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Income Tax Appellate Tribunal, RAIPUR BENCH “SMC”, RAIPUR
Before: SHRI RAVISH SOOD
आदेश / ORDER PER RAVISH SOOD, JM The present appeal filed by the assessee is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 23.03.2022, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 22.11.2019 for the assessment year 2017-18. The assessee has assailed the impugned order on the following grounds of appeal:
“1. Ld. CIT(A) erred in confirming the addition of Rs.10,44,500/- made by the A.O on account of cash deposited in the bank accounts of the appellant, invoking Section.69A. The addition made by the A.O and sustained by the Ld. CIT(A) is not justified. 2. The appellant reserves the right to add, amend or modify any of the ground/s of appeal.”
Succinctly stated, the assessee had e-filed her return of income for A.Y.2017-18 on 20.03.2018, declaring an income of Rs. 2,62,210/- . Subsequently, the case of the assessee was selected for limited scrutiny assessment u/s.143(2) of the Act for the reason, viz. “large value of cash deposit during demonetization period.”
During the course of the assessment proceedings, the A.O observed that the assessee during the year under consideration had 3 Vaishali Kanodia Vs. ITO-4(1)
deposited an amount aggregating to Rs.10,44,500/- in her bank accounts, viz. (i). cash deposit in SB account with State Bank of India, Raipur: Rs.1,50,000/-; (ii). cash deposit in Bank A/C No.904020017500542 with Axis Bank, Branch: Samta Colony, Raipur: Rs.8,94,500/-. On being queried about the aforesaid cash deposits, it was the claim of the assessee that the same were sourced out of, viz. (i) accumulated opening cash in hand of Rs. 9,87,186/- available with her on 01.04.2016; (ii) redeposit of the amounts of Rs. 6.80 lac withdrawn from her bank account over the period 07.04.2016 to 26.10.2016; and (iii) cash receipts from imitation jewellery business. It was observed by the A.O that though the assessee had claimed to have earned a net profit of Rs.2,01,060/- from business of trading of imitation jewellery, but the aforesaid income was offered by her for tax in the return of income under the head “income from other sources”. On being called upon by the A.O to substantiate the genuineness of her claim of having carried out business of trading in imitation jewellery the assessee furnished with the A.O list of persons to whom sales in the course of her business were carried out during the year. It was the claim of the assessee that after her marriage on 23.11.2014 she was residing at Kolkata, i.e., “H. No.99, 3rd Floor, Block C, Bangur Avenue, Kolkata”, and was carrying on her business of imitation jewellery from the said address. On being queried that now when the 4 Vaishali Kanodia Vs. ITO-4(1) business was being carried from Kolkata, then how the sale proceeds of the said business were deposited in her bank account at Raipur, it was the claim of the assesee that she was engaged in the business of selling of imitation jewellery to a limited clientele comprising of her relatives and friends who were living in different parts of India and they would deposit the sale proceeds in her bank account from their respective cities, viz. Jodhpur, Kota, Delhi, Jaipur etc. However, the assessee on being called upon to furnish bills of purchase/sale of her imitation jewellery business failed to do so, for the reason that no such records were maintained by her. Although the assessee had furnished the details of persons to whom sales were claimed to have been made during the year, but as observed by the A.O as she failed to provide the addresses of the respective purchasers, therefore, the authenticity of her claim could not be verified. On the basis of his aforesaid observations the A.O holding a conviction that the assessee had failed to satisfactorily explain the nature and source of the cash deposits of Rs.10,44,500/- (supra), thus, made an addition of the same by treating it as her unexplained money u/s.69A of the Act.
Aggrieved the assessee carried the matter in appeal before the CIT(Appeals) but without any success.
5 Vaishali Kanodia Vs. ITO-4(1)
The assessee being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before me.
I have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. A.R to drive home his contentions.
Before proceeding any further, I may herein observe that in the course of hearing of the appeal the Ld. Authorized Representative (for short ‘AR’) for the assessee was directed to produce documentary evidence which would substantiate the claim of the assessee that she was carrying on the business of trading in imitation jewellery during the year under consideration. In compliance to the aforesaid direction, the assessee during the course of next date of hearing had filed before me a letter dated 08.12.2022 seeking liberty to place on record certain documents as additional evidence under Rule 29 of the Income Tax Appellate Rules, 1963, which as per her would irrefutably evidence the fact that she during the year under consideration, as well as in the preceding and succeeding years, was carrying on the business of trading in imitation jewellery.
