pronounced in the open court on 29/01/2025.