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Facts
The assessee, engaged in the business of purchasing and selling ghee, deposited cash into his bank account from sales made during the demonetization period. The Assessing Officer made additions to the assessee's income related to these cash deposits and an amount receivable from a business transaction. The CIT(A) upheld these additions.
Held
The Tribunal found that the assessee had provided sufficient evidence to prove the genuineness of the cash sales. However, to prevent potential revenue leakage due to cash transactions, a disallowance of 8% of the disputed amount was made and taxed at the normal income tax rate. The addition pertaining to the amount receivable was remanded back to the Assessing Officer for de novo adjudication.
Key Issues
Whether the additions made by the Assessing Officer regarding cash deposits from sales and an amount receivable were justified, and whether sufficient evidence was provided by the assessee.
Sections Cited
139(1), 133(6), 68, 250, 143(3)
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI & SHRI DINESH MOHAN SINHA
सुनवाईक�तार�ख /Date of Hearing : 29/01/2025 घोषणाक�तार�ख /Date of Pronouncement : 26/02/2025 ORDER PERDR. ARJUN LAL SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to assessment year (AY) 2017-18, is directed against the order 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 10.05.2024,which in turn arises out of an assessment order passed by the Assessing Officer u/s 143(3) of the Income tax Act, 1961, vide order dated 21.12.2019.
(AY : 2017-18) 2 2. The solitary grievance of the assessee in this appeal is that ld. CIT(A) upheld the total addition of Rs.30,57,618/- (Rs. 25,82,579 +Rs.4,75,039). Out of total addition, the addition of Rs. 25,82,579/- pertains to cash deposit out of cash sales of Ghee ( business income) and Rs.4,75,039/- pertains to amount to be received from Shri Kishore Ved on account of business transaction.
Succinctly, the factual panorama of the case is that assessee before us is an Individual. The assessee has filed his return of income for assessment year 2017–18, under section 139(1) of the Income Tax Act 1961, showing income of Rs.35,110/-. The assessee is engaged in small business in purchasing and selling of ghee (retail sale). The assessee has deposited the cash in the bank account out of sale of ghee ( retail business) of Rs. 25,82,579/-. Therefore, during the assessment proceedings, assessing officer, asked the assessee to submit the name and address of the parties to whom he made cash Sales of the ghee. In response to the notice of the assessing officer, the assessee submitted, the name address and PAN number of the parties to whom he sold the ghee in cash. In order to ascertain the genuineness of the cash sales, the assessing officer, issued notices under section 133 (6) of the Act, to all the parties, to whom the assessee sold the ghee. In response, all the parties, replied to the assessing officer, that they have purchased the ghee, in cash, from the assessee. Apart from this,the assessee also submitted, bank statement, cashbook, and other financial statements, before the assessing officer, to prove his claim. However, the assessing officer, rejected all the above documents of the assessee, and made addition to the tune of Rs.25,82,579/-, under section 68 of the Act.
Aggrieved by the order of the assessing officer, the assessee carried the matter in appeal before the learned CIT(A). The ld. CIT(A) observed that assessee has failed to prove the genuineness of the cash deposit of (AY : 2017-18) 3 Rs.25,82,579/-, in the bank account during demonetisation period, with supporting evidences, therefore ld. CIT(A) confirmed 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, argued that during the assessment proceedings, the assessee submitted, the name, address and PAN number of the parties to whom he sold the ghee in cash. In response, to notices of assessing officer, under section 133(6) of the Act, all the parties, replied to the assessing officer, stating that they have purchased the ghee, in cash, from the assessee and paid the cash to the assessee. The assessee submitted VAT returns before the assessing officer. Apart from this, the assessee also submitted, bank statement, cashbook, and other financial statements, before the assessing officer, to prove his claim, however, assessing officer, rejected all the evidences of the assessee, and made addition, which is not acceptable, particularly, when the assessee has all the possible evidences, to prove his claim. Therefore, Ld. Counsel contended that addition sustained by the ld. CIT(A) may be deleted.
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. The ld. DR also stated that entire lis may be remitted back to the file of the assessing officer, for fresh adjudication.
