RAJIV DASGUPTA,KOLKATA vs. ITO, WARD-36(1), KOLKATA

The assessee in this appeal has taken the following grounds of appeal: “1. For that the order of the Ld. CIT (A) is arbitrary, illegal and bad in law.

The brief facts of the case are that the Assessing Officer noted that the assessee had deposited substantial cash in his bank account during demonetization period. He accordingly issued notice u/s 143(2) of the Act to the assessee. He also called information u/s 133(6) of the Act from Federal Bank in respect of accounts of the assessee. He noted from the aforesaid information collected from the bank that there were substantial transactions carried out in the bank accounts of the assessee. He noted that the total credits in the four accounts of the assessee with the Federal Bank were at Rs.26155363/-. He further noted from the Income Tax Returns of the assessee for three assessment years i.e. A.Ys 2015-16, 2016-17 & 2017-18 that the income of the assessee was not commensurate with the transaction Assessment Year: 2017-18 Rajiv Dasgupta carried out in the bank accounts of the assessee. Since, there was no compliance to the notices issued to the Assessing Officer, the Assessing Officer treated all the credit transactions in the bank account of the assessee as unexplained income of the assessee. He noted that the assessee, however, in the Income Tax Return has mentioned the cash deposits during the demonetization period of Rs.3018000/- only. He further noted that the total credit entries in the bank accounts of the assessee were at Rs2,61,55,363/-. He gave benefit of Rs.942746/- declared by the assessee and added back the remaining amount as unexplained income of the assessee u/s 69A of the Act.

Being aggrieved, the assessee preferred appeal before ld. CIT(A). The assessee moved application along with documents before the ld. CIT(A) and submitted that though the assessee had initially sought time from the Assessing Officer during the assessment proceedings for furnishing all the necessary details relating to the cash deposits during the demonetization period, however, later on, the notice could not be complied with as the data in computer of the assessee was corrupted/damaged. Thereafter, all sort of efforts were made to retrieve the data, details and documents in support of the case, which were not available at the time of assessment proceedings. The assessee, accordingly, furnished the necessary documents before the ld. CIT(A) and submitted that none of the transactions in the bank accounts of the assessee were unexplained. By relying upon various documents such as Profit & Loss A/c, balance sheet of the year under consideration, the details of advances taken during the year, the details of advances given during the year, the statement of bank accounts of the assessee etc., the assessee submitted that the amount of credits shown were majorly out of withdrawals from the bank accounts itself and the same could be verified from the bank statement. The transfer of Assessment Year: 2017-18 Rajiv Dasgupta the amounts inter se within the accounts of the petitioner were also demonstrated and further it was stated that some of the amounts were credited out of FD maturity. However, the ld. CIT(A) did not consider the aforesaid documents/evidences placed on the file and confirmed the additions made by the Assessing Officer.

Being aggrieved by the said order of the ld. CIT(A), the assessee has come in appeal before us. At the outset, the ld. counsel for the assessee has invited our attention to the opening paras of the assessment order to submit that the only query that was raised by the Assessing Officer from the assessee was in respect of cash deposits during the demonetization period. The ld. counsel has also referred to, in this respect, the copy of the show-cause notice placed at page 113 of the paper-book, whereby, the Assessing Officer had showcaused the assessee only in respect of cash deposits in the bank accounts of the assessee of Rs.6,07,000/-, 2,49,500/- and 30,18,000/- respectively and called upon the assessee to prove the source of the aforesaid cash deposits. The ld. counsel for the assessee has submitted that, however, the Assessing Officer while finalising the assessment made the addition of each and every credit entry, whether in cash or bank transfer, in a mechanical manner. The ld. counsel has relied upon various documents to submit that the total credit entries in the bank accounts of the assessee were of Rs.2,90,03,439/- out of which the transactions of Rs.83,20,792/- were by way of interbank transfers (contra entries) i.e. the amount was transferred from one account of the assessee to another. Further, the assessee during the year received an amount of Rs.76,40,000/- as loan/advances. That all this amount was received through banking channel and there was no cash deposits in this respect. Further, there was a repayment of advances amounting to Rs.29,73,833/-, which was also through banking channel. Net credit Assessment Year: 2017-18 Rajiv Dasgupta entries of loan were at Rs.1,00,68,814.60/-, which was through banking channel only. Further, there was proceeds from FD maturity credit to the bank account of the assessee of Rs.35,52,945/-, which was duly decipherable from the bank account of the assessee. Further, there was miscellaneous receipt of interest from bank etc. amounting to Rs.10,069.60/- and therefore, the total cash deposits during the entire financial year were amounting to Rs.65,05,800/- only. The ld. counsel has further given a chart of the transactions to submit that there was an opening cash balance of Rs.1,00,000/- only as on 01.04.2016 and further that there were total cash receipts of Rs.60,17,282/- upto 08.11.2016 i.e. before the start of demonetization period, which included an amount of Rs.32,17,882/- being income of the assessee and amount of Rs.27,99,400/- being out of cash withdrawals. Out of the said amount, there was a cash deposits of Rs.24,08,000/- and expenses of Rs.30,6250/-, total amounting to Rs.27,14,250/-, therefore, the closing cash balance as on 08.11.2016 was at Rs.34,03,032/-. During the demonetization period i.e. 08.11.2016 to 31.12.2016, there was a cash withdrawal of Rs.7,63,523/- and further there was cash deposits out of cash balance available with the assessee of Rs.40,74,500/-, expenses was of Rs.87,500/-, totalling at Rs.41,62,000/- and a closing balance as on 31.12.2016 was of Rs.4,555/-. Further, from the period 01.01.2017 to 31,03.2017, there were receipts of Rs.5,081/- out of income and an amount of Rs.8,60,722/- out of cash withdrawal and further there were expenses of Rs.8,10,576/- and deposits of Rs.23,300/- out of cash withdrawals and at the end of the year i.e. on 31.03.2017, the closing cash balance was of Rs.36,482/-. The ld. counsel, therefore, has duly explained that the total cash in the bank account during the entire year was at Rs.65,05,800/-. The ld. counsel in this respect has relied upon the following charts:

