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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SMT.ANNAPURNA GUPTA & SHRI SIDDHARTHA NAUTIYAL
PER SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER This is an appeal filed by the assessee against the order of the ld.Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 12.10.2023 for the assessment year 2017- 18 under section 250 of the Income Tax Act, 1961 (“the Act” for short).
The assessee has taken the following grounds of appeal: “1. The Hon' CIT(A) failed to appreciate that the Ld. AO has erred in law and facts by arbitrarily rejecting the audited books of accounts inspite of the assesses having submitted all the details and documents asked for, and wrongly denying the submission of the same in the assessment order.
2. The Hon1 CIT(A) failed to appreciate that the Ld. AO has erred in taking the view that the appellant has not provided details such as Identity and genuineness of the transactions in respect of sales made to the buyers under reference, etc.
3. The Hon' CIT(A) failed to appreciate that the ld.AO has erred in making addition by referring to provisions of section 69A of the Act without appreciating that provisions of this section are not applicable in a case where the appellant has deposited the cash in the bank account and such deposits were duly accounted for in the audited books of accounts regularly maintained by the assessee, as well as part of the profit offered by the assessee to tax vide the timely-filed ITR and Tax Audit Report.
4. The Hon’ CIT(A) failed to appreciate that the Ld. AO has erred in making the addition on account of cash deposited in the bank account during demonetization period w Men was out of sates proceeds/recovery from debtors/cash balance of before demonetization period alleging the same to be income chargeable to tax u/s 68/69A without appreciating the facts of the case and the scope of provisions of Section 68/69A.
5. The Hon’CIT(A) failed to appreciate that the ld. AO has erred in making addition on account of cash deposited in the bank which was represented by cash balance as per books and recovery from Sundry Debtors without appreciating that amount under reference has already been considered as income bf the appellant in the year under reference and therefore, addition made in this respect is not logical and which cannot be made as per settled legal position.
6. The Hon' C1T(A) failed to appreciate that the Ld. AO has erred in applying tax rate of 60 percentage u/s 115B8E of the Act without considering that In the facts and circumstances of the case the provision of section 68/69A are not applicable and, therefore, provisions of Section 115BBE of the Act could not be invoked.
The Hon' CIT{A) failed to consider the submissions made by the AR of the appellant, along with various documentary evidences, re-produced before him to prove the genuineness of the transactions, and arbitrarily dismissed at the grounds of appeals on the wrong pretext that the appellant had failed to make submissions during appeal proeeeding.
8. The Hon' CiT(A) failed to pass a speaking order, and completely ignored the various factual and legal issues raised in the submission filed during the appeal proceedings. The Hon' CIT(A) failed to also consider the binding judicial precedings mentioned in the appellant’s submission and rather gave references of Irrelevant Judgements in his/her appeal order of cases having absolutely distinct facts and legal issues from the assessee’s case.
9. The Hon’CIT(A) failed to provide a fair opportunity of being heard to the assessee by not granting the request of a VC Hearing.
10. It is prayed that the each of the above grounds be considered without prejudice to another by Your Honours and also to grant relief to the assessee by striking down the impugned appeal order.
In addition to the above, the assessee has also taken the following additional grounds of appeal “
The Hon' CIT(A) has erred in law and facts in confirming the assessment order passed by the Id. AO without considering that the entire assessment proceedings and consequential assessment order are bad in law, and void-ab-initio in view of the facts that the Ld. AO had issued Three Show Cause Notices PROPOSING ADDITIONS UNDER SEC. 69A, SEC.
68. AND both, respectively, and later in the assessment order, additions had been made by invoking both Sec. 68 & Sec. 69A, as also conducting the assessment proceedings inappropriately, thus vitiating the entire assessment proceedings and rendering the assessment order invalid."
3 4. Application for condonation of delay At the outset, we note that the present appeal is delayed by a period of 10 days, for which the assessee had filed application for condonation of delay, along with Affidavit. The assessee submitted that the delay is owing to the fact that the assessee is of advance old age and due to oversight, the assessee did not check his email ID, and thereafter the assessee was travelling abroad and therefore, there was a delay of 10 days in filing of the present appeal. However, the delay in filing of the present appeal is due to bona fide reasons and accordingly, it was submitted that the same may be condoned.
We have gone through the contents of the Affidavit filed by the counsel for the assessee. Looking into the reasons cited by the assessee for the delay in filing of the present appeal and the minor period of 10 days in filing of the present appeal, we are hereby inclined to condone the delay in filing of the present appeal, in interest of justice.
In the result, the delay in filing the appeal of 10 days is hereby condoned.
