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Facts
The assessee company, engaged in earth work and gravel supply, filed a return declaring a loss. During the demonetization period, significant cash deposits were made into the assessee's bank accounts. The Assessing Officer (AO) added back Rs. 49,49,000/- as unexplained cash deposit.
Held
The Tribunal held that the addition was made on the basis of surmises and conjectures as the books of accounts were audited and no defects were pointed out. The AO's allegation of unexplained cash deposit lacked evidence, particularly regarding the deposit of specified bank notes.
Key Issues
Whether the cash deposits made during the demonetization period are unexplained and thus liable for addition, and whether the claim of carry forward of business loss is correctly disallowed.
Sections Cited
68, 115BBE
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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
Before: SHRI NARENDRA KUMAR BILLAIYA, HON’BLE & SHRI RAHUL CHAUDHARY, HON’BLE
O R D E R
PER NARENDRA KUMAR BILLAIYA, AM:
This appeal by the assessee is preferred against the order dt. 17/10/2023 by NFAC, Delhi, pertaining to Assessment Year 2017-18.
The first substantive grievance of the assessee is that the ld. CIT(A) erred in confirming addition of Rs. 49,49,000/- being the cash deposited during the demonetization period. 3. Briefly stated, the facts of the case are that the assessee filed its return of income electronically declaring loss of Rs. 21,64,923/- on 31/03/2018. The return was selected for scrutiny assessment through CASS and accordingly statutory notices were issued and served upon the assessee. 4. The assessee is a private limited company engaged in filling of earth work and supply of gravel. During the year under consideration, the assessee has deposited cash in his bank accounts during the demonetization period. The assessee was asked to submit the details. The assessee explained the cash deposits during three financial years as under:- Bank A/c Cash deposits Cash deposits for Cash deposits for for F.Y. 2015-16 F.Y. 2016-17 (Rs.) F.Y. 2017-18 (Rs.) (Rs.) 414501010036515 12,35,000/- 93,16,000/- 5,03,500/- 414505010050024 26,93,000/- 21,93,000/- 1,50,000/-
A month-wise cash deposit and cash withdrawals during the year under consideration are as under:- The details of month wise cash deposits for F.Y. 2016-17 are as under:-
The details of month wise cash withdrawals for F.Y. 2016-17 are as under:-
The total cash deposits made during 09/11/2016 to 31/12/2016 was Rs.49,49,000/-. The AO was of the strong belief that the assessee has not established the source from which it has deposited the aforementioned cash in its bank account. The assessee was asked to 3 show-cause why the cash deposit be not treated as unexplained. The assessee filed a detailed reply which did not find any favour with the AO who went on to make addition of Rs.49,49,000/- u/s 68 r.w.s. 115BBE of the Act. The AO further rejected the claim of carry forward of loss as the return of income was filed after the due date. 6.1. The assessee carried the matter before the ld. CIT(A) but without any success.
Before us, the ld. Counsel for the assessee vehemently stated that, the books of the assessee were audited and complete details of source of cash deposit were filed during the proceedings before the lower authorities. Strong reliance was placed on the decision of the Co-ordinate Bench in the case of Pukhraj Nathmal Jain vs. ITO in AY 2017-18, order dt. 26/02/2024. Per contra, the ld. D/R strongly supported the findings of the AO and read the operative part of the same. 8. We have given a thoughtful consideration to the orders of the authorities below. The undisputed fact is that the books of accounts of the assessee are duly audited by a Chartered Accountant. The audited statement of accounts are placed in the paper book. A perusal of the profit and loss account for the year under consideration show that the assessee has revenue from operations amounting to Rs.17,02,48,851/- which includes sales of Rs.15,86,00,000/-. It is also not in dispute that the assessee earned income from transportation and trading primarily and to carry on its business, the assessee has purchased trucks. It appears that the AO has not considered the sales and nature of business of the assessee. Though, the AO has doubted the source of cash deposit, yet did not point out any error or infirmity in the books of accounts of the assessee. No defect was pointed out nor found by I.T.A. No. 4094/Mum/2023 4 any of the lower authorities and since the entire deposits have gone through the books of accounts regularly maintained by the assessee duly audited, therefore, we are of the considered view that the entire addition has been made on the basis of surmises and conjectures which have no legs to stand. Moreover, though the AO has alleged unexplained cash deposit during demonetization period but has not brought on record anything to show that the said cash deposits were made in specified bank notes (SBN). 8.1. Though at para 4.7., the AO has referred to huge variation in the cash deposited during the demonetization period and has also referred to the huge surge of revenue from operations but has not pointed out any error or defect in the books of accounts. However, we find that at clause (iv) at page 5, the AO has mentioned that the assessee has produced the accounts at the fag end of the assessment proceedings. Therefore, we are of the considered view that, the AO should examine the books of accounts thoroughly and decide the issue afresh after affording reasonable and adequate opportunity of being heard to the assessee. The AO is also directed to examine the authenticity of the bills furnished by the assessee. Accordingly, this ground is allowed for statistical purposes. 9. Insofar as the carry forward of the claim of business loss is concerned, we are of the concerned view that all that the AO is required is to inform the assessee about the amount of loss as computed by him. Whether the loss in any year may be carry forward to the following year and set off against the profits, has to be determined by the AO who deals with the assessment of the subsequent year. It is for the AO dealing with the assessment in the subsequent year to determine whether the loss of the previous year