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Facts
Vishal Mehra and Son (HUF), a jeweller, filed an ITR for AY 2017-18 declaring income of Rs. 6,02,510/-. During demonetization, the assessee deposited Rs. 2,10,00,000/- cash, claiming it as cash sales recorded in audited books. The Assessing Officer added this amount as income under Section 68, which the CIT(A) upheld, treating it as unexplained cash under Section 69.
Held
The tribunal noted that the assessee did not produce all sales invoices/memos to the AO for verification. To provide a reasonable opportunity, the matter was remitted back to the AO for de-novo consideration, including verification of sales and purchases, and to provide the assessee a fair hearing.
Key Issues
Whether the cash deposit during demonetization, claimed as cash sales, constitutes unexplained income under Section 68 or Section 69 of the Income Tax Act. Additionally, whether the assessment was procedurally invalid due to non-rejection of books under S.145(3) or improper notice issuance under S.143(2)/142(1) following a change of incumbent.
Sections Cited
Section 69, Section 68, Section 115BBE, Section 145(3), Section 143(3), Section 143(2), Section 142(1), Section 129
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
Before: SHRI KUL BHARAT & SHRI AVDHESH KUMAR MISHRA
Appellantby Sh. Vishal Mehra, Assessee Respondent by Sh. Vivek Vardhan, Sr. DR Date of Hearing 02/07/2024 Date of Pronouncement 30/07/2024 ORDER
PER AVDHESH KUMAR MISHRA, AM
This appeal of the Assessment Year (In short, the ‘AY’) 2017-18 preferred by the assessee is directed against the order dated 21.09.2023 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), New Delhi [In short, the ‘CIT(A)’].
Following grounds have been raised by the appellant/assessee:-
1. That the Ld. CIT (A), NFAC erred in confirming the action of the Ld. Assessing Officer in assessing the income at Rs. 2,16,02,510/- as against the declared returned income of Rs. 6,02,510/- which is illegal and against the law.
Vishal Mehra and Son (HUF) 2. That the Ld. CIT (A), NFAC erred on the facts and under law in confirming the action of the AO in making the addition of Rs. 2,10,00,000/- by alleging that the assessee has manipulated and prepared the fabricated ledger account of sales, which was without any material evidence before the AO and the AO has not provided an opportunity to the appellant to explain his case. The assessment order passed based on conjectures and surmises.
That Ld. CIT (A) has erred on the facts and under the law in confirming the addition of Rs. 2,10,00,000/-made by the AO by ignoring the CBDT in instruction No.20/2015 dated 29.12.2015 wherein the AO is required to issue appropriate show cause notice giving a fair opportunity to explain his case on the proposed addition. Accordingly, AO has not followed the CBDT instructions before framing the assessment order which was in contradiction of the CBDT guidelines. Therefore, the CIT(A) is not justified in confirming the addition made by the AO which is illegal and bad in law.
That the Ld. CIT (A), NFAC while confirming the addition of Rs. 2,10,00,000/- on account of deposit of cash in the regular bank account of the assessee and has ignored the facts that the appellant is maintaining regular books of account, which were duly audited, and no defects have been found either by the AO or by the CIT (A), NFAC and therefore, the valid documented evidence has been ignored summarily by the CIT (A), NFAC which is against the facts & circumstances of the case.
5. That the Ld. CIT(A), NFAC erred in confirming the addition of Rs. 2,10,00,000/- without rejection the regular books of account u/s 145 (3) and, therefore, that the books of account having not been rejected, it is settled law that the addition cannot be sustained, and the fact have been ignored by the CIT (A), NFAC.
The A.O has erred on the facts and under the law taxing the entire addition of Rs. 2,10,00,000/- u/s 115BBE of the IT Act as section 68 is not applicable since the appellant has explained the nature and source of amount, through cash sales, credited in the books of 2
Vishal Mehra and Son (HUF) A/C which is bad in law. However, under the facts and in circumstances of the case, Ld. CIT (A), NFAC has erred in law as much as in fact in upholding the application of section 69 of the Act on cash deposits representing cash sales. Cash deposits representing cash sales cannot be treated as unexplained. Application of section 69 of the Act on the addition of Rs 2,10,00,000/- is contrary to law and liable to be deleted.