7. The assessee has filed the following additional grounds of appeal:
The Hon' CIT(A) has erred in law and facts in confirming the assessment order passed by the Id. AO without considering that the entire assessment proceedings and consequential assessment order are bad in law, and void-ab-initio in view of the facts that the Ld. AO had issued Three Show Cause Notices PROPOSING ADDITIONS UNDER SEC. 69A, SEC. 68 AND both, respectively, and later in the assessment order, additions had been made by invoking both Sec. 68 & Sec. 69A, as also conducting the assessment proceedings inappropriately, thus vitiating the entire assessment proceedings and rendering the assessment order invalid.
8. On going to the facts of the instant case, the contention of the assessment order and the order passed by Ld. CIT(Appeals) , we are 4 of the considered view that the additional ground raised by the assessee have no merit whatsoever. The additional ground raised by the assessee is vague and the only the only technical plea which has been taken by the assessee is that the assessing officer is precluded from invoking section 68 and 69A, simultaneously, while making the additions.
9. We observe that the additions have been made by the assessing officer on account of cash deposited by the assessee during demonetisation period, the source of which could not be explained by the assessee, during the course of assessment proceedings. The assessee had submitted that the source of such cash deposits was out of amounts received from the debtors, however, the assessing officer was of the view that the genuineness of the debtors was under doubt. Accordingly, the cash deposited by the assessee are in the demonetisation period in his bank account was added as unexplained income in the hands of the assessee.
Accordingly, the additional ground raised by the assessee is hereby dismissed.
On merits: 10. The brief facts of the case are that during the course of assessment, the assessing officer observed that the assessee had deposited cash amounting to ₹ 35, 58, 500/- in the bank account. On being questioned, the assessee submitted that the aforesaid amount had been received by the assessee from it’s debtors and the details of such debtors were furnished to the assessing officer during the course of assessment proceedings. The assessing officer was of the view that the cash book which has been uploaded by the assessee on 11-12- 2019 was only an afterthought and the cash deposits during the 5 period had been camouflaged as cash sales. Accordingly, the assessing officer rejected the books of accounts of the assessee under section 145(3) of the Act and further observed that on verification carried out, it is seen that the name and address of the parties furnished by the assessee are not matching. Further, the Assessing Officer also observed that the assessee has not furnished day-to-day register with supporting evidences and has also failed to furnish copies of purchase bills etc. The assessee has also not furnished ledger account of debtors. The assessing officer was of the view that the assessee has manipulated the total sales figures, expenditure et cetera to show maximum cash in hand so that unaccounted money can be brought in books. Further, the assessing officer observed that on perusal of Tax Audit Report, it is seen that no quantitative details of stock have been mentioned in Form 3CD. Accordingly, the assessing officer rejected the books of accounts of the assessee and added a sum of ₹ 25,58,500/-as unexplained cash credit under section 68 of the Act.
In appeal, Ld. CIT(Appeals) dismissed the appeal of the assessee on the ground that the assessee has not filed any documentary evidences in support of the grounds raised during the appellate stage. Accordingly, Ld. CIT(Appeals) dismissed the appeal of the assessee with the following observations:
The facts emanating from the order of the AO that the case of the appellant was selected for scrutiny through CASS mainly on the ground that the appellant had deposited cash during demonetization. The AO had made enquiries and asked to submit the replies alonwith supporting documentary evidences. The appellant submitted replies which had been considered however, the appellant had not submitted the requisite documentary evidence and considering all the facts and circumstances of the case, the AO had rejected the books of accounts and made addition of Rs.35,58,500/- u/s 69A of the I.T. Act, 1961. Aggrieved for the same, the appellant preferred to file appeal. Notice u/s 250 of the IT. Act, 1961 was issued as mentioned supra. However, the appellant has not filed any documentary evidences in respect of the grounds raised during the appellate stage on the given date. Tie appellant submitted his detailed reply on 20.07.2021 through ITBA portal; in which it was submitted that the appellant had submitted all the requisite documentary evidences before the AO during the course of assessment proceedings which had not been incorporated while finalizing the assessment order. The contention of the appellant has been considered and found not acceptable as even appellate stage, the appellant has merely writing the same in his written submission whereas no such enclosures have been attached for verification at this stage. Further, the appellant was provided sufficient opportunities as mentioned supra to submit the details and documents in respect of grounds raised at appellate stage. However, the appellant did not bother to submit any details on the given date. It is imperative to understand here that a failure to explain the source of income attracts this section; the decking provisions are applicable to the year of finding. The burden of proof lies squarely upon the appellant assessee. It is his/her onus to explain the deposit and its source. Section 69A has basically been incorporated to detect tax evasion in respect of clandestine deposits made by the assessee which are not disclosed or recorded in the books of account, if any, maintained by the assessee. Thus, it is amply clear that adequate opportunity was provided to the appellant to explain the deposits made in the bank account. However, the appellant felled to explain the same, resultantly the AO added the said amount as un money u/s 69A. It is relevant to point out that the appellant even during the proceedings has also not produced any explanation with respect to the cash deposit along with documentary evidences. The appellant has also not filed any documentary evidences. Therefore, the addition made by the AO is sustainable in the eyes of law.