The ld. DR, at this stage, has submitted that the aforesaid bank account entries etc. are required to be examined by the Assessing Officer, therefore, the matter be restored to the file of the Assessing Officer.

The ld. counsel for the assessee, however, has submitted that the assessee is a small businessman and he has already suffered a lot of financial loss and physical harassment in pursuing the litigation before the lower authorities. He has submitted that all the necessary evidences were duly furnished before the ld. CIT(A) who has co-terminus power as that of the Assessing Officer. The ld. counsel, therefore, has submitted that remanding the matter back to the Assessing Officer will cause a lot of financial hardship and physical pain to the assessee and that the entries in the bank account can be verified by the ld. DR as demonstrated by the ld. counsel.

Considering the aforesaid submissions of the ld. representatives of the parties, it was directed that the ld. counsel would furnish all the relevant details/documents to the ld. DR who would go through the same and if the assessee would be able to show that there were no such cash transactions in the bank account of the assessee as alleged by the Assessing Officer, then there will not be any need to remand the matter. The ld. DR, thereafter, examined the entries/reconciliation statement. Though the ld. DR has primarily agreed that there were contra entries and deposits were through banking channel in the bank account of the Assessment Year: 2017-18 Rajiv Dasgupta assessee, however, he has submitted that since the number of such entries were huge, therefore, all the entries could not be correlated. Further, he has submitted that the genuineness of the unsecured loans taken and unsecured loans given by the assessee could not be verified. In rebuttal, the ld. counsel for the assessee has submitted that neither any such issue of verifications of loan transactions was ever raised nor any of the lower authorities ever called upon the assessee to verify the genuineness of the loans and advances given and taken. He has submitted that the only contention raised by the lower authorities was that there was substantial cash transaction during the demonetization period and in that respect, the assessee has duly established before the ld. CIT(A) that the said allegation was wrong. That even all the details and evidences were duly furnished before the CIT(A) and no issue was ever raised relating to verification of the loans and advances. The ld. counsel in this respect has relied upon the balance sheet of the assessee to submit that the aforesaid loans and advances received and disbursed during the year were duly disclosed in the balance sheet of the assessee which was duly filed before the ld. CIT(A).

In this case, the ld. counsel for the assessee has duly demonstrated the receipts as well as withdrawals during the year and has also demonstrated the nature of the transactions and that majority of the transactions were carried out through banking channel. The reconciliation statement has also been furnished to the ld. DR who could not point out any specific defect or infirmity in the same. The only allegation of both the lower authorities was regarding substantial cash deposits during the demonetization period, which has been duly proved to be wrong accusation by the ld. counsel for the assessee by relying upon various documents. After considering the details and documents furnished by the assessee and considering the submissions of the ld. Assessment Year: 2017-18 Rajiv Dasgupta DR, we are of the view that no additions as made by the Assessing Officer are warranted in this case and the same are accordingly ordered to be deleted.

In the result, the appeal of the assessee stands allowed.