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Facts
The assessee, a newspaper vendor, deposited a substantial amount in cash during the demonetization period. The Assessing Officer (AO) added the unexplained cash deposits under section 69A of the Income Tax Act and also estimated business income at 10% of sales proceeds. The CIT(A) deleted a portion of the cash deposit addition and reduced the business income estimation to 5%. The assessee appealed against the order.
Held
The Tribunal acknowledged a delay of 25 days in filing the appeal due to the assessee's lack of technical expertise and poor advice. While acknowledging the delay, the Tribunal noted that the assessee failed to provide documentary evidence to justify the cash deposits and the quantum of business income. The Tribunal decided to remit the issues to the AO for fresh consideration.
Key Issues
Whether the additions made by the AO and upheld by the CIT(A) regarding unexplained cash deposits and estimated business income are justified, and whether the assessee should be given another opportunity to present evidence.
Sections Cited
69A, 250, 115BBE
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Income Tax Appellate Tribunal, “B’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
IN THE INCOME TAX APPELLATE TRIBUNAL “B’’ BENCH: BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER Assessment Year: 2017-18 Veeranna Chandrashekhar Marnal H.No.296, I.P. Avaradi Building Near Mallikarjuna Temple ITO Bevangapeth Kade Oni Ward 3(1) Vs. Hubli Hubli Karnataka 580 023 PAN NO : AQOPM7209D APPELLANT RESPONDENT Appellant by : Smt. Prathibha R., A.R. Respondent by : Shri Ganesh R. Ghale, Standing Counsel for Department. Date of Hearing : 24.01.2024 Date of Pronouncement : 24.01.2024 O R D E R
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of NFAC for the assessment year 2017-18 dated 26.9.2023 passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”). The assessee has raised following grounds: 1) On the fact and in the circumstances of the case, the learned CIT(A) erred in confirming the additions made by AO by applying the provision of section 69A of the Act. 2) The learned CIT(A) ought to have appreciated fact that the cash deposits were made by the appellant is explainable if the opportunity would have been given, it is explainable. Thus, the addition made by AO has to be deleted in full. 3) The learned CIT(A) ought to have appreciated that the appellant is a newspaper vendor and in the said business there was no 10% profit margin on the total credits in the bank account, as estimated by the AO and same Veeranna Chandrashekhar Marnal, Hubli Page 2 of 7 was upheld by the CIT(A) without providing an opportunity, is bad in law. Hence, the order passed by him is unjustified and not in accordance with the law. 4) The ld. CIT(A) further erred in confirming the additional tax under sec 115BBE of the Act. 5) The learned CIT(A) ought to have appreciated the fact that there was no unexplained money at all and the credits in Bank account are duly explained. Therefore, the provisions of section 69A of the Act will not applicable to the facts of the case. 6) Without prejudice, the addition confirmed is arbitrary excessive unreasonable, and liable to be deleted intoto. 7) For these and such other grounds that may be urged at the time of hearing, the appellant prays that the appeal may be allowed.
2. At the outset, it is observed that there was a delay of 25 days in filing the appeal before this Tribunal. The assessee has filed a condonation petition stating that though the appellate order was passed on 26.9.2023, however, same was sent by e-mail to assessee on 28.10.2023, which is the date of receipt of e-mail from the ld. AO i.e. Income Tax Officer, Ward-2(1), Hubli. Thereafter, assessee took steps to file appeal before this Tribunal and filed appeal before this Tribunal on 20.12.2023. Thus, there was a delay of 25 days in filing the appeal before this Tribunal. The delay caused was non- intentional and deliberate and prayed that the delay may be condoned in the interest of justice.
The ld. D.R. strongly opposed the admission of appeal stating that assessee was very negligent in taking action to file appeal before this Tribunal and appeal be dismissed. 4. We have heard the rival submissions and perused the materials available on record. In this case, there is a short delay of 25 days in filing the appeal before this Tribunal. The assessee has explained that the delay was due to non-noticing of the first appellate order by assessee sent through e-mail and it was noticed by assessee only on 28.10.2023. In our opinion, since the assessee is not well Veeranna Chandrashekhar Marnal, Hubli Page 3 of 7 versed in Income Tax portals and assessee was not regularly checking e-mails sent by authorities, hence, it was noticed belatedly by the assessee. Considering these facts, we condone the short delay of 25 days and admit the appeal. 5. Facts of the case are that the assessee has claimed to be a newspaper vendor. During the year under consideration the AO found that there were total cash deposits in the whole financial year to the tune of Rs.1,17,47,750/-. Cash deposits during demonetization period from 08.11.2016 to 30.12.2016 was Rs.19,98,780/-. Since, the assessee could not justify the cash deposits in Specified Bank Notes the AO added the Rs.19,98,780/-u/s.69 of the Act. Further, the AO made an addition of Rs.13,21,452/- being business income @ 10% of Rs.1,32,14,520/-. During the appellate proceedings the assessee has not filed any written submissions or any documentary evidence to justify its stand. However, considering the data available on records the case of the assessee was decided by the ld. CIT(A) as under:-
