NARANJI RAJARAM DAVE,PORBANDAR vs. INCOME-TAX OFFICER, WARD-2(3), PORBANDAR , PORBANDAR, GUJARAT

Brief facts, as discernible from the orders of lower authorities are that assessee before us is an individual and has filed his return of income for assessment year (A.Y.) 2017-18, u/s 139 of the Income-tax Act, 1961, on 29.10.2017. The case of the assessee was selected through CASS (Complete) Scrutiny for A.Y. 2017-18. A notice u/s 143(2) of the Act, was issued to the assessee, on 21.09.2018, through ITBA and accordingly duly sent to the assessee on e-filing account of the assessee. Thereafter, during the course of assessment proceedings, notices u/s 133(6) of the Income-tax Act, 1961 were issued to various parties/banks. The assessing officer noticed that during the demonetization period, the Assessee has deposited Rs. 50,80,000/- in his two bank accounts of Porbandar Commercial Co-operative Bank Ltd and HDFC Bank Ltd. Therefore, assessing officer, issued show -cause notice to the assessee, to explain the cash deposit in the bank accounts.

However, assessing officer rejected the above contention of the assessee and observed that documents submitted by the assessee are not genuine, hence Rs. 50,80,000/-, cash deposited by the assessee, was treated as assessee's unexplained money u/s 69A and the same was added to his total income for assessment year (A.Y.) 2017-18.

Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the Ld. CIT(A), who has confirmed the action of the assessing officer. 3 Naranji R. Dave On perusal of the impugned assessment order, the ld. CIT(A) noted that assessing officer has clearly discussed the matter in the Assessment Order as to why the invoices/bills, confirmations from advance parties furnished are not acceptable. The assessing officer after examining the details as on record, has noticed that the assessee has made cash deposits of Rs. 50,80,000/- in SBNs during the demonetisation period. The assessee has claimed that the amounts are received from sales of goods in cash and advances received from the debtors for purchase of goods. It is also seen that the assessee has shown advances received 39 times from 16 different parties from 01st November, 2016 to 11' November, 2016. However, no reasonable explanation was provided by the assessee regarding sudden increase in cash advance. The reason attributed by the assessee cannot be accepted as genuine as there is no valid explanation provided by the assessee. The assessing officer has also stated that the assessee has inflated cash sales and cash advance sales to explain the source of unaccounted money deposited, which is not found true applying theory of preponderance of probability in the assessee`s case. Based on these facts and circumstances, the learned CIT(A), sustained the addition made by the assessing officer.

Aggrieved by the order of the Ld. CIT(A), the assessee is in further appeal before us.

Learned Counsel for the assessee vehimentaly argued that during the assessment proceedings, the assessing officer has made the addition u/s 69A of the Act, by treating the cash deposits made during the demonetisation period as unexplained without considering necessary evidences and documents submitted during the course of assessment proceedings. Further, ld.Counsel stated that the addition made by the assessing officer was without bringing any tangible material on record and based on assumptions and presumptions. The ld.Counsel has stated that the assessing officer 4 Naranji R. Dave had failed to consider the cash book, sales book, confirmation letters, bank book, books of account, audit report, etc. The assessing officer has failed to discharge his burden of proof by bringing on record any evidence or information that the assessee has not undertaken the aforesaid transactions by way of advance cash sales/cash sales. The business of the assessee is cash oriented, and therefore out of the total sales of Rs.12,41,40,286/-, the assessing officer has himself accepted the cash sales to the tune of Rs.8,56,42,000/-. Therefore, remaining cash sales of Rs.50,80,000/-, should also be accepted.

The learned Counsel further stated that the amounts deposited are out of cash sales and advance amount received from debtors. As such, the primary onus on assessee, has been discharged. The ld.Counsel has stated that the amount received is cash sales, which can be substantiated by the sale book and cash book and by way of audited books of accounts. The sale of 50,80,000/- has already been recorded in the books of accounts which are audited and assessee had offered the tax on the same by way of net profit. Therefore, to make again addition in the hands of the assessee for Rs. 50,80,000/-, is tantamount to double taxation.

The ld. Counsel also contended that the Provisions of Section 69A of the Income Tax Act, 1961, cannot be invoked in case where the transactions relating to the cash deposited into the bank account were recorded in the books of accounts and got them Audited by a Chartered Accountant and arrived the correct taxable income. The ld.Counsel has further contended that the assessing officer has accepted the books of accounts and adopted the profit arising from such books of accounts. The books of accounts of the assessee were not rejected. Further, the ld.Counsel has stated that assessee had received advances in cash for purchase of goods which were duly recorded in the books of accounts and confirmation from the cash advance parties was provided to the assessing officer. The assessee had stated during the assessment 5 Naranji R. Dave proceedings that all the books of accounts were audited u/s 44AB of the Income Tax Act and VAT and CST has been paid which was duly recorded in books of accounts. The assessee had also contended during the assessment processing that the assessing officer has accepted the books of accounts for Non-SBNs and not accepting the same for SBNs deposited during the demonetisation is not justified. Hence, entire addition made by the assessing officer may be deleted.

On the other hand, learned DR for the revenue submitted that during the demonetization period, the assessee has deposited Rs. 50,80,000/- in his two bank accounts of Porbandar Commercial Co-operative Bank Ltd and HDFC Bank Ltd, and such cash deposit has not been proved by the assessee with cogent evidences. No doubt, out of the total sales of Rs.12,41,40,286/-, the assessing officer has himself accepted the cash sales to the tune of Rs.8,56,42,000/-, however, for remaining cash sales of Rs.50,80,000/-, the assessee has not submitted the documentary evidences. The contra confirmations duly signed by third parties should not be believed because the handwriting are identical to each other. Therefore, the confirmations of the third parties, to whom the assessee sold, the goods should not be considered genuine, and hence the addition made by the assessing officer should be upheld.