The assessee is in appeal before us against the order passed by Ld. CIT(Appeals) dismissing the appeal of the assessee. The counsel for the assessee submitted that CIT has erred on several counts, while dismissing the appeal of the assessee and upholding the assessment order. Firstly, the counsel for the assessee submitted that an important fact which has been omitted to be considered by CIT during the course of appellate proceedings is that during the year under consideration, the turnover of the assessee has reduced by approximately 10% from the turnover of 1.52 crores in financial year 2015-16 to a turnover of ₹ 1.37 crores in financial year 2016-17. Further it was submitted that even in financial year 2014-15, the turnover of the assessee was ₹ 1.38 crores. Accordingly, the counsel for the assessee submitted that this clearly indicates that there is no 7 divergence in the pattern of turnover of the assessee, which would support the fact that the cash deposited against the sale is booked in assessment year 2017-18 are in fact out of sales consideration received from the customers. Secondly, the counsel for the assessee submitted that the CIT has erred in facts and in holding that the assessee has not submitted adequate details in support of the sales made by the assessee. The counsel for the assessee submitted that all the details viz sales invoices, transporters delivery challan, debtors ledger is, creditors ledgers, sales register and statement of sales (with complete details of cash consideration received from various customers) were submitted by the assessee before the Tax Authorities. However, despite of the plethora of documentary evidences furnished, the CIT has unjustifiably taken the view that the assessee has failed to furnish documentary evidences. Thirdly, the counsel for the assessee submitted that the assessing officer has not mentioned even a single finding on the basis of which he has concluded that the assessee has shown incorrect sales and has not given any adverse finding regarding correctness/completeness of accounts, invalidity of the documents furnished, manipulation of books of accounts or even about any errors/mistake in the books of accounts. The assessing officer, it was submitted by the counsel for the assessee, has not made any case about any irregular system of accounting or non-compliance of any applicable Accounting Standards. Merely on the basis of a simple analysis of cash sales, it was grossly unjustified to reject the duly audited books of accounts of the assessee.
In response, DR placed reliance on the observations made by the assessing officer and Ld. CIT(Appeals) in their respective orders.
We have heard the rival contentions and perused the material on record. On going to the facts of the instant case, certain facts are 8 noteworthy. We note that vide letter dated 20-07-2021, the assessee submitted a detailed written submission along with necessary supporting documents in support of its contention. Further, the assessee has also submitted various written submissions along with supporting documents during the course of assessment hearing. Before us, the counsel for the assessee submitted that so far as non- submission of stock register is concerned, the assessee does not follow the practice of maintaining a day-to-day stock register. However, the accounting principles do not prescribe maintaining of a day-to-day stock register, and the books of accounts cannot be rejected on this basis alone. Further, the counsel for the assessee submitted that all purchases are fully vouched and have been made through cheques, details of all sale bills have been submitted and further, details of transportation bilty has also been submitted before the Tax Authorities. Further, the allegation of the assessing officer that the sales have been manipulated is also controverted by the fact that the sales of the assessee had reduced during the impugned year under consideration and therefore, there is no question of artificially inflating/manipulating the sales so as to provide a false basis of deposit of money during demonetisation period. The counsel for the assessee is drew our attention to page 92 onwards of the paper book, wherein all lorry receipts against invoices have also been submitted before the tax authorities in support of genuineness of sales by the assessee. Further, we observe that the assessing officer has not given any concrete basis for rejecting the books of accounts in the assessment order. Also, maintenance of stock register is not a mandatory requirement for auditing the accounts of the assessee. The assessing officer has not doubted the genuineness of purchases made by the assessee. This coupled with the fact that the sale/turnover of the assessee has reduced during the year under consideration also 9 lends support to the fact that the sales have not been manipulated by the assessee. Accordingly, looking into the instant facts, we are of the considered view that the additions on account of cash deposits made in the bank account of the assessee during the demonetization period are not liable to be sustained, looking into the instance facts.
In the result, the appeal of the assessee is allowed on merits. Order pronounced in the Court on 14th June, 2024 at Ahmedabad.