5.1 The TDS details & commission earned by the assessee as per 26AS is reproduced hereunder:- TDS A.Y. Commission 2014-15 80,755/- 8,075/- 2015-16 1,02,870/- 10,287/ - 2016-17 1,18,998/- 11,045/- <•* i 2017-18 1,32,314/- 13,231/- 2018-19 -- -- 5.2 The details of income returned by the assessee for A.Y.2016-17 to 2018-19 tabulated hereunder:- A.Y. Returned Sale of Income from services other sources income 2016-17 -- 2,38,210/- 3,46,861/- 2017-18 2,71,059/- 3,53,130/- 1,32,422/- 2018-19 3,84,170/- 4,18,318/- 1,35,606/- Veeranna Chandrashekhar Marnal, Hubli Page 4 of 7 5.3 From the above details, the ld. CIT(A) observed that the commission income earned by assessee in A.Y.2017-18 is Rs.1,32,314/-. Further, he has disclosed income from sale of services to the tune of Rs.2,71,059/-. The assessee has not explained its exact role and scope of activity in respect of distribution of newspaper. However, the assessee is a distributor it is presumed that his role would be purchasing newspaper from the publisher and selling it to the vendors who in turn would make door to door delivery to the consumer. In such cases the assessee would derive income in the form of commission from the publisher and a margin of profit retained from the vendor. The door to door vendor usually get the commission income of approximately 20 to 25%. Therefore, it could safely be estimated that the distributor would retain 5% of such commission with himself. In the present case, there are two issues to be adjudicated. The first issue is regarding cash deposits during demonetization period and estimation of commission earned. In respect of the commission income earned the assessee has not furnished any documentary evidence to justify the cash deposited in the-specified bank notes 'SBN'. However, the fact remains that the assessee was a newspaper distributor and he has carried out this activity during the financial year. Since, the assessee has made a turnover of Rs.1,32,14,522/-, the average monthly turnover would be around Rs.11,00,000/-. The assessee can be given benefit of doubt that he had collected the October sale proceeds which was deposited in November to the tune of Rs.11,00,000/-. However, after the announcement of demonetization the assessee was not authorized to collect the cash in Specified Bank Notes. Therefore, no further benefit can be accorded to the assessee. So the cash in SBN notes over and above Rs.11,00,000/- is treated as unexplained by the NFAC. The assessee gets relief of Rs.11,00,000/- and addition to the tune of Rs.8,98,780/- was upheld by the NFAC.
Veeranna Chandrashekhar Marnal, Hubli Page 5 of 7 5.4 The second issue pertains to business income estimated 10% of sale proceeds. The assessee has not furnished any documentary evidence to establish the quantum of income earned by him in the form of commission from the publisher and margin from the vendor. Since the assessee has failed to substantiate its case at the assessment stage as well as assessee stage regarding the quantum of commission/margin available to it from publisher and from the vendor, there is no option left but to decide the case on the basis of material available on records. Even the AO has not made any enquiries to substantiate its decision to arrive at the estimation of its income. Considering the facts of the case and modus operandi of the business, the business income of the assessee is estimated @5% of sale proceeds. The income of this score would work out to Rs.6,60,726/-. The assessee gets relief of Rs.6,60,726/-. The addition to the tune of Rs.6,60,726/- was upheld by the NFAC. Against this assessee is in appeal before us.
We have heard the rival submissions and perused the materials available on record. In this case, the addition was made due to deposit of SBN notes during the time of demonetization and also estimation of income at 10% on sale proceeds. On appeal, ld. CIT(A) has deleted the addition of Rs.11 lakhs out of addition of Rs.19,98,780/- towards cash deposits during demonetization period and also reduced the estimation of income on sale proceeds at 5% and deleted the addition of Rs.6,60,726/- on this count. Now the contention of the assessee’s counsel is that the assessment order as well as CIT(A)’s order are ex-parte and prayed that one more opportunity be given before AO to avoid the miscarriage of justice. 6.1 On the other hand, ld. D.R. relied on the order of the Raipur Bench in the case of Adim Jati Sahkari Samiti Maryadit in dated 18.9.2023 wherein held as under: “15. Apropos, the claim of the Ld. A.R. that the matter in all fairness be restored to the file of the A.O. for fresh adjudication, the same does not favor us. As observed by us herein above, the grounds based on which the order of the CIT(Appeals) has been assailed before us are devoid and bereft of any merit; therefore, the appeal is liable to be dismissed Veeranna Chandrashekhar Marnal, Hubli Page 6 of 7 on the said count itself. Apart from that, we are of a firm conviction that the right vested with an appellant to approach the tribunal by preferring an appeal before it is for a limited purpose, i.e. a grievance that the assessment framed by the AO, or for that matter, order of the CIT(Appeal) were not according to law. In no case can the Tribunal be taken as a forum for an appellant who, as per his volition, had either adopted an evasive or lackadaisical approach before the lower authorities and not participated in the assessment or appellate proceedings to come up with its case for the first time before the Tribunal and, as a matter of right seek restoring of the impugned order to the file of the lower authorities for fresh adjudication.”
6.2 In our opinion, the assessee was not well educated and was not properly advised by the consultants after filing the return of income. As such, assessee has failed to represent before ld. AO and also failed to give proper reply before NFAC and the assessee has not derived any benefit by not representing before lower authorities. Being so, in our opinion, it is appropriate to remit the issues in dispute to the file of ld. AO for fresh consideration to see whether cash deposits is made out of business receipts/sales receipts and if it is from business receipts/sales receipts, there should not be double addition, one in the form of estimation of income on sales and another by way of unexplained income u/s 69A of the Act and due telescoping benefit to be given to the assessee, if any additions on this count is sustained. Ordered accordingly.
In the result, appeal of the assessee is partly allowed for statistical purposes.