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Facts
The assessee filed a return of income and the case was selected for scrutiny. The Assessing Officer (AO) noticed cash deposits of Rs. 1,22,78,123 into the assessee's bank account. Despite notices, the assessee did not fully comply, and the AO treated the deposits as unexplained cash credits.
Held
The Tribunal noted that the assessee deposited cash of Rs. 1,22,78,125 in the bank account. However, it also noted from the statement of facts that only Rs. 58,18,200 was deposited. The assessee could not comply with the notices issued by the AO during the assessment proceedings.
Key Issues
Whether cash sales realization deposited in the bank account can be treated as unexplained cash credits, especially when the assessee maintains audited books of account and the cash sales are a normal part of trade.
Sections Cited
115BBE, 68, 142(1), 44AB
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Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI LAXMI PRASAD SAHU & SHRI KESHAV DUBEY
Per Laxmi Prasad Sahu, Accountant Member
This appeal is filed by the assessee against the order dated 04.01.2024 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2017-18 on the following grounds:-
“1. That in the facts and circumstances of the case, the impugned order passed by the Learned Commissioner of Income Tax (Appeals) NFAC is highly unjust, arbitrary and contrary to law.
2. That in the facts and circumstances of the case the learned lower authorities have erred in law in treating the cash sales realizations, realized in the normal course of appellant's trading activities, as unexplained cash credits.
3. That in the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) NFAC is not justified to have dismissed the appeal, summarily and without complete appreciation of the nature of activities of the Appellant and the genuine nature of activities , as demonstrated by the appellant with comparative details of the volume of cash sales as a percentage of the gross turnover of the appellant year wise. 4. That in the facts and circumstances of the case, the learned Commissioner of Income Tax (Appeals) NFAC is not justified to have dismissed the appeal, summarily and without taking into consideration the decisions relied upon by the appellant and the ratios of those decisions are squarely applicable to the appellant's case. 5. That in the facts and circumstances of the case, the Learned lower authorities are not justified in treating the cash sales realizations deposited into the bank amounting to Rs.1,22,78,125/- during the year as Income from Other Sources, without taking into consideration that the appellant was maintaining regular books of account and which were duly audited and which clearly established the genuine nature of the activities of the Appellant and the cash sales realizations earned in the normal course of business. 6. That in the facts and circumstances, the learned lower authorities ought to have appreciated that the total volume of cash sales/ realizations, during the relevant previous year was a merge 13.93% and which was in parity with the similar receipts during the immediate previous year which was at 15.118; and thus there was no justification to invoke section 68 of the Act. For the above grounds and such other grounds that may be urged at the time of hearing, with kind permission, Appellant most humbly pray that the Appeal may kindly be allowed in the interest of justice.”
Briefly stated the facts of the case are that the assessee filed return of income on 01.11.2017 declaring total income at Rs.18,38,470. The case was selected for scrutiny under CASS for examining cash deposits made during the year. Statutory notices were issued to the assessee, but there was no response from the assessee’s side. The AO noticed that the assessee had deposited cash of Rs.1,22,78,123 into Canara Bank A/c No.2739261000006. During the assessment proceedings the assessee submitted part reply, but other requirements of AO were not fulfilled. The AO treated the entire cash deposits into the bank account as unexplained cash credit for want of proper explanation and applied tax rate u/s. 115BBE of the Act.
Aggrieved from the AO’s order, the assessee filed appeal before the First Appellate Authority (FAA). During the appellate proceedings the assessee could not comply with the requisite documents asked by the FAA for substantiating his case. The FAA granted ample opportunities to the assessee and confirmed the order of the AO. Against this, the assessee is in appeal before the ITAT.
The ld. AR reiterated the submissions made before the lower authorities and submitted that the ld. FAA has not appreciated the written submissions of the assessee properly. He submitted that the turnover of the assessee is Rs.14.68 crores, however there was only cash sales realization received during the year of Rs.48,18,280 which is 3.28% of the total turnover. The assessee is a retail trader in electrical goods which involves sales realization both through banking channels as well as through cash receipts which is universally accepted and followed trade practice. Books of account are audited u/s. 44AB and no adverse comments have been observed by the tax auditor. In retail trade practice, cash sales are very much common and assessee has deposited the realization of sales into his bank account. He further requested that if a chance is given to the assessee, he will fulfil the requirements of the AO and undertook to furnish the requisite documents.
The ld. DR relied on the order of lower authorities and submitted that ample opportunities were granted to the assessee by both the revenue authorities, however, assessee did not comply with the notices. He objected to sending back the matter.
Considering rival submissions, we note that during the impugned assessment year, the assessee has deposited cash of Rs.1,22,78,125 in Canara Bank account. We note from the statement of facts that assessee has deposited only cash of Rs.58,18,200. During the assessment proceedings, the assessee could not comply with the notices u/s. 142(1) issued by the AO. Considering the totality of facts of the case and in the interest of justice, we remit the issue to the Assessing Officer for fresh consideration and decision as per law, after reasonable opportunity of being heard. The assessee is directed to cooperate with the proceedings and in case of further default, the assessee shall not be entitled to any leniency.
In the result, the appeal by the assessee is allowed for statistical purposes.