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Facts
The assessee, Tirupati Jewels, a jewelry firm, made cash deposits of Rs.2.25 Crores in its bank account during the demonetization period (A.Y. 2017-18). The Assessing Officer added this amount as unexplained income under Section 69A, rejecting the assessee's explanation that the deposits were from cash sales during the festive season and immediately post-demonetization. The CIT(A) upheld the addition, leading to the present appeal. A jurisdictional issue was also raised, claiming the assessment order was passed by a different ITO ward than the one that issued the notice.
Held
The Tribunal found that the assessee had adequately explained the source of the cash deposits from legitimate cash sales, supported by documentation, and noting that their books were not rejected. It observed that increased sales were plausible during festive periods and due to people preferring cash purchases of jewelry post-demonetization. The Tribunal concluded that the assessee had discharged its onus to prove the genuineness of the transactions, and therefore, deleted the addition made under Section 69A. The jurisdictional argument was deemed untenable as it was not challenged within the stipulated time.
Key Issues
1. Whether cash deposits made during the demonetization period by a jewellery firm, explained as arising from cash sales, can be treated as unexplained income under Section 69A of the Income Tax Act. 2. Whether the assessment order was invalid for lack of jurisdiction when the notice under Section 143(2) was issued by one ITO Ward and the assessment order by another.
Sections Cited
Section 143(3), Section 143(2), Section 142(1), Section 69A, Section 115BBE, Section 271AAC, Section 124(1), Section 124(2), Section 124(3), Section 124(5), Section 120, Section 147, Section 148
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘H’, NEW DELHI
Before: SH. S. RIFAUR RAHMAN & SH. SUDHIR KUMAR
ORDER
PER SUDHIR KUMAR, JM:
1. This appeal by the assessee is directed against the order of the NFAC/Commissioner of Income Tax (Appeals), Delhi, [hereinafter referred to as “CIT(A)”], vide order dated 30.08.2023 pertaining to A.Y. 2017-18 arises out of the order passed by the Assessing Officer dated 27.12.2019 under Section 143(3) of the Income Tax Act, 1961 [hereinafter referred as ‘the Act’].
2. The assessee has raised the following grounds of appeal :-
1. That on the facts and circumstances of the case and provision of law the Ld. CIT(A) has failed to appreciate that the impugned order of assessment is illegal, bad in law, without jurisdiction and time barred.
2. That on the facts and circumstances of the case and the provision of law the Ld. CIT(A) has failed to appreciate that the assessment order passed by the Ld. AO needs to be quashed as the order has been passed without issuing notice u/s. 143 (2) by the AO who was having jurisdiction over the appellant.
That on the facts and circumstances of the case and the provision of law the Ld. CIT(A) has failed to appreciate that the impugned order of assessment has been passed without providing reasonable opportunity to the assessee to present his case before the AO prior to passing of the adverse order.
4. That on the facts and circumstances of the case and the provision of law the Ld. CIT(A) has failed to appreciate that the Ld. AO has erred in treating the amount of cash deposits of Rs.2,25,00,000/- in the Bank accounts as unexplained income u/s. 69A of the IT act ignoring the fact that the assessee has submitted all the relevant documents with regard to the source of the cash deposits in the bank account and the addition made by the AO are based on mere suspicion, surmises and conjectures which are unsustainable, arbitrary and unjustified.
5. That on the facts and circumstances of the case and the provision of law the Ld. CIT(A) has failed to appreciate that the Ld. AO has erred in making the above said addition of Rs.2,25,00,000/-on account of cash deposit in the bank account ignoring the fact that the cash deposits has been made out of the sales made during the year and on the same income has already been offered for taxation.
6. That on the facts and circumstances of the case and the provision of law the Ld. CIT(A) has failed to appreciate that the Ld. AO has erred in applying the amended provision of sec.115BBE brought into the statue book w.e.f. 15.12.2016 through taxation laws (second) amendment act, 2016 ignoring the fact that on the date of cash deposits, the provision of amended 115BBE were not applicable. The above action of the AO is unfair and arbitrary and against the principal of natural justice.
7. That on the facts and circumstances of the case and the provision of law the Ld. AO has erred in initiating the penalty proceedings u/s. 271AAC of the Act.
3. The brief facts of the case are that the assessee firm filed its return of income for A.Y. 2017-18 on 31.10.2017 declaring total income of Rs.4,51,620/-. The case was selected for scrutiny assessment through CASS to verify “cash deposit during demonetization period.” Accordingly, notices u/s. 143 (2) and 142 (1) of the Act were issued. The assessee made cash deposit to the tune of Rs.2,25,00,000/- into the bank account to HDFC Bank Ltd. during the demonetization period. During the course of assessment proceedings, the assessee claimed that the source for the cash depositing during the demonetization period was cash sales but failed to furnish necessary documentary evidence in support of its claim. Therefore, the AO treated the cash deposits as unexplained money and made the addition of Rs 2,25,00,000/- u/s. 69A of the Act, as unexplained money. Aggrieved the order of the A O the assessee has filed the appeal before the Ld.CIT(A) who vide his order dated 27-12-2019 dismissed the appeal against which the assessee is in appeal before us.
