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Facts
The Assessee, Mr. Sarosh Abdul Majid Zamindar, filed an appeal for A.Y. 2017-18 with a delay of 259 days due to the inaction of his erstwhile tax consultant. He had declared business income on a presumptive basis under Section 44AD. The AO made an addition of Rs. 22,67,000/-, including Rs. 7,79,000/- as SBN deposits, treating them as unexplained money under Section 69A. The Ld. CIT(A) deleted part of the addition but affirmed Rs. 7,79,000/- related to SBN, citing lack of cash book and previous nil cash balance.
Held
The Tribunal condoned the delay in filing the appeal, subject to the Assessee depositing Rs. 5,000/- with the Revenue. On merits, the Tribunal noted that as the Assessee declared income under Section 44AD, he was not required to maintain books of account. Reviewing the cash flow statement, the Tribunal found the SBN deposit of Rs. 7,79,000/- justifiable due to existing cash balance and cash sales. Therefore, the addition of Rs. 7,79,000/- under Section 69A was held unsustainable, but it was directed to be taxed at 8% under Section 44AD.
Key Issues
Condonation of delay in filing appeal. Whether SBN deposits during demonetization can be added as unexplained money under Section 69A when income is declared under the presumptive scheme of Section 44AD.
Sections Cited
Section 250, Income Tax Act, 1961, Chapter VIA, Section 44AD, Section 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “SMC”, MUMBAI
Before: SHRI NARENDER KUMAR CHOUDHRY
Per : Narender Kumar Choudhry, Judicial Member:
This appeal has been preferred by the Assessee against the order dated 10.11.2023, impugned herein, passed by the National Faceless Appeal Centre/Ld. Commissioner of Income Tax (Appeals) (in short Ld. Commissioner) u/s 250 of the Income Tax Act, 1961 (in short ‘the Act’) for the A.Y. 2017-18.
At the outset, it is observed that there is a delay of 259 days in filing the instant appeal, on which the Assessee has stated that he is not well acquainted and convergent with the digital system, internet and emails etc., hence the email address of his tax consultant was provided in the profile to follow up with the income tax notices and orders. The tax consultant till middle of June 2024 has not informed the Assessee about the impugned order and once the Assessee visited the office of his tax consultant then only, he came to know about the passing of the impugned order on 10.10.2023. His tax consultant asked the Assessee to file the appeal before the Tribunal immediately, since the same has already become time barred. Consequently, the Assessee on 18.06.2024 deposited the appeal fee of Rs.10,000/- and sent the payment receipt to his erstwhile tax consultant but he somehow failed to file the appeal even thereafter as well. Therefore, the Assessee appointed a new tax consultant, who on 24.09.2024 filed the instant appeal, however, with a delay of 259 days. The delay occurred was neither intentional nor malafide but because of the non-advice/in-action on the part of the erstwhile tax consultant.
On the contrary the Ld. D.R. refuted the claim of the Assessee.
The cause/reason shown by the Assessee for condonation of delay is attributable to the mistake of the erstwhile tax consultant, which is not appreciable and therefore the same cannot be entertained. However, considering the peculiar facts that as the mis-communication/non- communication between the erstwhile tax consultant and the Assessee cannot be ruled out under the peculiar facts and circumstances, hence this Court is inclined to condone the delay, however, subject to deposit of Rs.5,000/- in the Revenue Department under “other heads” and without seeking any exemption/disallowance of the same, but within 30 days of the receipt of this order.
Coming to the merits of the case, it is observed that the Assessee is an individual and during the assessment year under consideration was engaged in the business as proprietor of M/s. Taj Chicken and had declared his income to the tune of Rs.5,00,420/- by filing his return of income on 25.03.2018 after claiming the deduction under chapter VIA of the Act. Since the books of accounts were not maintained, therefore the Assessee offered the business income of Rs.6,61,418/- to tax on presumptive basis u/s 144AD of the Act @ 6% on sales of Rs.1,10,23,640/-. During the year under consideration, as per the Assessee, the total credits in bank account were Rs.1,34,84,367/- out of which Rs.7,79,000/- were SBN and Rs.14,88,000/- were non-SBN deposited during demonetization period out of business receipts/sales. Somehow the Assessing Officer (AO) has treated the above deposits as unexplained money u/s 69A of the Act and made the addition of Rs.22,67,000/-.
