BABITA JAIN,AMBALA CITY vs. INCOME TAX OFFICER ,WARD -1 AMBALA, AMBALA CANTT

A notice under section 143(2) was issued to the assessee on 13/08/2018 through system.

Subsequent notice under section 142(1) alongwith questionnaire were also issued from time to time in response to which the assessee filed reply online.

That during the proceedings the assessee was specifically asked to explain the source of cash deposits of Rs. 48,70,000/- during the demonetization period i.e; 09/11/2016 to 31/12/2016. 7. In response to the query (supra), the assessee stated that the cash deposit were out of cash sales.

The assessee in addition was also called upon to furnish the details of comparison of cash deposits during the same period in the last year as there was a tremendous difference between the cash deposit made during the demonetization period and the last years corresponding period i.e; 48,70,000/- and Rs. 40,82,000/- respectively, despite the fact that cash sales have decreased in the pre demonetization period from last year by 38% i.e; from 01/04/2015 to 08/11/2015 the cash sales are Rs. 83,22,221/- and from 01/04/2016 to 08/11/2016 cash sales are Rs. 51,80,331/- and there is also a sharp decrease in cash deposit in current year from last year i.e; Rs. 1,67,81,000/- in F.Y. 2015-16 and Rs. 60,30,000/- in F.Y. 2016-17 which shows that the huge cash unaccounted was lying with the assessee which has been given shape of sales.

There was a loss of Rs. 52,248/- on account of house property which was added to the income of the assessee (i.e; Rs. 48,70,000/- + Rs. 52,248/-) and assessed income for tax was worked out at Rs. 53,55,786/- i.e; Rs. 3,81,290/- + 49,22,248/- + 52,248/- = Rs. 53,55,786/-.

The Ld. AO order is dt. 06/12/2019 which simply says as core finding “that keeping in view the facts (supra) of the case and reply of the assessee addition of Rs. 49,22,248/- is made and so also Rs. 52,248/-. Assessed income is Rs. 53,55,786/-(supra)”

The assessee being aggrieved by the aforesaid assessment order dt. 06/12/2019 had preferred an appeal before the Ld. CIT(A) who has sustained the addition vide impugned order. Be it noted following are statement of facts before CIT(A):

That learned AO has rejected the submissions of assessee and therefore made an addition of Rs. 49,22,248/- as business income and Rs. 52,248/- on account of loss from house property as a result of which assessed the income at Rs. 53,55,786/-.

The following were grounds of appeal before Ld. CIT(A): 1. That the learned AO has erred in law and facts in treating the cash deposit of Rs. 48,70,000/- as business income of the assessee.

That the learned AO has erred in law and facts in making a disallowance of Rs. 52,248/- on account interest paid to bank for housing loan in the absence of any evidence filed.

That the learned AO has erred in law and facts in making an double addition of Rs. 52,248/- covered under Ground No. 2. 4. That the learned AO has erred in law and facts in applying the provisions of s. 115BBE while calculating tax despite Rs. 48,70,000/- added as business Income.

That the learned AO has erred in law and on facts in calculating tax u/s 115BBE on disallowance of Rs. 52,248/- on account of interest on housing loan.

That learned AO has erred in law and facts in applying an effective tax rate of 77.5 percent (60 percent tax plus 25 percent surcharge plus 3 percent education cess) on the addition of Rs. 49,74,496/- by retrospective applying rate of tax introduced through Taxation Laws (2nd Amen dment Act 2016) dated 15- 12-2016. 7. That the learned AO has erred in law and on facts in completing the assessment on the basis of estimations, probabilities and suspicions ignoring the facts of the case.

The appellant craves leave to add to or amend the aforesaid grounds before disposal of the appeal.

In the impugned order Ld. CIT(A) has stated that there is absolutely no response from the assessee despite notices after notices. Total five notices were issued i.e; on 27/01/2021, 22/08/2023, 30/08/2023, 08/09/2023 and 18/09/2023. He has called the act of assessee as non responsiveness.

The Ld. CIT(A) in para 5.3, 5.4, & 5.5 of the impugned order has observed as under:

In the present case, all the above notices were issued to the assessee as per section 282 of the Act read with rule 127 of Income tax rules, 1962. To follow the principles of natural justice, many notices were issued to the appellant. However, the appellant has failed to utilize the opportunities presented to him. Hence, I am of the considered opinion that the appellant is not seriously interested in pursuing appeals on hand. The law aids those who are vigilant, not those who sleep upon their rights. This principle is embodied in well known dictum, "VIGILANTIBUS ET NON DORMIENTIBUS SERVIUNT LEGES". Considering the fact that appellant has not responded to the notices 5.4 issued, it is observed that the appellant has no valid explanation to offer. The appellant could not avail the opportunities provided even after sufficient time granted. Mere filing of appeal is not sufficient but submissions along with evidences are necessary to substantiate his case. In the present case the appellant has failed to substantiate his case by furnishing relevant submissions/evidence. The appellant has not submitted valid explanation supported with corroborative evidence. Since, the appellant failed to avail the opportunities accorded in the form 5.5 of notices mentioned supra, this office has no option but to pass an ex-parte order based on the material available on record i.e assessment order, grounds of appeal (filed by appellant), statement of facts (filed by appellant). Accordingly, the appeal is adjudicated based on the facts available on record in the ensuing paras.

