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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI V. DURGA RAO & SHRI K.M. ROY, ACCOUNTANT, MEMBER
Date of Hearing – 08/07/2024 Date of Order – 08/07/2024
O R D E R PER K.M.ROY, A.M.
The present appeal has been preferred by the assessee challenging the impugned order dated 03/11/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeal), [“learned CIT”], for the assessment year 2017-18.
Mohan Pandurangji Kharalkar vs ITO Ward 4(5) Nagpur ITA no.416/Nag./2023
2. The assessee has raised following grounds of appeal:– “1. Whether on the facts and in law, the order passed by learned CIT (A) u/s 250 of the Act is bad in law. 2.Whether on the facts and in law, the learned CIT (A) erred in upholding the action of learned AO in making addition in respect of cash deposits of Rs.56,73,000/- u/s 69A of the Act to income of the assessee, ignoring the facts of the case as well as submissions and documentary evidences filed by the assessee.
3. Whether on the facts and circumstances, the Assessee having justifiable source of cash to explain the amount deposited in the bank account with supporting evidences, the addition made u/s 69A deserves to be deleted.
4. Whether on the facts and circumstances of the case and in law, the AO grossly erred in not accepting the turnover of the appellant declared u/s 44AD as primary source of cash deposits in the back account despite accepting the returned income u/s 44AD.
5. Whether on the facts and circumstances of the case and in law, provision of Section 69A is not applicable, once the income is offered by assessee under provision of presumption taxation i.e. u/s 44AD.
6. The assessee craves to add, alter, vary, omit, amend or, delete one or more of the above grounds of appeal before or at the time of hearing of the appeal so as to enable the Hon’ble Tribunal to decide this appeal according to law.
3. At the very onset, the assessee has invited our attention to the detailed submission filed before the Assessing Officer, contending that;
“1. That the assessee is an individual engaged in the business of dealing is properties and also petty construction works. The assessee is duly assessed to tax vide the above mentioned PAN and has been regularly filing his returns of income. The assessee filed his return of income for AY 2017-18 on 30.3.2018 declaring Gross Total Income of Rs. 7,29,166/- comprising primarily of income from business declared u/s 44AD of the Income Tax Act, 1961 ("Act") (Rs. 7,14,745) and some bank interest (Rs. 14,421). The turnover of the assessee for the purposes of business u/s 44AD was Rs. 91,21,540/- being Rs. 7,48,916/- received through banking modes income on which offered @6% + Rs. 83,72,624/- received through cash/non-banking modes income on which offered @8% as per the provisions of section 44AD of the Act. Copy of computation enclosed.
Mohan Pandurangji Kharalkar vs ITO Ward 4(5) Nagpur ITA no.416/Nag./2023
The assessee had filed his return of income for AY 2016-17 on 27.3.2017 declaring gross total income of Rs. 6,52,730/- comprising primarily of income from business. The assessee for AY 2016-17 had declared an income u/s 44AD of Rs. 6,47,235/-. The case of the assessee for AY 2016-17 has been duly assessed u/s 143(3) of the Act vide order dt. 17.12.2018 accepting the returned income (Copy of order enclosed).