The Ld AR has submitted that the notice u/s 143(2) of the Act was issued by the ITO Ward 30(3) and the assessment order was passed by AO of the ITO Ward 30(6) without giving the notice and without jurisdiction. He has further submitted that the sources of the cash deposit of Rs.22500000/- was cash sale which was duly explained before the AO. He also has submitted that the main reason for increase of sale was the cash sale of the jewellery during the festival seasons. In the support of the contention he has filed a paper book containing pages no 1to 215 in which he attached copy of the notice u/s143(2) dated 21-09-2018, copy of the notice u/s 142(1), copy of reply dated 03-10-2019, copy of notice u/s 142(1), copy of reply dated 04- 11-2019, copies of notices u/s 142(1) of various date and copy of reply dated 17-12-2019. Reliance has been placed on the following judgments :-
1. PCIT 3, New Delhi Vs. M/s. Agson Global Pvt. Ltd. by Hon’ble High Court, & CM No.9319/2021 2. CIT Vs. Smt. Charu Aggarwal (2022) 140 taxmann.com (Chandigarh – Trib.)/ (2022) 96 ITR (T) 66 (Chandigarh- Trib.) 3. CIT, New Delhi Vs. Kailash Jewellery House by Hon’ble Delhi High Court,
4. DCIT Vs. Roop Fashion, 98 (ITR)(T) 419, passed by Hon’ble ITAT Chandigarh.
The Ld DR has submitted that the jurisdiction of the AO has not challenged by the assessee. He has further submitted that the assessee has failed to explain the sources of cash deposit, so the addition made by AO be upheld.
We have heard the parties and perused the material available on record.
7. The Ld.AR has submitted that the assessment order was passed by ITO ward 30(6) whereas notice u/s 143(2) was issued by the ITO ward 30(4) so the assessment order was without jurisdiction. In the case of Principal commissioner of Income Tax v. Cosmat Traders (P) Ltd.[2023] 146 taxmann.com 207 (Calcutta) the Hon’ble Calcutta High court held as under :-
6. It is the submission of the learned standing counsel for the Department that the assessee had not raised the question of jurisdiction before the assessing officer but participated in the assessment proceedings and, therefore, could not have issued before the Tribunal.
This argument cannot be acceded to for more than one reasons, firstly, there cannot be any estoppels against the statue. It is not the case of the revenue that the assessee consciously waived his right to raise such a jurisdictional issue. Secondly, the assessee had filed an application before the learned Tribunal seeking leave to raise additional grounds and this application was held and after contest the application was allowed. The learned Tribunal, in fact, recorded that the Department could not controvert any of the submissions of the assessee on the additional grounds which have been raised and, therefore, the application was allowed taking note of the matter that the issue goes to the root of the entire proceedings.
The Ld DR has submitted that the assessee has not challenged the jurisdiction of the AO. He has submitted that notice u/s 143(2) was served within time. The assessee has attended the proceedings but never challenged the jurisdiction of the AO within time. Reliance has placed on the followings judgment :
Abhishek Jain Vs Income Tax officer, ward-55(1), New Delhi{2018} 94 taxmann.com 355 (Delhi), in this case Hon'ble Delhi High Court held as under :-
19. We would reiterate that sub-section (1) to Section 124 states that the Assessing Officer would have jurisdiction over the area in terms of any direction or order issued under sub-section (1) or sub-section (2) to Section 120 of the Act. Jurisdiction would depend upon the place where the person carries on business of profession or the area in which he is residing. Sub- section (3) clearly states that no person can call in SS. Ahlinvalia (supra) would negate and reject arguments question jurisdiction of an Assessing Officer in case of non-compliance and/or after the period stipulated in clauses (a) and (b), which as predicated on lack of subject matter jurisdiction. Where an assessee questions jurisdiction of the Assessing Officer within the time limit and in terms of sub-section (3), and the Assessing Officer is not satisfied with the correctness of the claim, he is required to refer the matter for determination under sub-section (2) before the assessment is made. Reference of matter under sub- section (2) would not be required when Assessing Officer accepts the claim of the assessee and transfers the case to another Assessing Officer in view the objection by the assessee. (In terms of sub-section (3) to Section 124 of the Act, the petitioner had Tost his right to question jurisdiction of the Income Tax Officer, Ward No. 1(1), Noida,
Sub-section (5) to Section 124, though limited in scope, would also be applicable in the facts and circumstances of the present case as the Income-Tax Officer, Ward-1 (1), Noida had the power to assess income accruing or arising within the area as it is not the case of the petitioner-assessee that the said officer did not have jurisdiction in view of location of the bank account and/or petitioner's place of work. Section 124(5) of the Act saves assessment made by an assessing officer provided that the assessment does not bring to tax anything other than income accruing, arising or received in that area over which the assessing officer exercises jurisdiction. However, notwithstanding Section 124(5), the Act does not postulate multiple assessments by different assessing officers, or assessment of part or portion of an income (see Kanji mal & Sons v. CIT [1983] 12 Taxman 34/[1982] 138 ITR 391 (Delhi)]. Thus, it is necessary that the Assessing Officers having concurrent jurisdiction ensure that only one of them proceeds and adjudicate. This is the purport and objective behind sub-section (2) to Section 124 of the Act.