The Ld. CIT(A) finally has held as under in the impugned order:

1 The appellant has raised 8 grounds of appeal. Even though the appellant has raised 8 grounds of appeal, the effective issue to be dealt with is with regard to the addition of Rs.48,70,0007-. Thus, the main ground of appeal is against the addition made for an amount of Rs.48,70,000/- as business income of the assessee which are the cash deposits made during the demonetization period. By instituting these grounds the appellant contended that the AO has erred in making an addition of Rs.48,70,000/- treating the same as business income. Vide statement of facts as per form 35, the appellant claimed that the said cash deposit represents cash deposit made out of cash balance held as per books of accounts and same was out of cash sales until such date. It was further stated that the appellant is proprietor of M/s G.M.Trading Co dealing in the business of trading of sugar and edible oil. Complete books of accounts are maintained comprising cash book, ledger bills and vouchers of expenses and are audited by a Chartered Accountant. The deposits during demonetization period i.e. 09.11.2016 to 30.12.2016 amounting to Rs.48,70,000/- in CC account which was normal course of business and during preceding financial year i.e. 08.11.2015 to 30.12.2015 assessee had deposited Rs.40,82,000/-. Further the appellant submitted that cash was deposited out of cash balance held as per books of accounts and same was out of cash sales until such date.

2 The AO in the order under appeal has categorically mentioned that the assessee has failed to substantiate the sources of cash deposit of Rs.48,70,000/- appearing in the bank account held by the appellant. Accordingly, the AO added the cash deposit of Rs. Rs. 48,70,000/- treating the same as business income of the asssessee.

During the course of assessment proceedings the assessee was asked to justify the cash deposits made for which the appellant has stated that the cash deposits were out of cash sales. The appellant was further asked to furnish the details of comparison of cash deposits during the same period in the last year as there was tremendous difference between the cash deposits made during the demonetisation period and the corresponding previous year. The AO has further noticed that the cash sales have decreased in the pre monetization period in comparison to last year by 38%. The observation of the AO is tabulated below:

In Form 35, grounds of appeal, the appellant has stated that "cash was deposited out of cash balance held as per books of accounts and same was out of cash sales until such date". No other explanation or proof was submitted. When appeal is filed, it is the duty of the appellant to respond to the notices issued and submit (i) corroborative evidences and the trail of entire transactions related to cash deposits made (ii) explain how there is huge cash deposits in spite of decreased sales which was pointed out by the AO (iii) why there was no response to the notices issued. However, except for filing appeal on 10-01-2020, no compliance was made to the notices issued.

7 In the case of Narinder Mohan Jain Vs DCIT, Central Circle-5, in ITA No. 2928/Del/2017, wherein the Hon'ble Delhi Bench of ITAT held that the assessee merely gives an explanation without any supporting evidences, the assessee has failed to explain the sources for the cash. Again in case of Smt. P. Anasuya Vs ITO, in ITA No. 1750/HYD/2014, Honble Hyderabad Bench of ITAT held that when the surrounging circumstances do not lend support to the assesssee's plea, the addition towards cash deposits will be upheld. 550/Bang/2011, Hon'ble Bangalore Bench of ITAT held that "as rightly pointed out by the learned Departmental Representative, the assessee at no stage could categorically prove with material evidence the claims put forth". Hon'ble Bench, upheld Assessing Officer's order maintaining that earlier withdrawals from bank accounts do not explain the cash deposits when the assessee could not produce the evidences in support of the claimed reasons for withdrawal. In the present case also, the appellant has not furnished any documentary evidences in support of his claim.

8 In view of the facts and circumstances as discussed above and respectfully following the decisions as cited above, the appellant's grounds of appeal are DISMISSED.

In the result, the appeal of the appellant is DISMISSED.

Being aggrieved by the impugned order of Ld. CIT(A) the assessee is in appeal before us and interalia has raised following grounds of appeal before us:

The hearing before us took place on 24/06/2024 when both the parties appeared before us and were heard for some time. The Ld. AR gave up the ground of principle of natural justice and exparte nature of the impugned order of CIT(A). The Ld. AR proceeded on merits of the case his argument was books of accounts are not rejected by the Ld. AO as well as by Ld. CIT(A) and on this limited ground the impugned order of Ld. CIT(A) should be set aside. The Ld. AR then contended that assessee is in the business of trading in sugar, edible oil and food grains. The assessee is sole proprietor of M/s GM Trading Company. Cash deposit during demonetization period is nothing but proceeds of sales which are all accounted for in the books of account and duly audited. The evidentiary value of books of accounts cannot be ignored at all and perse they are sufficient explanation for cash deposit during the period of demonetization since books of accounts are not rejected the order of Ld. CIT(A) who has since sustained the finding of Ld. AO should be set aside. The amount of Rs. 48,70,000/- was cash in hand on 08/11/2016 i.e; “accumulated sales” i.e; Name

