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Facts
The assessee, proprietor of Shet Jewellers, filed a return declaring an income of Rs. 18,51,470 for AY 2017-18. During the demonetization period, the assessee deposited a total of Rs. 5,17,42,703 in various bank accounts. The Assessing Officer (AO) treated Rs. 1,30,37,571 of these deposits as unexplained cash credit and unexplained investment, subsequently computing tax under section 115BBE of the Act.
Held
The Tribunal noted that the issue pertains to the demonetization period and should be examined in light of CBDT instructions. The Tribunal referred to a coordinate bench decision and decided to remit the issue back to the AO.
Key Issues
Whether the cash deposits made during the demonetization period are to be treated as unexplained income, and whether the CIT(A) erred in sustaining the additions made by the AO.
Sections Cited
250, 143(3), 68, 69B, 115BBE
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “B” BENCH : BANGALORE
Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI LAXMI PRASAD SAHU
Per Laxmi Prasad Sahu, Accountant Member
This appeal is filed by the assessee against the DIN & Order No.ITBA/NFAC/S/250/2023-24/1055537243(1) dated 29.8.2023 of the CIT(Appeals), National Faceless Appeal Centre, Delhi [NFAC], for the AY 2017-18.
The assessee has raised the following grounds:-
“1 That on facts and circumstances of the case, the provisions of law, the order passed by the Ld. CIT (Appeal) under section 250 of the act is bad both in the eyes of law and on facts and the same has been passed against the guidelines/circular of CBDT and violating the principle of natural justice by not providing the ample opportunity of being heard. 2 That on the facts and circumstances of the case and the provisions of the law, the Ld. CIT (Appeal) has failed to appreciate that the assessment order passed u/s 143(3) is illegal bad in law, time barred, without jurisdiction and the same has been passed against the guidelines/circular of cum and violating the principle of natural justice by not providing the ample opportunity of being heard and passing the order without 3 That the Ld. CIT(A) has erred on facts and in law In Sustaining the addition Of Rs.1,30,37,571/- made by the Ld. AO on account of Cash deposits in bank account treating the same as unexplained money without appreciating the facts of the case. 4 Thal the Ld. CIT(A) has erred on facts and In law In sustaining the addition of Rs. 22,34,334/- made by the Ld. AO on account of unexplained gold stock without appreciating the facts of the case.
5. That the Ld. CIT(A) has erred on facts and in law in appreciating the action of Ld. AO in invoking of provisions of section 115BBE of the Act while computing the tax payable in the case of the appellant.
6. That the impugned CIT(A) order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence. 7 The appellant craves leave to add, amend or alter any of the grounds of appeal before/al the time of hearing.”
The brief facts of the case are that the assessee is a proprietor of Shet Jewellers, Kundapura and filed return of income on 24.08.2017 declaring total income of Rs.18,51,470. The case was selected for scrutiny under CASS and statutory notices were issued to the assessee. During the year, the assessee had maintained following bank accounts and deposited cash during demonetization period as under:-
Name of bank A/c No. Amount Bharath Co-operative Bank CC 00491300000017 43,000 Bharath Co-operative Bank 004910500055445 3,45,07,000 Corporation Bank 000201601000293 1,37,94,000 Bhatkal Urban Co-op. Bank 00611101000916 15,07,703 Vijaya Bank 104801010017156 14,46,000 Corporation Bank 000200101018414 58,000 Total 5,17,42,703
During the assessment proceedings the AO issued various notices and asked the source of cash deposits. The assessee filed reply, but the AO was not satisfied from the submissions made and he calculated the amount of cash deposited of Rs.1,30,37,571 being difference in purchases reported in VAT returns as unexplained cash credit u/s. 68 and the difference in stock valuation as unexplained investment u/s. 69B and computed tax u/s. 115BBE of the Act.
The assessee filed appeal before the CIT(Appeals) and filed submissions on 03.06.2022 which were duly considered by the CIT(A) . The CIT(A) quoted the entire assessment order in his order and he upheld the action of the AO. He observed that the monthly VAT return for purchase and sale filed by the assessee were revised only to shift the purchases to a different dates to accommodate different purchase figures and purchases got shifted from post-demonetization period to pre-demonetization period. The assessee has effectively revised VAT returns by reducing purchases during initial months and shown purchases during later part of the year.
The ld. AR reiterated the submissions made before the lower authorities and submitted that if a chance is given to the assessee for reconciling the observations of the AO and undertook that assessee will comply and satisfy the revenue authorities that there is no malafide intention to shift the purchases as observed by the AO. The stock difference has arisen because of valuation method adopted.
On the other hand, the ld. DR relied on the order of lower authorities and submitted that the assessee has revised VAT return for giving effect to demonetization activity done by the assessee and accepted cash in SBNs which were deposited in the bank account. The submission made by the assessee is not correct that there was a dispute with the Bank in the OD account, therefore the assessee did not deposit the amount in OD a/c. Since the assessee had maintained number of bank accounts for depositing the cash before demonetization period, there was no need to keep huge cash balance running over the period. Therefore, the order of authorities below should be upheld.
8. Considering the rival submissions and perusing the material on record, we note that the assessee had deposited a sum of Rs.5,17,42,703 in his bank accounts. Out of above deposits, cash of Rs.1,30,37,571 only was not accepted by the AO for the reason that the appellant had revised the VAT return which was attributed to a discharged accountant to account for purchases from unregistered dealers. The AO has done analysis of cash deposits for 3 years and observed that there is a range of Rs.27,400 to Rs.1.17 crores in these three years for which the assessee failed to file any plausible explanation and noted that the assessee revised the VAT returns for giving effect the sales / cash deposits made during the demonetization period.
Since the issue involved in this case relates to the demonetization period the issue has to be examined in the light of the instructions issued by the CBDT in regard to the cash deposited during the demonetization period. The co-ordinate bench of the Tribunal in the case of M/s. Bhoopalam Marketing Services Pvt. Ltd., vs. ACIT in & 564/Bang/2022 vide order dated 15.09.2022 has held as under:-
7.1 We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-ITA.II. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases.
In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby
unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. 8.1 The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash sales or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Nonavailability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters or not. 8.2 The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim.”
Respectfully following the above decision, in the interest of justice, we deem it fit to remit the issue to the file of AO to decide the issue afresh in the same terms. The AO will consider the explanation furnished by the assessee in respect of the cash deposited during the demonetization period and in light of the CBDT instructions. The AO is directed to give reasonable opportunity of being heard to the assessee and decide the issue as per law. The assessee is also directed to produce evidence/documents in substantiating its case. The assessee is directed not to seek unnecessary adjournments for early disposal of the case.
In the result, the assessee’s appeal is allowed for statistical purposes.
Pronounced in the open court on this 23rd day of February, 2024, as per Rule 34 of the Income Tax (Appellate Tribunal) Rule 1963.