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Income Tax Appellate Tribunal, LUCKNOW BENCH ‘B’, LUCKNOW
Before: SHRI A. D. JAIN & SHRI T. S. KAPOOR
This is an appeal filed by the assessee against the order of learned CIT(A), dated 14/09/2020 pertaining to assessment year 2017-2018.
In this appeal the assessee has taken a number of grounds however, the crux of grounds of appeal is the action of learned CIT(A) by which he has confirmed the addition of Rs.3,70,500/- out of total addition of Rs.43,70,500/- which the Assessing Officer had made on account of deposits in bank. The Learned counsel for the assessee, explaining the facts of the case, submitted that the assessee is an individual and is engaged in Sarafa business and during the course of assessment proceedings the Assessing Officer observed that the assessee had deposited an amount of Assessment Year:2017-18 2 Rs.43,70,500/- in the demonetized currency between the period 09/11/2016 to 30/12/2016. The assessee was questioned about the deposits in cash in the demonetized currency and in reply the assessee submitted that the same was represented by cash sales and there was an opening balance of Rs.3,86,779/- as on 01/04/2016 and during the period 01/04/2016 to 08/11/2016, the cash sales were amounted to Rs.1,86,08,211/- out of which Rs.43,70,500/- was deposited during the period from 09/11/2016 to 30/12/2016. The Assessing Officer, on the basis of comparison of cash sales for financial year 2015-16 and 2016-17, held that the sale in October till 8th November had recorded huge increase as compared to preceding previous year and therefore, he held that the assessee was not able to explain the deposits of demonetized currency notes in his bank account and therefore, he held the same to be unexplained and made the addition u/s 69A of the Act. Learned counsel for the assessee submitted that before the learned CIT(A), detailed submissions were made and on the basis of submissions the learned CIT(A) held that the source of above cash deposit was sales as submitted by the assessee and learned CIT(A) further held that when the Assessing Officer has accepted the claim of sales made by him then the action of the Assessing Officer in rejecting the explanation of the assessee regarding source of these cash deposits is unjustified as the source are cash sales. Learned counsel for the assessee argued that learned CIT(A) accepted the contention of the assessee and therefore, deleted the substantial addition of Rs.40 lacs but still confirmed an addition of Rs.3,70,500/- which is arbitrary and based on surmises as on the one hand he has accepted the explanation of the assessee and on the other hand confirmed part of the addition which is not justified as learned CIT(A) has not cited any other specific reason for confirming the part addition and therefore, it was prayed that the addition sustained by learned CIT(A) be deleted. Assessment Year:2017-18 3
3. Learned D. R., on the other hand, submitted that it is undisputed fact that the cash sales of the assessee had increased manifold during the period of demonetization and he had deposited the cash in the bank account out of demonetized money and therefore, learned CIT(A) has wrongly allowed the relief and in fact he should have confirmed the entire addition. It was submitted that learned CIT(A) has already allowed substantial relief therefore, there is no merit in filing the appeal by the assessee which may be dismissed.
We have heard the rival parties and have gone through the material placed on record. We find that the Assessing Officer has held the amount of Rs.43,70,500/- to be out of demonetized cash which was deposited in the bank account between the period 09/11/2016 to 30/12/2016. The Assessing Officer has made the addition by making following observations:
• The details in the above para 3 show that the assessee has deposited cash of Rs.43,70,500/- in SBN during demonetization period. • The Reserve Bank of India had withdrawn legal tender character of old bank notes in the denomination of Rs.500/- and Rs.1000/- w.e.f. 8th November 2016 through specific bank notes (cessation of liabilities) Act, 2017 and specified bank notes (deposit of confiscated notes) Rules, 2017. • The legal tender character of the bank notes in denomination of Rs.500/- and Rs.1000/- issued by the Reserve Bank of India till November 8, 2016 (specified bank notes) were withdrawn. • The sources of deposits of old currency notes (SBNs) were not explained. • It is apparently clear that the cash deposits made in the bank accounts during financial year 2016- 17 relevant to ASSESSMENT YEAR 2017-18, especially during demonetization period, are unexplained and from undisclosed sources, the same was not offered for taxation purposes. • Where the assessee was unable to prove that in his normal business or otherwise, he was possessed of so much cash, it was held that the assessee started under a cloud and must dispel that cloud to the reasonable satisfaction of the assessing Assessment Year:2017-18 4 authorities to hold that the amount represented income from some undisclosed source. In this case, provisions of Section 69A of I T Act, 1961 are clearly attracted.”
