MR. JAI SINGH,LUCKNOW vs. ITO, RANGE-2(5), LUCKNOW

(A) These cross appeals have been filed by assessee and by Revenue against common impugned appellate order dated 22/09/2020 passed by learned Commissioner of Income Tax [“CIT(A)” for short]. The grounds of appeal taken by the assessee and by Revenue are as under:

“1. The learned CIT(A) has erred in law and on facts in passing the order, which is unlawful, unjustified and against the principles of natural justice.

I.T.A. No.443/Lkw/2020 (Revenue’s appeal)

1. The learned CIT(A) has erred in law and on facts by deleting the addition of Rs.1,36,00,000/- made by the Assessing Officer on account of unexplained cash credit u/s 69A of the I. T. Act.

(B) In this case assessment order dated 30/12/2019 was passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (“I. T. Act” for short) whereby the assessee’s total income was assessed at Rs.1,55,70,340/-. In the aforesaid assessment order, total addition of Rs.1,41,78,000/- was made, treating specified bank notes (“SBNs” for short), deposited by the assessee, as assessee’s unexplained income u/s 69A of the I. T. Act. Out of the aforesaid amount of Rs.1,41,70,000/-, an amount of Rs.1,36,00,000/- was deposited in the assessee’s bank account pertaining to proprietary business of travel agent. The remaining amount of Rs.5,78,000/- was deposited by the assessee din the assessee’s savings bank account. The assessee’s appeal against the aforesaid assessment order was dismissed by aforesaid impugned appellate order of learned CIT(A) wherein the aforesaid addition amounting to Rs.1,36,00,000/- was deleted and the aforesaid remaining addition of Rs.5,78,000/- was sustained. Thus, the assessee’s appeal was partly allowed by the learned CIT(A). The present two cross appeal, before us, have been filed by the assessee and by Revenue against the aforesaid impugned appellate order of the learned CIT(A). In the course of appellate proceedings in Income Tax Appellate Tribunal, a paper book containing the following particulars was filed from the assessee’s side:

S.No. Particulars 1. Photocopy of list of customers alongwith the complete address provided to the Ld. Assessing Officer during the assessment proceeding 2. Photocopies of certified order sheet alongwith notices u/s 133(6) of Income-tax Act issued by Ld. Assessing Officer and the corresponding response received from such persons Photocopy of order of Hon'ble Allahabad High Court in the case of 3. CIT(A) v. Raj Kumar Agarwal in of 2008 dated 17.11.2009 4. Photocopy of order of Hon'ble ITAT, Delhi in the case of Ritu Raj in for the AY 2017-18 dated 21.07.2022. Hon'ble ITAT, Agra in the case of Smt. Vim la Rani Agarwal in ITA No. 5. 197/Agra/2013 for AY 2009-10 dated 31.01.2014 (C) The aforesaid appeal filed by Revenue vide has been filed beyond the time limit prescribed under section 253(3) of the I. T. Act. An application seeking condonation of delay was filed by Revenue stating the following reasons:

Due to nationwide situation arising out of Covid-19 pandemic and further in view of the decision of Hon'ble Supreme Court vide order dated 23.03.2020 by taking cognizance for extension of limitation in Suo Moto Writ Petition (Civil) No(s.) 03/2020 in the situation arising out of the challenge faced by the country on account of Covid-19 pandemic.

(C.1) The learned A.R. for the assessee did not express any objection to condonation of delay. In view of the foregoing and considering the reasons stated by Revenue, in the specific facts and circumstances of the present case, the appeal filed by the Revenue is admitted for hearing on merits.

(C.1.1) On merits, the learned Sr. D.R. for Revenue strongly relied on the assessment order passed by the Assessing Officer. The learned A.R. for the assessee vehemently supported the order of the learned CIT(A) as regards the deletion of aforesaid amount of Rs.1,36,00,000/-. She further submitted that the Assessing Officer made the addition in a pre-meditated manner, and further that his opinion was coloured by the mere fact that the deposits in bank accounts were made in SBNs. She contended that on proper consideration of nature and scale of the assessee’s business, common practices in the assessee’s line of business (travel agency), past record of the assessee and continuing practice after end of the previous year, relevant to assessment year 2017-18 (to which the appeal pertains), there was no case for any addition in the case of the assessee. She submitted that it was common in assessee’s line of business for customers/clients to make payment in cash, and to periodically deposit the same in bank accounts. The learned A.R. for the assessee further submitted that as a result of which there was substantial amount of cash balance. She submitted that it was common practice to deposit accumulated cash in the bank in smaller parts and not larger bulks. She also submitted that the assessee provided the list of customers from whom cash was received as payment against airline tickets. She further submitted that the Assessing Officer had made inquiries u/s 133(6) of the I. T. Act from selected customers from the aforesaid list; and most of such persons had confirmed that payments were made by them in cash. Despite all these facts and circumstances, she lamented the Assessing Officer made a high pitched assessment, making the addition in the assessment order, causing agony and avoidable litigation for the assessee.

