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Income Tax Appellate Tribunal, BENCH: COCHIN
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against order of Ld. CIT(A), NFAC, Delhi dated 14.3.2022 for the assessment year 2017-18. The only issue in this appeal is with regard to sustaining of addition of Rs.1,10,49,000/- made by AO u/s 68 of the Income-tax Act,1961 ['the Act' for short] on account of unexplained cash deposit to assessee’s bank account during demonetization.
Facts of the issue are that in the ground nos. 2 to 3, the assessee has challenged the addition of Rs. 1,10,49,000/- under section 68 of the Act on account of cash deposited in bank account of the assessee. In this connection, the facts of the present case, as noted from impugned assessment order are that NIL income was filled by the assessee for the A.Y. 2017-18 and admitting loss of Rs. (11,18,28,940/-). This case was selected for complete scrutiny in order to examine the increase in cash deposit during the demonetization period. Statutory notices under section 143(2) & 142(1) were issued to the assessee by the Assessing Officer. The assessee filed details / books of account, cash book etc. against the above statutory notices.
2.1 The AO has observed that, cash of amounting to Rs. 1,10,49,000/-, was deposited in the various bank account of the assessee the demonetization period. The argument of the assessee that deposits are made on account of collection from debtors & also out of withdrawal from bank account. The assessee has also furnished details of debtors from whom the cash was collected. Further, notice under section 133(6) of the Act was issued to the debtors as claimed by the assessee in its submission during the course of assessment proceedings. The assessee furnished various documents which were considered by the AO but were found to be inadequate to substantiate the claim of the assessee. The cash book of the assessee was also rejected by the AO for the fact that it was artificially projected. The AO finally observed as under:-
"9. The assessee has failed to prove with credible evidences sources for the cash deposit and the claim of the assessee that the cash deposit is from collection from debtors is rejected. The deposit of Rs.1,10,49,000/- assessed as unexplained cash credit u/s 68 of the Income Tax and taxed u/s 115BBE of the Income Tax."
Against this assessee is in appeal before us.
The Ld. A.R. submitted that the order of the Learned Commissioner of Income Tax, in so far as prejudicial to the interest of the assessee is opposed by law, facts and circumstances of the case. The learned Commissioner of Income Tax and the learned Assistant Commissioner of Income Tax, Circle I, Palakkad, erred in not considering the documentary evidences annexed or submitted during the course of assessment or at the time of filing the appeal. The learned Commissioner of Income Tax construed the extract of copies of ledger submitted by the corresponding debtors, by squarely mistake, as the same is considered as the mere confirmation when the cash was received. In fact, the annexures submitted along with Form 35, is the copies of ledger accounts in the books of corresponding debtors namely, M/s Mascom Steel Private Limited and M/s Surabhi Steel Rolling Private Limited. Further, the extract of tally sheet is cross signed and sealed by the corresponding debtors, which is clearly depicting the genuineness of the debtors. However, the learned Commissioner of Income Tax erred in considering the valid documentary evidences submitted to prove the credit worthiness and genuineness of the debtors and construed that the assessee has failed to submit the credible documentary evidences.
3.1 Further, Ld. A.R. submitted that all the dates, debit and credit entries, and opening and closing balances of debtors are matching with the books of accounts maintained by the assessee. However, the same is not mentioning in any part of the order, as it is crystal clear that the learned Commissioner of Income Tax has taken arbitral and narrow view over these matters. The mere conclusion or the stand taken by the learned Assistant Commissioner of Income Tax, Circle I, Palakkad, that the assessee has projected the cash books is not acceptable. Further, the learned Commissioner of Income Tax has also followed the same ratio. The vehement stand taken is cryptic and not tenable. They simply states that the assessee has projected the cash books, on the grounds that the corresponding debtors made no response to the summons issued under section 133(6) of the Act. Simply, due to this reason, the learned State Income Tax officer, rejected the cash books. Merely because of the parties are not traceable, the assessee cannot be penalized. The stand taken support from the judgment in the case ITO vs. Surana Traders 93 TTJ 875 (Mum.), wherein it was held that "Merely because for the reasons that the purchase parties were not traceable, the assessee could not be penalized. In the sale documents the assessee has made available all necessary details i.e. the total weight sold as well as the rate per kilogram. Undisputedly, the assessee has maintained completed books of accounts along with day to day and kilogram to kilogram stock register and also submitted stock tally sheet along with the audited accounts The assessee cannot be put to prove a negative. It was for the department to substantiate and prove the allegation being leveled by it. This, however, has not been done. Even in the remand report, the AO has stated that the sales were duly verified and found to be genuine. Since the purchases has been held to be genuine, the corresponding sales cannot, by any stretch of imagination be termed as hawala transactions."
3.3 The Ld. A.R. further submitted that over here, the debtor namely M/s Supreme Steels Industries, responded to the notices or summons issued under section 133(6), which clearly depicts that the debtors are in existence and in respect of the debtor M/s Mascom Steels Private India Limited, the summons or the notice found to be served, further depicting the existence of the debtors. Thus, the identity of the debtors are established by the debtors are correct and cannot be construed as fictional. Thus, the Ld. A.R. argued that the stand taken by the learned Commissioner of Income Tax and learned Assistant Commissioner of Income Tax, Circle I, Palakkad is not tenable. Further no additions can be made without proper enquiry, as held by the Honorable Income Tax Appellate Tribunal (ITAT), Delhi, in the case DCIT Vs Senorita Enterprises Pvt. Ltd. (I.T.A. No. 5388/DEL/2015).
