MAHALINGAM SUMATHI,SALEM vs. ITO, WARD 1(8), SALEM

:-3-: ITA. No: 1363/Chny/2024 01.11.2019, but the assessee failed to respond and hence, the Assessing Officer framed assessment on best judgement basis vide order u/s.144 of the Act dated 15.11.2019 holding as under:-

“7. In the above circumstance, the assessment is completed with the following additions: (i) Total amount of cash deposits during the 'Demonetization period (i.e. From 9th November, 2016 to 30th December, 2016)'- The statement of bank account maintained by the assessee during the year under consideration [i.e. prior to demonetization period (01/04/2016 to 07/11/2016), during demonetization period [09/11/2016 to 30/12/2016] and post demonetization period [31/12/2016 to 31/03/2017 have been examined. The assessee had made total cash deposits of Rs.14,54,000/- during the 'Demonetization period (i.e. From 9th November, 2016 to 30th December, 2016) as discussed in para no.5. Further, the assessee failed to furnish any explanation for the source of the said cash deposits in spite of providing several opportunities as mentioned in para 3. Hence, in the absence of any plausible explanation, the assessment is completed treating the entire cash deposits during demonetization period as unexplained and unaccounted income in the hands of the assessee u/s 69A of the I.T.Act and taxed the same at the rates specified under section 115BBE of the Income tax Act. Addition u/s 69A. Rs. 14,54,000/- Since the assessee has concealed his income, penalty proceedings u/s.271 AAC(1) of the Act in respect of unexplained income is hereby initiated. (ii) Business Income- It is also considered that, though the assessee had not offered any explanation for the credits and cash deposits made into the bank, it is illogical to state the entire credits and cash deposits, into the bank account as unexplained income of the assessee for the A.Y. 2017-18. Since the assessee is doing the business, which could be seen from bank statement itself. Hence, after taking into account of the facts as discussed in para 6, the total amount of Rs.1,06,64,248/- (i.e. total credit (inclusive cash deposits), during the F.Y. 2016-17 minus cash deposits during the 'Demonetization period from 9th November, 2016 to 30th December, 2016) taken as sales turnover of the assessee's business for the F.Y.

:-4-: ITA. No: 1363/Chny/2024 2016-17 for assessment purposes. Therefore the net income of the assessee is estimated @ 8% of sales turnover, which is worked out to Rs.8,53,140/-and added in the income of the assesse as unaccounted business income. Addition: Rs. 8,53,140/- Since the assessee has not offered the above income from business, by filing a valid return of income within the due date prescribed, the act of the assessee attract penalty proceedings u/s 270A of the IT Act, 1961 and penalty proceedings u/s 270A for under reporting of income is initiated separately. Since the assessee has not produced/maintained books of account, penalty proceedings u/s 271A is also initiated. Subject to the above discussion, total income of the assessee for the assessment year 2017-18 is assessed u/s.144 of the Act and the assessment is completed by computing the taxable income as under.