In view of the above discussion, objections as to the jurisdiction of assessing officer in the present case cannot be equated with lack of subject matter jurisdiction. They relate to place of assessment. Income-Tax Officer Ward 1(1), Noida would not per se lack jurisdiction, albeit he had concurrent jurisdiction with the Income-Tax Officer Ward-36(1)/58, Delhi. In facts of the present case the contention raised about the lack of jurisdiction would not justify quashing the notice under section 147/148 of the Act.”
In the case of Commissioner of income tax -III vs Shri Shyam the Hon’ble Delhi High Court held s as under :-
“5. Learned counsel for the assessee contended that the ITAT possessed jurisdiction to return a finding on whether the AO’s order was a nullity, and can give the verdict that such adjudication cannot go into the merits of such of the proceedings. Facially, Section124(3) stipulates a bar to any contention about lack of jurisdiction of an AO. It is not as if the provisions of the Act disable an assessee from contending that in the given circumstances the AO lacks jurisdiction; rather Section 124(3) limits the availability of those options at the threshold. The assessee upon receipt of notice of the kind mentioned in Clause (a) and (b) of sub-section 3 has the option to urge the question of jurisdiction; the expressed tenor and terms of the provisions clarify that such objections are to be articulated at the threshold or at the earlier points of time. The two points of time specified in Section 124(3)(a) are as under:
(i) Within one month from the date of service of notice or; (ii) After completion of assessment - whichever is earlier.
6. In the present case, there is no dispute that the reassessment notice was issued by the AO on 22.03.2010; upon its receipt, the assessee reiterated its earlier return on 21.04.2010. Since its response led to objections as to the jurisdiction, it lost the capacity to urge the ground by virtue of the provision under Section 124(3)(a). This condition has been obviously overlooked by the ITAT which proceeded to set aside the assessment and completed the reassessment proceedings. The impugned order is consequently set aside; the question of law urged by the Revenue is answered in its favour. The matter is remitted for consideration on the merits of the appeal concerning the additions made in the reassessment proceedings.”
The assessee has not challenged the jurisdiction before the AO within time so this argument is not tenable. Ground decided accordingly.
We find that the assessee is engaged in the business of trading of gold, silver and diamond jewelry since 2014. We observed that the source of the cash deposit of Rs.1,00,00,000/- in the HDFC bank account on 10.11.2016 and Rs.1,25,00,000/- on 13.11.2016 was the cash sales made during the months of October & November and during the period 01.11.2016 to 08.11.2016. We further observed that the cash sales made has been included in the sales in the month of October and first week of November was that, Dussehra and Diwali festivals which were celebrated from 30-10-2016 to 10.11.2016. Accordingly in the month of October, 2016 there was substantial increase in sales with regard to increase in sale during the above said period after the announcement of the demonetization on 08.11.2016 at 8 pm shutters of the jewellers were opened and during the period 8.30 pm to 12.00 am substantial sales were made by the jewellers. We find that during the assessment proceedings, copy of the purchase register and sale register item wise and value wise was filed. Further copy of the complete item wise and value wise stock summary of the FY 2016-17 was also filed before the AO and the assessee also filed the copy of the returns. We also observed that even the book of accounts has not been rejected by the AO. We observed that in support of the above, the assessee has filed the paper book in which he has filed details of the sale and purchase of the jewellery and the same was increased due to the festival occasion because the people may have chosen to purchase the jewellery in cash. Therefore, the assessee has explained the reason of the increase of the cash sale during the year under consideration. We observed that the assessee has deposited Rs.2,25,00,000/- during the demonetization period in the bank account and explained the reason of the cash deposit, hence he has discharged the onus and prove the genuineness of the transaction. In view of the above, there is no justification for sustaining addition of Rs.2,25,00,000/- u/s.69A of the Act. In view of the above, we hold that the Ld. AO has wrongly made the addition of Rs.2,25,00,000/-, therefore, the addition made by the AO and confirmed by the Ld CIT(A) is liable to be deleted. Accordingly, the appeal of the assessee is liable to be allowed.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 01.10.2024.