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Facts
The assessee, a registered partnership firm dealing in cement distribution, deposited Rs. 1,45,24,000/- during the demonetization period. The Assessing Officer (AO) added this amount as unexplained cash deposit under Section 69A of the Income Tax Act, which was upheld by the CIT(A). The assessee claimed the deposits were from debtors' realization and cash sales, providing confirmations and cash book entries.
Held
The Tribunal observed that the assessee had provided relevant details and discharged the initial onus of proof. The lower authorities rejected the evidence citing unsigned confirmations and lack of PAN, without conducting independent inquiries. Therefore, the Tribunal directed the AO to delete the addition.
Key Issues
Whether the cash deposits made during the demonetization period, claimed to be from debtors' realization and cash sales, were sufficiently substantiated by the assessee to avoid addition under Section 69A.
Sections Cited
69A, 250, 143(1), 143(2), 142(1), 143(3), 133(6)
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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
O R D E R Per Kavitha Rajagopal, J M:
This appeal has been filed by the assessee, challenging the order of the learned Commissioner of Income Tax (Appeals) (‘ld.CIT(A) for short), National Faceless Appeal Centre (‘NFAC’ for short) passed u/s.250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2017-18.
The assessee has raised the following grounds of appeal:
1. The CIT Appeal has erred in confirming addition of Rs.1,45,24,000/- towards the cash deposits in bank account during the demonetization period.
2. The CIT Appeal has erred in confirming the action of Assessing Officer in making the additions u/s. 69A of the cash deposit duly reflected in books of accounts.
3. The CIT Appeal has erred in confirming the addition made by the Assessing Officer without the learned Assessing Officer rejecting the books of accounts.
4. The CIT Appeal has erred in confirming the action of Assessing Officer in rejecting the explanations as submitted by the appellant.
Brief facts of the case are that the assessee is a registered partnership firm engaged in the business of wholesale distributor of cement. The assessee had filed its return of processed u/s. 143(1) of the Act and the assessee’s case was selected for scrutiny under CASS and notices u/s. 143(2) and 142(1) of the Act were duly issued and served upon the assessee.
The learned Assessing Officer ('ld. A.O.' for short) observed that the assessee had deposited cash aggregating to Rs.1,45,24,000/- during demonetization period in its account held in Bank of India and Kotak Mahindra Bank. The ld. A.O. then passed the assessment order u/s.143(3) of the Act on 30.12.2019, declaring total income at Rs.1,46,55,890/-, after making an addition on the impugned amount u/s. 69A of the Act as ‘unexplained cash deposit’.
Aggrieved the assessee was in appeal before the first appellate authority, challenging the assessment order.
The ld. CIT(A) vide order dated 31.01.2024, upheld the order of the ld.A.O. for the reason that the assessee has failed to substantiate its claim by documentary evidences.
The assessee is in appeal before us, challenging the impugned order of the ld. CIT(A).
The learned Authorised Representative (ld. AR for short) for the assessee contended that the assessee has furnished all the relevant documentary evidences such as bank statement, statement of cash deposits, month wise sales and purchase summary, month wise cash summary and details of sundry creditors and debtors. The ld. AR further contended that the confirmation letters from around 57 debtors were also furnished before addition without rejecting the books of accounts and relied on a catena of decision which held that the addition made without rejecting the books of account is unsustainable.
The learned Departmental Representative (ld. DR for short), on the other hand, controverted the said fact and contended that the assessee has merely furnished the Xerox copies of the confirmation and even otherwise some of the confirmations were without PAN and signature. The ld. DR relied on the order of the lower authorities.
We have heard the rival submissions and perused the materials available on record. It is observed that the assessee has collected the said amount from its sundry debtors, which was due in the earlier assessment years in cash and the same was deposited in the assessee’s bank account in Specified Bank Notes (SBN) for which the assessee is said to have furnished its cash book for a period from 01.04.2016 to 31.03.2017 to substantiate the fact that the assessee was into the habit of maintaining cash balances in the normal course of its business on daily basis. The ld. A.O. in her finding has also stated that the assessee is in the habit of depositing cash as and when it is collected by the assessee and had also analyzed the cash deposits and cash withdrawal of earlier financial year. It is also noted that the assessee has furnished the confirmation of 57 sundry debtors, out of which only 2 were found to be unsigned and some of it did not contain the PAN, which according to the lower authorities was found to be not genuine.
The ld. A.O. has also specified that some of the receipts had no receipt numbers and since there has been a sudden increase in the sales, few months before the demonetization period, which was in the month of August, 2016 which subsequently decreased after the not genuine and the cash deposit made by the assessee was ‘unexplained money’ which resulted in the impugned addition u/s.69A of the Act. The ld. CIT(A) has extensively relied on the order of the ld. A.O. to uphold the impugned addition made by the ld. A.O.
It is also pertinent to point out that the lower authorities have rejected the claim of the assessee for the reason that the assessee has not made the cash deposit in one go and has been depositing the same over a period of more than a month in about 34 transactions.
Per contra, the assessee’s contention is that the assessee which is into the business of cement distribution and sales, which is procured from ACC Cements Ltd. and Bharati Cements Ltd. where the goods are directly supplied to the customers for the reason that the assessee’s godown cannot withhold such huge stocks where the assessee has declared a turnover of Rs.11,52,37,928/- with a closing stock of Rs.15,37,575/- substantiate the fact that the cash deposits are out of debtors realization. The assessee also contends that the total cash deposits out of the debtor realization for the year under consideration was Rs.3,13,00,000/- including the cash deposits made during demonetization and in comparison with FY 2015-16, the same was around Rs.2,23,00,000/-, thereby substantiating the fact that it was not a sudden increase in sales. Pertinently, the cash deposit made during demonetization during 8.11.2016 to 22.12.2016 which aggregated to Rs.1,45,24,000/- was added by the ld. A.O. as ‘unexplained deposits’ u/s. 69A of the Act whereas the balance cash deposit of Rs.1,04,70,556/- during the period from 01.04.2016 to 08.11.2016 was accepted by the ld. A.O. for which no addition was made. The assessee further contended that the said deposit was from both cash sales and also from its sale debtors. It is observed that neither the ld. A.O. nor the ld. CIT(A) has called for details from the said parties u/s.133(6) of the Act. The assessee has also contended that it had reduced its business since 2018 and had later closed down its business, which reflects in the P & L account and the balance sheet for last four years, where there has been no sales in the year ended 31.03.2021, thereby explaining why there has been a decline in the cash deposit post demonetization period.
From the above factual matrix of the case, it is observed that the assessee has furnished the relevant details before the lower authorities, thereby discharging the initial onus of proof casted upon it as per the provisions of the Act. The lower authorities have merely rejected the same that some of the confirmations were unsigned and without PAN and had not gone beyond this by conducting independent enquiry on the alleged parties for rebutting the claim of the assessee. In the absence of the same, we hold that the assessee has duly discharged the onus casted upon it and, therefore, deem it fit to direct the ld. A.O. to delete the impugned addition made in the hands of the assessee. Hence, the grounds of appeal raised by the assessee are allowed.
In the result, the appeal filed by the assessee is allowed.