:-5-: ITA. No: 1363/Chny/2024

“6.7 The assessee claimed that once it is accepted that credits including cash deposits in his bank accounts during the year under consideration are related to his business and taxed u/s. 44AD on presumptive basis, then treating the credits on account of cash deposits during demonetization period as unexplained money u/s. 69A of the Act and other credits as turnover is illegal and unfair. The said claim would have been found to be acceptable in a normal year but not for the year under consideration due to announcement of demonetization of SBNs. Regarding the sources of cash deposits made by the appellant in SBNs during demonetization period, there are two things to be proven here, either the appellant had cash balance in SBNs prior to demonetization or he had accepted, SBNs after announcement of demonetization in his regular course of business where he was allowed to accept SBNs. The appellant has failed to submit any evidence on either count to prove his claim. The assessee claimed that the above amount relates to business however no documentary/evidence has been submitted to substantiate assessee has also not Income, his claim. The t submitted details to compare the cash deposit pattern every month during last two years to justify the high cash deposits during demonetization period. The assessee has also not submitted any details for giving the benefit of telescoping of business profits to cash deposits into the bank, Thus, the assessee has not discharged his primary onus to explain satisfactorily with supporting evidences about the nature and source of cash deposited in SBNs during demonetization period either during assessment proceedings or during appellate proceedings. Therefore, the AO was justified in not treating the aforesaid cash deposits of Rs. 7,70,000/- as business receipts. 6.8 The facts and finding of the case laws relied upon by the assessee are different where in those cases, those assessees explained the relation of the deposits with the business, but not in present case, the assessee has not explained satisfactorily about the nature and source of SBNs deposited during demonetization period. 6.8.1 The Hon'ble Tribunal in the case of Sridevi Ravi (supra) for AY 2009-10 to 2011-12 has given the finding it is an admitted that the assessee had proved with necessary evidences that she had received cash from business activity of civil contract and interior decoration work. In that case, the year under consideration was also not demonetization year. Further, no such evidence has been submitted by the assessee in the present case and the year is also demonetization year. 6.8.2 The Hon'ble Tribunal in the case of Smt. Saraniyaa Karthick (supra) has given the finding that the assessee had submitted that :-6-: ITA. No: 1363/Chny/2024 during demonetization period, the clients approached with demonetized currency to book tour packages and such cash was deposited in the bank account; that such receipts constitute business receipts and nothing else. In the present case, no evidence about of source of SBNs has been given by the assessee. 6.8.3 In the case of Mahendra Kumar (supra), that assessee was an exempted entity and allowed to receive the demonetized currency between 09.11.2016 to 30.12.2016 against the sale of medicines. In this case, the assessee was not an exempted entity. 6.8.4 In the case of Thomas Eapen (supra) for AY 2015-16, the Hon'ble ITAT observed that this is not a case, where the Assessing Officer has doubted the gross receipts or gross turnover of the assessee and in fact, accepting the same, estimating income @ 8% on the same at presumptive rate, he preferred to make further addition under section 68/69A of the Act. The ITAT in that case held that since the scheme of presumptive taxation has been formed in order to avoid the long drawn process of assessment in cases of small traders Il traders or in cases of those businesses where the incomes are almost of sfatic quantum of all the businesses, the Assessing Officer could have made the addition under section 69A of the Act, once he had carved out the case out of the glitches of the provisions of section 44AD of the Act and no such exercise has been done by the Assessing Officer in this case. In that case, the year under consideration was also not demonetization year. Further, in the present case, the Assessing Officer had not accepted entire credits as turnover and had estimated income @ 8% on credits excluding cash deposited of Rs. 14,54,000/- at presumptive rate. Thus, in this case, the AO had carved out the case out of the glitches of the provisions of section 44AD of the Act. 6.8.5 In the case of Gregory Francis D'Silva (supra), the Hon'ble Tribunal held that t he burden u/s.69A of the Act is only to give a satisfactory explanation and the facts and circumstances of a given case would be sufficient to draw an inference that receipts can be attributed to only business and no other source. In that case, there are no cash deposits in SBNs. Further, in the present case, as stated above, the assessee failed to explain to the satisfaction of the AO that cash deposits in SBNs can be attributed to only business and he had so much cash in hand as on 09.11.2016 in SBNs, 6.9 The assessee has relied upon the decision of Hon'ble Delhi High Court in the case of CIT vs HERSH WASHESHER CHADHA, dated 12/12/2023 to contend that sec. 69A is not applicable in this case. However, it is found that in that case, the :-7-: ITA. No: 1363/Chny/2024

Hon'ble Delhi High Court had kept that question open and has dismissed the appeal as there was no substantial question of law raised by the revenue. The Relevant para is as under: 7. Admittedly, in the present case, the respondent/assessee is a Non- Resident Indian and his source of income in India being from interest on bank accounts and interest on income tax refund, he is not obliged to maintain any books of account in India. It appears to us prima facie that the expression "if any" specifically used in Section 69A of the Act amplifies that where books of account are not maintained, it would not be possible to invoke this provision. But as mentioned above, learned counsel for appellant/revenue requested to keep this question open to be agitated in some better case. We accede to this request. ……… 8. In view of the aforesaid it is held that there is no substantial question of law raised by the appellant/revenue in this appeal for being considered by us. Accordingly, the appeal stands dismissed.(emphasis supplied.) 6.10. The Hon'ble Supreme Court in the case of Krishan Kumar [2019] 107 taxmann.com 464 (SC) has dismissed the SLP against High Court’s order where High Court upheld Tribunal’s order confirming addition madeby the AO u/s.69A on ground that during relevant year, assessee made cash deposits of more than Rs. 37 lakhs in saving bank account whereas its entire sales as per VAT return was only Rs. 9.65 lakhs. 6.11 In view of above facts, as no satisfactory explanation has been offered by the assessee about the nature and source of cash deposits in SBNs amounting to Rs 7,70,000/- in his bank account during demonetization period, the AO was justified in treating it as deemed to be the income of the assessee for the year under consideration u/s 69A of the Act read with sec. 115BBE of the Act. Thus, the addition of Rs 7,70,000/- is upheld. The assessee gets partial relief in this issue. 6.12. With regard to the estimation of income at Rs, 8,53,140/- being 8% of the total credits excluding cash deposits during demonetization period, the assessee has not furnished any evidence to justify that what is the net profit earned by him during the year under consideration. The assessee has not submitted any details of total sales, total purchases, stock register or return of income for AY 2017- 18. In the absence of any document, I am of the opinion that there was no other option with the AO than to estimate net profit at a certain percentage and estimation at 8% of the turnover appears to :-8-: ITA. No: 1363/Chny/2024 be not unreasonable in view of provisions of sec. 44AD of the Act. Therefore, the action of the AO to estimate business income at 8% of the turnover is upheld. The turnover in this case shall be taken as entire credits of Rs. 1,21,18,748/- excluding cash deposited in SBNs of Rs.7,70,000/-. The AO is, therefore, directed to rework the income from business as directed above.” Aggrieved, now the assessee is in appeal before us.