4.1 The learned CIT(A), on the other hand, after going through the extensive submissions made by the assessee, allowed the assessee substantial relief of Rs.40 lacs by holding that the cash deposits in the bank account were represented by the sales made by the assessee and the Assessing Officer had accepted the claim of sales made by the assessee and therefore, since the Assessing Officer has accepted the sales made by the assessee, the rejection of the explanation of the assessee regarding source of these cash deposits is unjustified. The findings of learned CIT(A) are contained in para 4.4 to para 4.8, which for the sake of completeness are reproduced below: “4.4 The appellant has submitted on the merit of addition that the source of deposited cash was sale of jewellery during the Diwali period and complete details regarding the sales including the bills/vouchers and books of account were produced before the AO.
4.5 The AO has held that the entire cash deposits made by the appellant in SBN during the demonetization period are unexplained u/s 69A on the ground that the appellant has deposited cash in his banks on 26/10/2016 and 07/11/2016 in one bank account and on 14/10/2016 and 03/11/2016 in another bank account and thus accumulation of cash explanation, as submitted by the appellant before the AO, was rejected.
4.6 The above submission of the appellant has been considered. The AO has not found any defect in the books of account and has accepted sales of the appellant as no adverse comments have been made by the AO on sales in the assessment order. Books of account have not been rejected by the AO. The source of above cash deposits is sales as submitted by the appellant. Thus, when on one hand the AO has accepted the claim of sales made by the AO then the action of the AO in rejecting the explanation of the appellant regarding sources of these cash deposits in SEN is unjustified as sales are the sources of these cash deposits. Besides the above, the AO has made double addition as the appellant has already disclosed profit on these sales.
Assessment Year:2017-18 5
4.7 The entire addition has been made by the AO on presumption and on 'preponderance of probability' and not on evidence. Though preponderance of probability is an accepted principle to judge reliability of evidences as held by the Hon'ble Courts in plethora of cases but its application in judging the quality evidences should be done in a reasonable manner. The above action of the AO is not reasonable as he was not able to point any defect in the books of account or sales of the appellant. When as per the submission of the appellant sales are the sources of these cash deposits in SEN then some inquiries on sales claimed by the appellant ought to have been done by the AO. However, there is some merit in the contention of the AO as the appellant has disclosed abrupt jump in sales during the months of October and November (till the demonetization date) with no cogent explanation. However, holding the entire deposits as unexplained is arbitrary and unreasonable. Considering the facts of the case, considering the fact that the appellant has already disclosed profit on the sales of Rs.43,70,500/- and considering the fact that the AO has accepted the sales of the appellant I hold Rs.40,00,000/- out of the above cash deposit as explained. The addition of the AO is confirmed to the extent of Rs.3,70,500/- u/s 69A read with 115BBE of the Income Tax Act. 4.8 Appeal is thus partly allowed.” 4.2 From the findings recorded by learned CIT(A), we find that learned CIT(A) was convinced with the arguments of the assessee and therefore, he gave substantial amount of relief to the extent of Rs.40 lacs. However, he confirmed an addition of Rs.3,70,500/- by holding that there is some merit in the contention of Assessing Officer as the assessee had disclosed abrupt jump in sales during the months of October and November. While confirming the part addition the learned CIT(A) has not given any specific explanation for confirming the part addition. Therefore, the confirmation of part addition is based only on surmises and is arbitrary in nature and therefore, is liable to be deleted. In view of the above, ground no. 1 to 4 are allowed.
Assessment Year:2017-18 6
Ground No. 5 to 8 are legal grounds and were not argued. Since we have allowed relief to assessee on merits, therefore, these grounds have not been adjudicated.
In the result, the appeal of the assessee stands partly allowed.
(Order pronounced in the open court on 22/08/2022)
Sd/. Sd/. ( A. D. JAIN ) ( T. S. KAPOOR ) Vice President Accountant Member