6 Vaishali Kanodia Vs. ITO-4(1)
On a perusal of the documents filed before me as “additional evidence compilation” (for short “ADC”), I find that the same comprises of, viz. (i). confirmations of certain parties who had admitted of having purchased imitation jewelry from the assesee during the year under consideration, Page 1-6 of ADC; (ii) purchase bills, Page 7 to14 of ADC; (iii) photograph of a board displayed at the outside of the office of the assessee at Kolkata, Page 15 of ADC; and (iv) screen shots of Whats App chats of the assessee with certain persons, Page 16 to 29 of ADC. As the aforesaid documents which are in the nature of additional evidences have been filed by the assesee pursuant to the direction of the Tribunal, therefore, the same are admitted under Rule 29 of the Appellate Tribunal Rules, 1963.
Adverting to the issue in hand, it transpires from the orders of the lower authorities that the assessee on being queried about the source of the cash deposits of Rs.10,44,500/- (supra) in her bank accounts during the demonetization period, had tried to relate the same to three streams of sources, viz., (i). out of the accumulated cash- in-hand of Rs. 9,87,186/- stated to be available with her on 01.04.2016; (ii). redeposit of cash withdrawals of Rs.6,80,000/- made from her bank account during 07.04.2016 to 26.10.2016; and (iii). cash in hand generated from imitation jewellery business.
7 Vaishali Kanodia Vs. ITO-4(1)
Although the A.O had raised serious doubts about the claim of the assessee that she was carrying on the business of trading in imitation jewelry, however, as stated by the Ld. AR, neither of the lower authorities had drawn any adverse inferences as regards her claim that the same were, inter alia, sourced from, viz. (i) accumulated opening cash in hand of Rs. 9,87,186/- available with her on 01.04.2016; and (ii) redeposit of the amounts of Rs. 6.80 lac withdrawn from her bank account over the period 07.04.2016 to 26.10.2016.
As regards the claim of the assessee that cash deposits of Rs. 10,44,500/- (supra) in question were partly sourced out of the redeposits of the cash withdrawals of Rs. 6.80 lac made from her bank account over the period 07.04.2016 to 26.10.2016, I find that the same had been rejected by the A.O, for the reason that he was of the view that the said amount of cash withdrawals would have been utilized by the assessee for two-fold purposes, viz. (i) towards household expenses; and (ii) incurring of expenses in the course of the business, if any, carried out by her. In so far the second reason given by the A.O for rejecting the claim of the assessee, i.e., part of such cash withdrawals would have been utilized towards incurring of expenses for her business, if any, the same in my considered view militates and in fact, contradicts the observation of the A.O that the assessee was actually not carrying on any genuine business of trading in imitation jewellery.
8 Vaishali Kanodia Vs. ITO-4(1)
I, say so, for the reason that while for the A.O on the basis of a strong conviction had concluded that the assessee was not carrying on any business of trading in imitation jewellery, but while rejecting her claim that cash deposits in her bank accounts were, inter alia, sourced out of the redeposits of the earlier cash withdrawals of Rs. 6.80 lac made by her from her bank account over the period 07.04.2016 to 26.10.2016, he had adopted a contradictory stand and observed, that such cash withdrawals from the bank accounts would have, inter alia, been utilized towards incurring of expenses by the assessee for her business, if any. Ostensibly, the said observation of the A.O defies the basic logic, i.e., now when the claim of the assessee of having carried out the business of trading in imitation jewellery was rejected by the A.O for the reason that no such business was in existence, therefore, there could be no justification on his part in declining her claim that part of the cash deposits in her bank accounts were sourced from the redeposit of cash withdrawals made anterior to the same, for the reason that the same, inter alia, would have been utilized towards incurring of expense for her business. In case I subscribe to the aforesaid claim of the A.O, then it would clearly lead to a perverse observation, i.e., though the business of the assessee is found to be non-existent, but her claim that the cash deposits in her bank account were partly sourced out of the redeposit of the cash withdrawals was 9 Vaishali Kanodia Vs. ITO-4(1) not be accepted for the reason that the same must have been utilized towards incurring of expenses of her business, which, though, had been held to be non-existent. Accordingly, I am unable to subscribe to the rejection of the claim of the assessee that part of the cash deposits in her bank accounts were sourced from the redeposit of the cash withdrawals of RS. 6.80 lac made from her bank account over the period 07.04.2016 to 26.10.2016. At the same time, I cannot also remain oblivion of the fact that the assessee except for harping on her claim that the cash withdrawals made from her bank accounts were redeposited, had however failed to place on record any such material which would substantiate the same to the hilt.