Per contra the Ld. DR has supported the order of Ld. AO and Ld. CIT(A). The Ld. DR emphatically contended that books of account is just one of the factor in the entire gamut of facts and circumstances of the case. The Department had credible information and they have acted on it. No explanation save and except that these are sales proceeds of business / trades and duly accounted so also further audited is not sufficient in law. The assesse is under a legal obligation to describe the source of income in addition to mere entry in account statement that these are proceeds of sales made in cash. He finally prayed for dismissal of appeal of the assessee as accounts are prepared on the basis of papers and entries which are fictitious. Sources are all bogus. In house papers basis which accounts are prepared are all bogus and fictitious. Findings and Conclusions

We now examine the legality validity and proprietary of the impugned order of Ld. CIT(A) dt. 31/10/2023. 20. We hold that in the original proceedings before the Ld. AO the sales bills of the assessee ought to have been verified and cross checked. The true nature of the business activities of the assessee ought to have been verified and cross checked by field formations. The volume of sales disclosed is Rs. 2,72,77,474/- . Sales bills of this ought to have been verified and cross checked as volume is very high. Looking to the fact that since the assessee is in to the business of trading in sugar, edible oil and food grains the details of her stocks and purchases ought to have been verified. From where she has sourced these goods ought to have checked and verified. In brief a detailed enquiry ought to have been made basis books of account so produced. In demonetization cases where sales are involved the antecedent verification of the assessee is a must as Department has prima facie material in their possession about cash deposit that too from a nationalized bank. We notice from sheet called “Cash transaction 2016” Income Tax Department it is revealed that concerned bank is Punjab National Bank. Transaction- cash deposit amount Rs. 48,70,000/- etc. In Column B6 the caption is cash received from unidentifiable persons (without PAN). We notice that perse there is no dispute on this sheet. Cash indeed is received from unidentifiable persons to the extent of Rs. 48,70,000/-. The majority of deposits are of the amounts exceeding Rs. 20,000/-. This document was filed by the assessee before AO during original proceedings where there is clear narration that an amount of Rs. 48,70,000/- stands deposited by unidentifiable persons. We hold that at least assessee should know their buyers. Sale bills must have been in their names. In brief it is indeed regrettable situation for us as we have reply of assessee simplicitor (without enclosures) before Ld. AO a bare balance sheet ending 31/03/2016 showing cash in hand of Rs. 87,026/- and a bare balance sheet ending 31/03/2017 showing cash in hand of Rs. 4,47,148. 23. From the reply before AO we notice that assessee is in both “whole sale and retail sale” of sugar edible oil and food grain items. This to us seems to be local

Be that as it may after carefully perusing the orders of the lower authority we observe that their is a failure both on the part of assessee as well as Department. The assessee did not appear before Ld. CIT(A). The assessee just filed a reply (Page 7 to 8 of paper book filed before us) which was filed before AO and Ld. AO without examining the said reply with enclosures, assessed the income. We have perused the said reply (without enclosures) we notice that there were many accompaniments with it but same were not considered, and examined while passing the assessment order.

1 The Ld. AO ought to have done exhaustive and deeper inquiry before arriving at finding whereby income is assessed as at Rs. 53,55,786/-. The Ld. AO has not invoked any section of Income Tax Act, 1961 i.e; 69/69A r.w.s 115BBE. Before Ld. CIT(A) and before us grounds of appeal is raised with regard to Section 115BBE even though not invoked by the Ld. AO in his assessment order. We consequently hold that order of Ld. CIT(A) lacks merits and is set aside with a direction to reexamine the case a fresh on merits and to give a detailed finding on merits. The Ld. CIT(A) would be at full liberty to seek such information and make such, further enquiry as he deems fit by utilizing the good office of Ld. AO so that case is examined on merits including finding on books of account of the assessee. Order

Accordingly, impugned order of CIT(A) is set aside as and by way of remand on denovo basis with a direction to pass a reasoned order on merits after taking into consideration all the submission of the assessee on merits including a finding on books of account. Sales to be examined, stocks to be seen, identities of person mentioned in sale bill etc to be verified and cross checked. In brief source of cash is required to be ascertained as voluminous sales has been done of different goods alongwith corresponding purchase documents.

In the result, appeal of the assessee is allowed as and by way of remand back to the file of Ld. CIT(A) on denovo basis with above directions. It is expected that Ld. CIT(A) would pass a detailed order on merits of the case after giving full and complete opportunity to the assessee. The assessee to fully cooperate with the Department for early disposal of the appeal. It is further expected that the denovo proceedings would be completed as expeditiously

In the result, appeal of the Assessee is allowed for statistical purposes.

""यथ"/ The Respondent 3. आयकर आयु"/ CIT 4. आयकर आयु" (अपील)/ The CIT(A) 5. िवभागीय "ितिनिध, आयकर अपीलीय आिधकरण, च"डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड" फाईल/ Guard File