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Facts
Two assessees, engaged in fruit processing and marketing, filed appeals against disallowances of unexplained purchases, treatment of cash deposits during demonetization as unexplained, and an addition under Section 115JB. The Assessing Officer had already held them eligible for Section 80-IB(11A) deduction.
Held
The tribunal reversed the disallowance of business expenditure, citing a CBDT circular that such disallowances are not sustainable when the assessee is eligible for Chapter II deduction. For cash deposits, a 5% GP estimation was applied, and Section 115BBE was deemed inapplicable for transactions before April 1, 2017. The Section 115JB adjustment was remanded for fresh adjudication.
Key Issues
The key legal issues were the sustainability of disallowance of business expenditure for assessees eligible for Section 80-IB(11A) deduction, the treatment of cash deposits during demonetization, and the applicability of Section 115BBE and Section 115JB adjustments.
Sections Cited
Section 68, Section 69A, Section 80-IB(11A), Section 115BBE, Section 115JB, Section 143(3)
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Income Tax Appellate Tribunal, DEHRADUN “SMC” BENCH, DEHRADUN
Before: SHRI SATBEER SINGH GODARA & SHRI MANISH AGARWAL
ORDER PER SATBEER SINGH GODARA, JM: These twin assessee’s ‘M/s. Harsil Gangotri Fruits Processing and Marketing Pvt. Ltd.’ and ‘M/s. Taknor Jhala Fruits Collection and Processing Pvt. Ltd.’ have filed their instant as many appeals & 32/DDN/2024 for assessment year 2017-18 against the Commissioner of Income Tax (Appeals)-3 [in short, the “CIT(A)”], Noida’s orders, both dated 10.01.2024, passed in case nos. CIT(Appeal) Dehradun/10726/2019-20 and 10728/2019-20 involving proceedings under section 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’), respectively. Case called twice. None appears at the assessees’ behest. They are accordingly proceeded ex-parte.
The Revenue vehemently argues that both the lower authorities’ respective findings have rightly disallowed these twin assessees’ respective unexplained purchases, treated their cash deposits during demonetization as unexplained followed by section 115JB addition of Rs.4,92,326/- representing subsidy reserve credited in profit and loss account; in the twin assessment years which deserve to be upheld.
We have given our thoughtful consideration to these assessees’ and the Revenue’s respective pleadings all along. We make it clear first of all that even the learned Assessing Officer’s twin assessments; framed on 23.12.2019 and 28.12.2019, have already held the assessee as eligible for section 80-IB(11A) deduction since engaged in collection, procurement, sorting, grading of apple produce. We accordingly are of the considered view that in light of CBDT’s recent Circular No.37/2016 that once the assessees/appellants are eligible for foregoing Chapter II deduction (supra), no such disallowance of business expenditure is sustainable in their hands in very terms since enhancing their business income eligible for the very deduction. We thus reverse both the learned lower authorities’ respective findings holding these assessees’ corresponding purchases claim as unexplained in light of CBDT’s circular (supra).
Next comes second identical issue of correctness of both the learned lower authorities’ action treating the assesseees’ cash deposits during demonetization as unexplained under section 68/69A r.w.s. 115BBE of the Act. Suffice to say, it has come on record that both these assessees/appellants are engaged in various
3 | P a g e activities in purchase and sale of apples wherein possibility of cash turnover in such an unorganized sector could not be altogether ruled out. That being the case, we deem it appropriate in the larger interest of justice that once the impugned cash deposits are prima facie found to be a part of the assessee’s cash sales/turnover in regular business activity, a further lumpsum estimation of GP thereupon @ 5%, would be just and proper with a rider that the same shall not be treated as a precedent. Necessary computation shall follow as per law.
So far as assessee’s assessment under section 115BBE is concerned, we quote S.M.I.L.E. Microfinance Ltd. Vs. ACIT, W.P. (MD) No.2078 of 2020 & 1742 of 2020, dated 19.11.2024 (Madras) that the impugned statutory provision would come into effect on the transaction done on or after 01.04.2017 only. The assessee is accordingly directed to be assessed under the normal provision as per law.
We now left with the latter assessees’ third substantive ground challenging section 115JB adjustment (supra). We are of the considered view that since the matter is being restored for the learned assessing authority’s afresh computation, he shall de novo
4 | P a g e adjudicate the same as per law within, within three effective opportunities of hearing, in consequential proceedings.