The assessee is in receipt of your honours above referred SCN dt. 7. 12.2019 giving details of the amounts deposited by the assessee in his bank account with Syndicate Bank totalling to Rs.58,83,000/- and further enquiring from the assessee the source of the said cash deposits. Your honour has further asked to assessee to show cause as to why the amounts so deposited should not be treated as unexplained credit u/s 69A of the Act. 4. The assessee at the outset submits that the amounts of cash so deposited in the bank account by the assessee are out of the turnover of the assessee declared u/s 44AD of the Act. As mentioned earlier, the assessee had declared a turnover of Rs. 83,72,624/- received through non-banking modes during the year under assessment. The amount of Rs. 58,83,000/- allegedly deposited in the bank accounts by the assessee was out of the receipts of Rs. 83,72,624/- plus cash withdrawn during the year from bank account and also from the cash available out of receipts declared u/s 44AD for earlier years including AY 2016-17. That the assessee is engaged in the business covered u/s 44AD is not in dispute and has even been accepted by the department vide order dated 143(3) for AY 2016- 17 mentioned above. The amount of Rs. 58,83,000/- so deposited in the bank thus stands duly explained. 5. Your honour has mentioned in the SCN that the assessee has shown sales of Rs. 7,14,745/-. The assessee inadvertently in the return of income had mentioned the turnover u/s 44AD at Rs. 7,14,745/- which is not the turnover but as mentioned above is the income declared u/s 44AD of the Act. The total turnover as mentioned above is Rs. 91,21,540/- which the assessee requests your honour to kindly accept. 6. That with respect to specific query raised by your honour as to why the amount deposited in SBN during demonetization should not be treated as income on account of the same having been deposited in bank on more than one occasion as the acceptance of the same was not allowable after midnight on 8.11.2016, the assessee submits that as mentioned above the amounts so deposited in the bank was primarily out of the turnover declared u/s 44AD of the Act and the same stands explained warranting no addition much less addition u/s 69A of the Act. The amount so deposited was the amount with the assessee as on 8.11.2016 which was deposited in parts by the assessee and was permitted under law. 7. That with respect to specific query raised by your honour regarding the total credits appearing in bank account at Rs. 1,61,21,270/- and as to why the same
Mohan Pandurangji Kharalkar vs ITO Ward 4(5) Nagpur ITA no.416/Nag./2023 should not be treated as turnover of the assessee and income assessed u/s 44AD on the same, the assessee submits that the assessee has already declared a turnover of Rs. 91,21,540/- for the year under assessment. The differential credits amounting to Rs. 69,99,730/- (Rs. 1,61,21,270 - Rs. 91,21,540) is primarily on account of the following: a. Rs. 35,00,000/- pertaining to maturity proceeds of FDR with Aditya Anagha Multistate which has been made in the current year itself and appearing in the bank statement. b. Balance on account of advances received from customers. Copies of receipts enclosed. The entire credits in the bank account thus stand explained.
8. That with respect to the levy of penalty u/s 272A(1)(d) the assessee most respectfully submits that the earlier notice issued u/s 142(1) could not be complied in time due to medical reasons. The assessee requests leniency of your honour and assures your honour of his full co-operation in completing the assessment in time. The assessee prays before your honour to kindly drop the penalty proceedings u/s 272A(1)(d) in the interest of natural justice.
From the Assessment Order, it appears that a sum of Rs.58,83,000/- was deposited in a specified bank SBN with Syndicate Bank. The Assessing Officer has held in para 6 of his Assessment Order as follows:
“6. From the above sequences of events, it is clear that the contention of the assessee is without evidences and cannot be relied upon as the assessee fails to establish the turnover, as claimed in the only reply filed on 16/12/2016. Further as per the reply, the sources of cash deposit is the work executed by the assessee as contractor. But, the assessee fails to submit the evidences of expenses made to earn the amount of work executed i.e. the assessee fails to establish the sources of expenditure made to earn the turnover/sales claimed in the only reply submitted. Further, since, the assessee is claiming income u/s 44AD, and not submitting the details of purchases made and sales/work executed, the claim of the assessee regarding the sources of cash deposited during the demonetization stands unexplained. Considering the fact that assessee has conducted the business during the year under consideration, the cash deposit on 11/11/2016 of Rs.2,10,000/- (2,00,000+10,000) is allowed and remaining amount of Rs.56,73,000/- is treated as unexplained money in the hands of the assessee and added to his total income. Separate proceedings u/s 271AAC are initiated for addition made u/s 69A.”
Mohan Pandurangji Kharalkar vs ITO Ward 4(5) Nagpur ITA no.416/Nag./2023
It is manifest that the Assessing Officer has not doubted about the conduct of the business. He has in fact accepted the return income of Rs.5,83,480/- arising out of income from business as return u/s 44AD. Such income has been calculated on a turnover of Rs.91,21,540/-. Thus, it is quite apparent that the amount of cash deposited with the Bank is sufficiently covered by the amount of turnover and hence the nature of source of such cash deposited is adequately explained. The Assessing Officer has made the addition u/s 69A of the IT Act, 1961, notwithstanding the above telltale evidences.