(C.2) We have heard both sides. We have perused the materials on record. The relevant portion of the order of learned CIT(A), as regards the aforesaid amount of Rs.1,36,00,000/-, which is the subject matter of appeal filed by the Revenue, is reproduced as under for the ease of reference:

(C.2.1) The relevant facts are not in dispute. The business of the assessee is in the nature of commission agents of various business houses dealing in travel & tours, mainly commercial airlines. The assessee books tickets on behalf of the assessee’s principal, various commercial airlines and sells travelling tickets on behalf of the assessee’s principals to customers. The assessee collects money from the customers and subsequently remits the money to the principals. The assessee gets brokerage/commission from the principals. The payments received by the assessee are partly in cash. The payments received from the customers, by the assessee are deposited by the assessee directly in the airlines’ bank accounts. It is regular practice in the business of the assessee to receive payment in cash from the assessee’s customers who booked the ticket through the assessee. The Assessing Officer had made verification from some of the selected customers who made payments in cash against purchase of airline tickets, by issuing notice u/s 133(6) directly and such customers were asked to provide information regarding services provided by the assessee, payments made by them to the assessee and some other related details. Almost all the customers, to whom notices were issued u/s 133(6) of the I. T. Act by Revenue, submitted their response and accepted the fact regarding payments made by them to the assessee in cash. The cash so received by the assessee against sale of tickets is not the assessee’s own money but the assessee holds in fiduciary capacity, to be transferred to the respective airlines on whose behaves the assessee acts in fiduciary capacity. The Assessing Officer, however, omitted to mention in the assessment order that inquiries were made u/s 133(6) of the I. T. Act, and that almost all the persons, to whom notices were issued, submitted their responses and accepted that the payments were indeed made to the assessee in cash. Further, the cash book and ledgers of the customers, from whom the assessee received cash payments, were part of the books of account of the assessee, which the Assessing Officer did not doubt. The accounts of the assessee were not rejected u/s 145 of the I. T. Act. The Assessing Officer also completely ignored the fact that the assessee had made payments in the bank accounts of the airlines through banking channel, which was evident from the bank statement of the appellant. In view of the foregoing facts; the submissions made by the learned A.R. for the assessee at the time of hearing before us, and after due consideration of the order of the learned CIT(A), the deletion of addition of Rs.1,36,00,000/- done by learned CIT(A) in impugned order is held to be just and reasonable in the specific facts and circumstances of the present case. It is evident that the addition made by the Assessing Officer was coloured by mere fact that the deposits were made in SBNs. No material has been brought for our consideration by Revenue to persuade us to take a view different from the view taken by the learned CIT(A) regarding the aforesaid amount of Rs.1,36,00,000/-. The Assessing Officer has made the addition merely on the basis of doubts, surmises and suspicions; without giving careful consideration to the submissions made by the assessee, the information collected by the Assessing Officer himself u/s 133(6) of the I. T. Act, and the relevant facts and circumstances. Accordingly, we decline to interfere with the order of learned CIT(A) on the issue of addition amounting to Rs.1,36,00,000/- deleted by the learned CIT(A) in the impugned appellate order. The appeal filed by Revenue vide is dismissed.

(E.1) The learned A.R. for the assessee submitted before us that the assessee’s explanation that this amount represented past savings should be accepted having regard to nature and scale of assessee’s business, financial and social standing of the assessee and the common social practice in Indian households to save some amount in cash every month from out of funds meant for house hold expenses.

(E.2) The learned D.R. for Revenue supported the orders of the Assessing Officer and the learned CIT(A) on this issue.

(E.2.1) We have given our thoughtful consideration to the materials on record and the submissions made by learned A.R. for the assessee. The amount of Rs.5,78,000/-, claimed to be out of past saving, is not an excessive or unreasonable amount having regard to nature and scale of assessee’s business, financial and social standing of the assessee and the common social practice in households to save some amount in cash from time to time. The explanation tendered by the assessee regarding this issue and the submissions made by the learned A.R. for assessee are, therefore, found to be reasonable and acceptable in the specific facts and circumstances of the present case. Accordingly, we direct the Assessing Officer to delete the aforesaid addition of Rs.5,78,000/-. Thus, the appeal filed by the assessee vide is allowed.

(G) In the result, the appeal of Revenue is dismissed and the appeal of the assessee is allowed.

(Order pronounced in the open court on 30/12/2024)