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 do not agree with the (AY : 2017-18) 4 propositions made by ld. DR for the revenue to the effect that entire lis may be remitted back to the file of the assessing officer, for fresh adjudication, particularly, when the assessee, does not have any new evidence to be submitted before the assessing officer, except those evidences, which have been produced before us, by the assessee, during the course of hearing. Hence, adjudication should be done based on the evidence available on record. We find that assessee is engaged in a retail business of purchasing and selling of ghee, and runs a small Kirana Store. The assessee submitted before the assessing officer, the name, address and PAN number of the parties to whom he sold the ghee in cash. In response, to notices of assessing officer, under section 133(6) of the Act, all the parties, replied to the assessing officer, stating that they have purchased the ghee, in cash, from the assessee and paid the cash to the assessee. The assessee submitted VAT returns before the assessing officer. Apart from this, the assessee also submitted, bank statement, cashbook, and other financial statements, before the assessing officer, to prove his retail sales and cash deposited in the bank account. A small businessman, who runs a small retail shop, and engaged in purchase and sale of ghee, on retail basis, and whose margin is hardly between 8% to 10%, and since he is retail businessman, therefore entire sale and purchase are in cash. Such a small businessman, had submitted all the possible evidences to prove his claim, and moreover, the parties to whom he sold the ghee in cash, has confirmed the transactions, before the assessing officer, in response, to notices of assessing officer, under section 133(6) of the Act. That is, all the parties, replied to the assessing officer, therefore, in these circumstances, all the cash -sales, cannot be treated false.
8.We find thatduring the demonetization period, the assessee has deposited total cash of Rs. 30,57,618/-in his bank account, including an amount of Rs. 4,75,039/-, received from sundry debtors, Shri Kishore Ved. First, we sell (AY : 2017-18) 5 adjudicate the cash of Rs. 25,82,579/-, which was deposited in bank account, by the assessee, out of sale consideration received from sale of Ghee. During the assessment proceeding, the AO required to explain source of cash deposited. In response, the assessee submitted that cash of Rs. 25,82,579/-was deposited out of sale consideration received from sale of Ghee, which is credited to profit & loss account. For sale of Ghee, the assessee submitted sales ledger from the books of account, name of purchasers, their address & PAN. The assessee also furnished stock registers showing availability of stock for sales of Ghee and its VAT Returns showing due tax on such sales has been paid. The AO also issued notices u/s. 133(6) to purchasers and all of them have confirmed the purchase of goods from assessee and making cash payment to the assessee. The AO accepted the book results and consequently, accepted cash sales declared by the assessee in books of account. When the AO accepted the cash sales declared in the books of account and also assessed the income/profit earned on such sales, there is no question of disbelieving amount deposited in bank account out of such cash receipts. The AO has also accepted the availability of stock in the books of account of the assessee and also not disputed the sales declared in VAT Returns filed by the assessee, therefore, genuineness of the transaction should not be doubted.
However, at the same time, we are of the view that since all the Sales of the assessee, are in cash, therefore, there is possibility of leakage the revenue. Hence, to plug the leakage of the revenue, we therefore take into account all these peculiar facts to restrict the impugned disallowance @ 8% of Rs.Rs.25,82,579/-, which comes to Rs.2,06,606/-. Since, the assessee has deposited the cash in the bank account out of business sale, therefore, we direct the assessing officer to tax the amount of Rs.2,06,606/-, by applying normal income tax rate. It is made clear that instant adjudication shall not be treated as a precedent in any preceding or succeeding assessment year. The Assessing (AY : 2017-18) 6 Officer is accordingly directed to recompute the impugned disallowance @ 8% afresh, as per law. This ground of the assessee, is partly allowed, in above terms. 10.About addition of Rs.4,75,039/-, which pertains to the amount to be received from Shri Kishore Ved, on account of business transaction, the learned Counsel, submitted that there was gross violation of the principles of natural justice, when the assessee was not furnished, the material collected by the assessing officer, behind his back, and used against him, during the assessment proceedings. Therefore ld. Counsel for the assessee, submitted that this issue may be remitted back to the file of the assessing officer for fresh adjudication, with the direction to the assessing officer to provide an opportunity of cross examination, with Shri Kishore Ved. On the other hand, the ld. DR did not have any objection, if the matter, is remitted back to the file of the assessing officer, for fresh adjudication.
We have heard both the parties. We find that neither the ld. CIT(A) nor the Assessing Officer has reached on a logical conclusion to determine the correct income of the assessee, so far addition of Rs.4,75,039/-, is concerned, hence we are of the view that this issue should be remanded back to the file of the Assessing Officer for de novo adjudication. The ld. DR for the revenue did not have objection if the matter is remitted back to the file of Assessing Officer. Therefore, we think it fit and appropriate to remit this issue back to the file of the Assessing Officer. Therefore, we set aside the order of the ld. CIT(A) and remand the matter back to the file of Assessing Officer for de novo assessment. For statistical purposes, this issue, is treated to be allowed.
In the combined result, the appeal of the assessee, is partly allowed, for statistical purposes, in above terms.
Order is pronounced in the open court on 26/02/2025