3.4 Ld. A.R. further submitted that the learned Commissioner of Income Tax (A) has taken arbitral and narrow view over the extract of ledger copies submitted as in the form of confirmation from the corresponding debtors. The simple contentions that the assessee doesn't submit the credible details are erroneous. It is true that assessee doesn't submit the ledger copies for the Financial Year 2015-16, of the debtors established. This demand is actually done by the learned Assistant Commissioner of Income Tax, Circle I, Palakkad, to prove the contentions of the assessee that the "Debtors are quite outstanding in the books for a longer period". However, it is pertinent to note that the both the ledger containing a larger amount of opening balance, which is the clear indication, that the debtors are quite outstanding in the books for a longer period. The learned Commissioner Income Tax and learned Assistant Commissioner of Income Tax, Circle I, Palakkad, erred in considering thus and presumed that the assessee has submitted projected cash books, which is irrational and prejudice to the interest of the assessee.
3.5 Ld. A.R. further submitted that the learned Commissioner of Income Tax (A) erred in not considering the tally entries, most particularly the credit entries, genuineness of the debtors established and the copies of the ledger presented before the authorities. The assessee specifically submitted the confirmation from the corresponding debtors, but the authority mechanically ignored the documentary evidences, on the ground that they are not credible. In fact, the confirmation and corresponding debit entries are submitted by the assessee is to prove the creditworthiness and genuineness of the debtors established. Even if the same is given, the same is construed as simple documentary evidence and both the authority vehemently rejected the same on the ground that the source is not determinable and the holding of cash by the debtors is not satisfactorily explained. The stand taken by the both authority is wrong and irrational.
3.6 The Ld. A.R. submitted that the Hon'ble jurisdictional High Court in the case of CIT vs. (1) Dwarakadhish Investment P. Ltd., (ITA.No. 911 of 2010) and (ii) Dwarkadhish Capital P. Ltd., (ITA.No.913 of 2010) (2011) 330 ITR 298 (Del.) (HC), in which it was held as under : "In any matter, the onus of proof is not a static one. Though in section 68 of the Income Tax Act, 1961, the initial burden of proof lies on the assesses yet once he proves the identity of the creditors/share applicants by either furnishing their PAN number or income-tax assessment number and shows the genuineness of transaction by showing money in his books either by account payee cheque or by draft or by any other mode, then the onus of proof would shift to the Revenue. Just because the creditors/share applicants could not be found at the address given, it would not give the revenue the right to invoke section 68. One must not lose sight of the fact that it is the Revenue which has all the power and wherewithal to trace any person. Moreover, it is settled law that the assessee need not to prove the "source of source".
3.7 According to Ld. A.R., the assessee initially proved the identity of the debtors established and the learned Assistant Commissioner of Income Tax, Circle I, Palakkad, issued summons under section 133(6) of the Act. Merely because of non-response from-the part of the debtors or not providing information's that the revenue sought, may not lead to shift the burden of proving the sources of sources to the assessee. Thus, in these facts and circumstances of case, the Ld. A.R. submitted that the statement that the "Sources are not determinable", by the learned Assistant Commissioner of Income Tax, Circle I, Palakkad, and the same ratio followed by the learned Commissioner of Income Tax is not tenable by law.
3.8. It was submitted that by Ld. A.R. that both the authorities erred in interpreting the facts and grounds submitted. In actual the contentions raised by the assessee are "The sundry debtors are in verge of insolvency". In actual they were not insolvent. The assessee, accepted the cash to avoid the serious loss of bad debts, since these debtors are outstanding quite larger in the books of accounts. Further, the assessee is under pressure to accept the cash, from the debtors, since their market behaviors and continuing down trend in the market, depicts a view that they were going to be insolvent. In respect of these facts and circumstances, the assessee is unable to produce the same and the stand taken by the both the authority is vague and not tenable.
The Ld. D.R. relied on the order of lower authorities.
We have heard the rival submissions and perused the materials available on record. In the present case, the addition has been made on account of deposit of Rs.1,10,49,000/- during demonetization period into assessee’s bank account. The assessee has taken a plea that the said amount has been taken by the assessee from its debtors and deposited to bank account. To verify the same, the AO has issued a notice to the debtors namely Mascom Steel India Pvt. Ltd., Surabhi Steel Rolling Mills Pvt. Ltd. & Suprime Steel Industries. The assessee filed confirmation letter only from Suprime Steel Industries and no confirmation from other parties. Hence, the Krishna Steel Rolling Mills, Kanjikode Page 8 of 8 A.O. made addition towards unexplained bank deposit. The assessee’s counsel reiterated the argument that the said amount has been received from the above parties and cannot be doubted. In our opinion, the assessee has to prove the identity of the parties and genuineness of the transaction and also capacity of the parties to make such payments. These ingredients were not discharged by the assessee. Hence, we remit this issue back to the file of AO for fresh consideration with the direction to the assessee to produce certificate of the above ingredients of the transaction.
In the result, appeal filed by the assessee is partly allowed for statistical purposes.
Order pronounced in the open court on 14th Sept, 2022