That under the facts and in circumstances of the case, Ld. CIT (A), NFAC has failed to appreciate that the cash deposited in the bank account during the demonetization period was out of cash in hand generated through cash sales duly recorded in the books of accounts and also returned in the VAT returns in the regular course and the accounts of the appellant are audited and no defect was found in the maintenance of the account. The turnover shown in the accounts includes cash sales and the turnover as per books of accounts with stock records by Assessing Officer has been accepted.
The Ld. CIT (A), NFAC has also failed to appreciate that all the details regarding sale and purchase were duly furnished before the AO as well as before CIT (A) and no defect or discrepancy was found either in sales or in purchases which are duly supported by the Invoices. The cash sale amount has been taxed twice, firstly the same was treated as sales and secondly the same was treated as unexplained cash credit under section 68 of the Act. The CIT (A) is erroneous to the extent of treating the same as sale proceeds and the unexplained cash credit simultaneously.
That the order passed by The A.O. and confirmed by the CIT(A), NFAC is illegal and without jurisdiction because the A.O. has not issued notice u/s 143(2)/142 (1) before completion the assessment since on perusal of the assessment order showing that there was change of incumbent u/s 129 of the IT Act. Therefore, the assessment order suffered from patent illegality and deserved to be quashed.
Vishal Mehra and Son (HUF) 10. That the appellant craves leave to add or to amend any of the grounds of appeal before the appeal is finally heard or disposed- off."
2.1 The core issue emerged from the above grounds of appeal is that whether the cash aggregating to Rs.2,10,00,000/- deposited in the bank account during the demonetization period by the assessee is his income taxable under section 69 of the Income Tax Act, 1961 (In short, the ‘Act’). Besides the above-mentioned core issue, the assessee, vide ground of appeal no. 9, had also challenged the impugned order on the reasoning that the Assessing Officer (In short, the ‘AO’) was not justified in completing the assessment as he had not issued any fresh notice as new incumbent.
3. The relevant facts giving rise to this appeal, in brief, are that the appellant/assessee, a jeweller, filed its Income Tax Return (In short, the ‘ITR’) on 07.11.2017 declaring income of Rs.6,02,510/-. The case was picked up for complete scrutiny. The assessee had deposited cash aggregating to Rs.2,10,00,000/- in his bank account during the demonetization period. The scrutiny assessment was completed vide order dated 29.12.2019 passed under section 143(3) of the Act treating cash of Rs.2,10,00,000/- deposited during the demonetization period as income under section 68 of the Act. On appeal, the Ld. CIT(A) upheld the addition of Rs.2,10,00,000/- with the finding that the unexplained cash deposited in Vishal Mehra and Son (HUF) the bank account during the demonetization period in guise of cash sales was taxable under section 69 of the Act.
4. Shri Vishal Mehra, Karta of the appellant/assessee HUF attended and argued the case. He also filed copies of all cash sales invoices/memos in support of the claim that the cash deposited, in the bank account, during the demonetization period is nothing but the cash sales. It was submitted that some of these invoices were also produced before the AO and Ld. CIT(A); however, the same were not properly considered. It was further submitted that the AO had not rejected the books of account of the appellant/assessee; therefore, taxing the sales of Rs.2,10,00,000/- under section 68 of the Act after accepting the entire sales including the sales of Rs.2,10,00,000/- as per the books of account and taxing the income embedded in the sales as business income, was not justified.
4.1 As per details filed by the Karta of the appellant/assessee HUF, the cash sales of Rs.2,08,70,572/- had taken place only in October, 2016 which along with some cash in hand (Rs.2,10,00,000/-) was deposited during the demonetization period. The cash sales in the first 9 months of Financial Year (FY) 2016-17 was Rs.2,13,22,000/. The cash sales for corresponding period of FY 2015-16 were NIL. On specific query, the Karta of the appellant/assessee HUF requested for restoring the matter back to the AO
Vishal Mehra and Son (HUF) for verification/investigations of the sales and purchases of the relevant years. To which the Ld. DR seemed in agreement.
We have heard both the parties and perused the material available on record. The appellant/assessee had not produced the entire bills/vouchers/ invoices/memos of cash sales before the AO for verification/examination/ investigations. Therefore, in the interest of justice and facts in entirety, we are of the considered view that the appellant/assessee deserves reasonable opportunity of being heard to make shortcomings or non-compliances. In view thereof, without offering any comment on merit of the case we deem it fit to set aside the impugned order and remit the matter back to the file of the AO for de-novo consideration. The appellant/assessee should ensure compliances during the set-aside proceeding before the AO. The AO is also required to provide reasonable opportunities of being heard to the appellant/assessee before deciding the case on merit.