We have heard both the parties and carefully gone through the submission put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the fact of the case including the findings of the ld CIT(A) and other materials brought on record. We note that out of the total cash sales of Rs.12,41,40,286/-, the assessing officer has himself accepted the cash sales to the tune of Rs.8,56,42,000/-. Besides, the cash was deposited by the assessee during the demonetization period amounting to Rs. 1,85,65,000/-, out of that the assessing officer has accepted cash deposited for an amount of Rs.1,34,85,000/-, as genuine. 6 Naranji R. Dave Therefore, the assessing officer has also accepted the cash deposited, during demonetisation period to the extent of Rs. 1,34,85,000/-, as genuine business sale. However, balance, cash deposit of Rs. 50,80,000/- ( Rs. 1,85,65,000- Rs.1,34,85,000), has not been accepted by the assessing officer, as genuine business sale. Therefore, out of the total case sales of Rs.12,41,40,286/-, the assessing officer rejected assessee`s cash sales of Rs. 50,80,000/-, which is only 4% of the total sales. It means assessing officer accepted 96% of cash sales, as genuine and only 4% cash sales was treated by the assessing officer, as not genuine. This discrimination made by the assessing officer is not acceptable. That is, the treatment of the assessing officer, is not acceptable, particularly when the books of accounts of the assessee are audited and said books of accounts were not rejected by the assessing officer, and based on the said books of accounts, the assessing officer treated 96% cash sales, as genuine, whereas 4% cash sales, as not genuine, despite of the fact that the assessee submitted confirmations from the parties, bank statements, cashbook, sales book, ledger account, audited books of accounts, and explained the nature of business stating that assessee`s business is cash oriented business, where the customer ( agriculturalist) pay him cash. Moreover, we also find that during the pre- demonetisation period, ( 01.04.2016 to 07.11.2016) the assessee has received cash to the tune of Rs.5,42,65,000/-, which was accepted by the assessing officer, as genuine, cash sales. In the post demonetisation period, (01.01.2017 to 31.03.2017), the assessing officer accepted cash sales, to the tune of Rs.1,28,12,000/-. However, a small portion of sales to the tune of Rs. 50,80,000/-, was not accepted by the assessing officer, as genuine, therefore, assessee is in appeal before us.

We note that substantial nature and character of the main business of the assessee, which is cash oriented business, does not change, and assessee has been doing same business since long. The pith and substance of the cash sale of Rs. Naranji R. Dave 50,80,000/- cannot be treated false, as the the ‘tail’ cannot wag the ‘dog’, when the assessing officer treated 96% cash sales, as genuine, whereas 4% cash sales, as not genuine, despite of the fact that the assessee submitted confirmations from the parties, bank statements, cashbook, sales book, ledger account, audited books of accounts, and explained the nature of business stating that assessee`s business is cash oriented business, where the customer ( agriculturalist) pay him cash. We note that assessing officer has not refuted or discredited these above evidences and documents, submitted by the assessee during the assessment proceedings. The assessing officer does not mention why he is not accepting these evidences. On the contrary, the assessing officer has just brushed aside these evidences without even a word on why they are not acceptable. It is a well settled Law that when an assessee has all the possible evidence in support of its claim, they cannot be brushed aside based on surmises.

We have examined the nature of the business undertaken by the assessee. The assessee is engaged in the business of sale of agricultural produce, primarily dealing in "Khod" and "Bhusa". The transactions are carried out predominantly on a cash basis, in line with the prevailing trade practices in rural and agricultural markets. The cash received from such sales is subsequently deposited into the assessee's bank account in a regular and transparent manner.On perusal of the figures, it is evident that the total cash deposits in the bank during the whole year are Rs. 8,56,42,000/-, out of which only Rs. 1,85,65,000/- were deposited during the demonetization period. The assessing officer has made an addition of Rs. 50,08,000/-, out of Rs. 1,85,65,000/-. It can be clearly established that in the subsequent years as well, it is the normal course of business of the assessee and there is no magnificent huge volume of cash deposits in the year under consideration but a normal parlance of business for the assessee. The nature of the business is such that the cash is received Naranji R. Dave from the sale of the agricultural products and the same is further deposited in the bank. Further, the assessee has deposited a sum of Rs. 5,42,65,000/- during the pre- demonetization period, the source of which is not disputed, then why the source of the cash deposited during the demonetization period is doubted by the Assessing Officer. The relation of the assessee with few of the purchasers of his products is that they provide him with the advance money and subsequently the products are sold to them. This is the regular practice in business undertaken and therefore, on perusal of the cash book enclosed from page 20 to 74, of paper book, it is established that the assessee has accepted the advances from the debtor parties throughout the year and not just during the pre-demonetization period.Just because the assessee has received the advance from the trade debtors, the same cannot be alleged to be bogus. Further, in the course of assessment proceedings, notices u/s 133(6) of the I.T. Act, 1961 were issued to the IDBI Bank, HDFC Bank, PCC Bank and also to various entities for calling information related to the cash deposit made by the assessee during the year under consideration. On the basis of the same, all the notices issued u/s 133(6) were duly served to 22 parties and replies were received in all cases which proves the correctness of the book result and the facts submitted by the assessee before the assessing officer. Further, the contra confirmations of the transactions (advance taken) made by the assessee were also obtained during the assessment proceedings, which is confirmed by assessing officer while passing the assessment order u/s 143(3) of the Act.

In the result, the appeal of the assessee is allowed.