It may be gainful to refer Section 69A of the IT Act, 1961, at this juncture as follows, to effectively analyse the entire gamut of the issue: "Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Income Tax Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year."
In this case, all the transactions were duly disclosed in the return of income and is also recorded in the books of account, so also the return has been filed in line of the provisions of Section 44AD, which is a special provision for computing profits and gains of business on presumptive basis. Yet the assessee has gone a step further and kept a detailed record meticulously of all the banking transactions and has also reconciled the total credits in the bank statement at Rs.1,61,21,270/- vis-à-vis a declared turnover of Rs.91,21,540/- . We find that even in the exactly previous
Mohan Pandurangji Kharalkar vs ITO Ward 4(5) Nagpur ITA no.416/Nag./2023 assessment year, the Assessment Order u/s 143/3 was passed on 17.12.2018 where the return income was accepted. The Assessing Officer had come to a clear conclusion in that order that the assessee is a property dealer. There is no change in the facts and circumstances of the case and we find that he has submitted a copy of detailed list of instalments received from plot holders along with the agreement with the customers before CIT (A). Copies of plot sale instalment receipts were also submitted before the Assessing Officer. But the CIT (A) has passed a very cryptic order by mentioning that the assessee has failed to satisfy the Assessing Officer with the explanation and also was not able to explain genuineness of the transactions. He has further noted that the assessee has failed to submit the details of expenses and also details of expenses of purchases to satisfy that he was engaged in the business. The assessee has submitted all the possible details he had in his possession before the lower authority. Without carrying out any enquiry or whatsoever about the truthfulness of the evidences submitted, the entire submission has been brushed aside at the threshold. The assessee has all along mentioned that he is working as a contractor as well as engaged in the business of selling of plots. Obviously, the cash deposit must be emanating out of genuine business transactions as there is no other source of income. The Assessing Officer has only disbelieved certain portion of cash deposited, but for the balance credit in the bank account, he has not expressed any doubt. It is a clear pointer that the Assessing Officer is trying to blow hot and cold in the same breath. There is no concept of approbate and reprobate in the same set of transaction.
The Ld. AR submitted that the appellant had tried his best to place all relevant evidences and documents to buttress his averments. But the AO had Mohan Pandurangji Kharalkar vs ITO Ward 4(5) Nagpur ITA no.416/Nag./2023 adopted a perfunctory approach and dismissed the same. Even CIT(A) who has a coterminous power with that of AO did not embark upon any enquiry as envisaged under section 250(4) of the Act, but has gone to confirm AO’s order in a cavalier manner. The Ld. Sr.DR on the other hand could not satisfactorily explained as to how AO had cherry-picked only certain deposits during demonetisation period to be falling u/s 69A without correlating the return of income and turnover. We find similar issue was considered in Deepak Setia v. Dy. CIT [2023] 155 taxmann.com 293/ 106 ITR (Trib.) 125 (Asr,- Trib), wherein it has been held as under: “Held that the revenue was not able to submit any evidence during assessment and appeal proceeding that the said income is not connected with the business income of the assessee or accumulated from non- recognising source, Hence, when all the incomes earned by the assessee are only from the business income of the assessee, there do not arise any question as to application of provisions of section 69A and hence taxing such income at special rate as per section 115BBE is improper. It is a settled principle of law that when there is no other/separate source of income identified during the course of survey or during the course of assessment proceedings, any income arising to the assessee shall be treated to be out of the normal business of the assessee only. During survey proceeding, the assessee filed surrendered letter and in statement assessee also recorded and income was surrendered. The conversion of business income into other income and application of section 69A is bad and illegal. Accordingly, levy of tax under section 115BBE on the income amount is liable to be quashed.”
Upon the conspectus of the entire material and record, it is apparent that the assessee has genuinely discharged his onus of the nature and source of cash deposit in the bank account. No addition is warranted upon the same. Accordingly the appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Mohan Pandurangji Kharalkar vs ITO Ward 4(5) Nagpur ITA no.416/Nag./2023 Order pronounced in the open Court on 08/07/2024.