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Facts
The assessee deposited a substantial amount of cash (Rs. 8,12,500) in Specified Bank Notes during the demonetization period across three bank accounts. The Assessing Officer (AO) treated this as unexplained income under section 69A of the Income-tax Act, 1961, after the assessee failed to provide satisfactory explanations and did not file a return of income. The CIT(A) upheld the AO's order.
Held
The Tribunal noted that the initial Rs. 2,50,000 of the deposit falls under the blanket exemption provided by CBDT instructions for small depositors, especially considering the assessee's income was below the taxable limit. For the remaining Rs. 5,62,500, the Tribunal, considering the nature of the assessee's trading business and the submitted documents, restricted the disallowance to 10% of this amount.
Key Issues
Whether the cash deposits made during the demonetization period are unexplained income, and if so, to what extent.
Sections Cited
69A, 144, 139, 119, 115 BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
ORDER PERDR. ARJUN LAL SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2017-18,is directed against the separate orders passed by the Learned Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, Delhi[in short ‘Ld.CIT(A)/NFAC’], under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), dated 10.01.2024,which in turn arises out of an assessment order passed by the Assessing Officer u/s144 of the Act, vide, order dated 14.11.2019.
Succinct facts are that during the assessment proceedings, the assessing officer noticed that assessee has deposited huge cash in his bank accounts maintained with Veraval Peoples Co-op Bank, Dena Bank and Junagadh Commercial Co-op Bank and from the quantum of cash deposit made by the assessee, it was noticed by the assessing officer that the assessee was liable to file return of income offering correct picture of income. Accordingly, before the end of the financial year (F.Y.) 2017-16, a notice u/s.142(1) of the Act, dated 10.03.2018, was issued and duly served upon the assessee, requiring him to file return of income for assessment year(A.Y.) 2017-18, however the assessee has failed to file return of income for (A.Y.) 2017-18, within time as mentioned in section 139 of the I.T. Act.
3.On perusal of information received from respective banks, it was observed by the assessing officer that assessee was maintaining bank account No. 5134 with Veraval Peoples Co-op Bank, account no 10710045285, with Dena Bank (now BOB) and account No. 5131800002153 with Junagadh Commercial Co-op Bank, where in the assessee has deposited aggregate cash of Rs.8,12,500/- in Specified Bank Notes, during the demonetization period. In this regard, the assessee was requested to explain the source of cash deposit. However, on schedule date, neither anyone attended nor any details were submitted. In absence of any details, the source of aggregate cash of Rs. 8,12,500/- deposited during demonetization period in his bank accounts is remain unexplained. Accordingly, addition of Rs. 8,12,500/- was made by the assessing officer u/s 69A of the Act.
4.Aggrieved by the order of the assessing officer, the assessee, carried the matter in appeal before the ld.CIT(A), who has just reiterated the facts narrated by the assessing officer and confirmed the addition made by the assessing officer.
5.Aggrieved by the order of the ld.CIT(A), the assessee is in further appeal before the Tribunal.
6.The ld.Counsel for the assessee submitted that nature of trading activities demonstrates that there was direct and proximate nexus between available cash on hand on eve of 08.11.2016, being realization of business receipts, and corresponding deposits of specified bank notes. The assessee is not so educated and having regards to the quantum of turnover of the trading activities, no accountant or tax consultant was deployed and it is reiterated that no books were maintained for the relevant period. There exist vital evidences suggesting business receipts from known source of trading activities and therefore the conclusion drawn by the assessing officer, as unexplained income is just founded on mere suspicion, therefore, addition made by the assessing officer, should be deleted.
7.On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity.
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 assessee did not file the return of income, as his income was below the maximum amount, which is not chargeable to tax, which is Rs.2,50,000/-.We find that CBDT has issued instruction, to the assessing officers as to how to examine of the case of cash deposit during the demonetization period and in said circular the CBDT has explained and narrated facts that there should be blanked exemption of Rs. 2,50,000/- per person, vide instruction No. 03/2017, dated 21/02/2017, wherein CBDT has explained that in case of small assessee, like artisans, daily workers, housewives, and small assessee etc, then such small amount would not be questioned by the Ld. AO up to Rs. 2,50,000/- per person. Taking into account, the facts narrated above, we note that Instruction issued by the CBDT should be considered, vide Press Release dated 18.11.2016 and Guidelines for Verification of Cash deposit during demonetization to the AO vide Instruction No. 3/2017[ F.NO. 225/100/2017/ITA-II] dated 21.2.2017 and annexure thereof issued under section 119 of Income Tax Act, which are discussing and providing a blanket exemption of Rs. 2,50,000/- per person. In the Press release dated 18.11.2016 also, it was stated that:
“It was announced by the Government earlier that small deposits made in the banks by artisans, workers, housewives, etc. would not be questioned by the Income Tax Department in view of the fact that present exemption limit for Income Tax is Rs.2.5 lakh”. 9.Therefore the amount of Rs.2,50,000/- falls in the basic exemption limit, hence, the addition to the extent of Rs.2,50,000/-, made by the assessing officer, should be deleted.
Now the balance addition comes to Rs.5,62,500/- ( Rs.8,12,500- 2,50,000), which needs to be adjudicated by us. The Ld.Counsel for the assessee, submitted bank statements, bills and vouchers etc., and theld.CIT(A) also called for remand report from the assessing officer. The ld. Counsel for the assessee submitted that the said amount was deposited out of the cash in hand, agriculture income and small savings of the assessee, and therefore, the addition made by the assessing officer should be deleted. On the other hand, the Ld. DR for the revenue relied on the finding of the assessing officer. We note that before the lower authorities, the following documents, evidences were submitted by the assessee:
i) Registration certificate of APMC (page no.10-11 of the PB) ii) Ledger accounts from purchase parties (page No.12-18 of the PB) iii) Purchase bills (page no.19-27 of the PB) iv) Bank statements (page no.33-42 of the PB)
We note that assessing officer did not discredit these documents and evidences submitted by the assessee, and did not find any mistake and error in the documents so submitted by the assessee, during the assessment proceedings. The assessee is engaged in semi-whole sale trading in lemon: ginger: coriander etc. and having regards to the nature of trading activities, the turnover is not so impressive during the relevant period. The assessee has not maintained regular books and even his income is below the maximum amount, which is not chargeable to tax. The lemon, ginger, coriander etc, is procured from whole- sale, semi whole sale traders of Gondal, Palitana, Ahmedabad, Rajkot, Bhavnagar etc., as evident from copies of contra accounts of a few suppliers of lemon, ginger, etc. The trading in lemon, ginger, coriander etc, with hawkers, traders, restaurants are mainly on cash basis and availability of cash on hand is inevitable factor, in such kind of business.
We also find that the assessee has not been able to prove all of its above cash deposits in the bank account, and documents and evidences, submitted by the assessee, in most of the cases are self -servicing documents, therefore, we are of the view that considering these circumstances, and taking into account all these peculiar facts, we restrict the impugned disallowance @ 10% on Rs.Rs.5,62,500/-, which comes to Rs.56,250/-. Therefore, assessing officer is Shri Anish Hasan Bakhai (AY : 2017-18) 6 directed to make the addition to the tune of Rs.56,250/-, in the hands of the assessee, by applying the normal rate of income tax ( not the rate prescribed under section 115 BBE of the Act).It is also made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year.
In the result, the appeal of the assessee is partly allowed, in above terms.
Order is pronounced in the open court on 22/04/2025