On appeal, the Ld. Commissioner though deleted the addition of Rs.14,88,000/- and taxed the profit estimated @ 8% on presumptive basis u/s 44AD of the Act, however, affirmed the addition of Rs.7,79,000/- related to SBN as un-explained money u/s 69A of the Act on the following reasons:
i. No cash book is maintained to prove the cash balance of Rs.7,79,000/- as on 08.11.2016. ii. As per the ITR filed for A.Y. 2016-17, the closing cash balance as on 31.03.2016 is shown as “Rs. Nil”. iii. The receipt of SBN currency after 08.11.2016 was not permitted. iv. For the cash withdrawal from bank account from 01.04.2016 to 08.11.2016 were “Nil” except Rs.7,600/- from ATM on 08.11.2016 etc.
The Assessee has therefore submitted that since the Assessee has disclosed his business income on presumptive basis u/s 44AD of the Act therefore he is not required to maintain the books of account including the cash book. The SBN cash balance of Rs.7,79,000/- as on 08.11.2016 has been generated out of the cash sales made from 01.04.2016 to 08.11.2016, which reflects from cash flow statement (annexure A) and shown that cash balance as on 08.11.2016 was Rs.8,15,800/-. However, the Ld. Commissioner has wrongly assumed that SBN of Rs.7,79,000/- were received on or after 09.11.2016. The Assessee further claimed that the Ld. Commissioner has wrongly stated that source of cash deposits of Rs.7,79,000/- was out of cash withdrawn from bank account prior to 08.11.2016 but in fact the Assessee never claimed that the source of cash deposit of SBN of was out of cash withdrawn from bank account and re- deposited. The Assessee in support of his claim also relied on various judgments.
On the contrary, the Ld. D.R. refuted the claim of the Assessee.
Having heard the parties and perused the material available on record. Admittedly, it is not in controversy that the Assessee had offered his income from business as per section 44AD of the Act and has not maintained any books of account and having only source of cash deposit from the business receipts and therefore though the Ld. Commissioner correctly applied the provision of section 44AD of the Act computing the income of the Assessee @ 8% of the total turnover of Rs.1,27,05,376/- which is not in controversy. However, the Ld. Commissioner sustained the addition of Rs.7,79,000/- u/s 69A of the Act mainly on the reasons that the Assessee does not have a cash book to prove the cash balance as on 08.11.2016 and there are “nil” cash withdrawals up to 07.11.2016 and on 08.11.2016 there were cash withdrawals/ATM withdrawals totaling to Rs.7,600/-. In the absence of cash withdrawal, SBN deposit during demonetization period can only be from unexplained sources.
This Court has considered the conclusion drawn by the Ld. commissioner and observe from the perusal of cash flow statement, wherefrom, it clearly appears that as on 08.11.2016 the Assessee was having opening balance of Rs.8,15,800/- and cash sales of Rs.4,00,000/- and therefore the deposit of Rs.7,79,000/- in the SBN currency appears to be justifiable. Even otherwise there is no allegation against the Assessee that he has carried out any other business. Admittedly, gross receipt/turnover of the Assessee from the business has not exceeded the prescribed limit of Rs.2,00,00,000/- as applicable to A.Y. 2017-18 which is under consideration and therefore the Assessee has not maintained the books of account. Thus, on the aforesaid analyzations, the addition of Rs.7,79,000/- in entirety is un-sustainable, however, the same is liable to be taxed @ 8% as prescribed u/s 44AD of the Act. Consequently, the AO is directed to tax the amount of Rs.7,79,000/- @ 8% and recompute the liability accordingly.
In the result, the appeal filed by the Assessee stands allowed partly.
Order pronounced in the open court on 11.12.2024.