On a perusal of the records, it transpires that the assesee had claimed to have made cash withdrawals of Rs.6.80 lac from her bank account with Axis bank over the period 07.04.2016 to 26.10.2016. As I am concerned with the cash deposit of Rs.10,44,500/- (supra) made by the assesee during the demonetization period, i.e., 09.11.2016 to 31.12.2016, thus, in the absence of any irrefutable material having been placed on record, which would prove that at the time of making the cash deposit of Rs.7,37,500/- in her bank account with Axis Bank on 18.11.2016, she was in possession of any amount of cash out of the cash withdrawals of Rs. 6.80 lac that was made by her during 07.04.2016 to 26.10.2016 from the said bank account, therefore, in 10 Vaishali Kanodia Vs. ITO-4(1)
my considered view only some amount out of the cash withdrawal of Rs.1.60 lac made by the assessee at the fag end of October, 2016 can be held to be available with her disposal for partly sourcing the aforesaid cash deposit of Rs. 7,37,500/- (supra). As no details have been furnished by the assessee before me which would irrefutably establish the availability of cash in hand with her out of the cash withdrawals made from her aforesaid bank account, i.e., Axis bank, Branch: Raipur, therefore, I am of the considered view that 50% of the said withdrawals can safely be held to be available with her for partly sourcing the cash deposit of Rs. 7,37,500/- (supra) made on 18.11.2016 in her aforementioned bank account with Axis Bank. I, thus, on the basis of my aforesaid observations partly allow the assessee’s claim as regards sourcing of the cash deposits out of cash withdrawals from her bank account with Axis bank, Branch : Raipur to the extent of Rs.80,000/- ( 50% of Rs.1,60,000/-).
Adverting to the claim of the assessee that cash deposits were also sourced from the opening cash in hand of Rs.9,87,186/- that was available with her as on 31.03.2016, I am unable to concur with the said unsubstantiated claim so raised by her. Although, it is the claim of Ld. AR that the A.O had not rejected the aforesaid claim of the assessee as regards availability of cash-in-hand with her out of the opening balance of Rs.9,87,186/- (supra), however, if that would have 11 Vaishali Kanodia Vs. ITO-4(1)
been so then the assessee would not have suffered an addition of Rs.10,44,500/- u/s.69A of the Act. Be that as it may, in my considered view as the income returned by the assessee varies from as low as Rs.1.50 lac to as high as Rs.2.42 lac over the period A.Y.2003-04 to A.Y 2015-16, the same by no means inspires any confidence as regards her unsubstantiated claim that she was in possession of opening cash- in-hand of Rs.9,87,186/- on 31.03.2016. Apart from that, as the assessee had made cash deposits during the pre-demonetization period, i.e., 01.04.2016 to 08.11.2016 of Rs.5,17,200/- in her various bank accounts, therefore, utilization of the accumulated savings of the assessee (to the extent the same would have actually been available with her on 01.04.2016) would have been utilized for making such deposits. Accordingly, on the basis of my aforesaid observations, I am unable to concur with the claim of the Ld. AR that the assessee had partly sourced the cash deposits of Rs.10,44,500/- during the post demonetization period, i.e., 09.11.2016 to 31.12.2016 out of the opening cash in hand of Rs.9,87,186/- that was available with her on 01.04.2016.
Be that as it may, as the assessee in her attempt to fortify her claim of having carried out genuine business of trading in imitation jewellery during the year under consideration, and also the preceding and succeeding years, had placed on record additional documentary
12 Vaishali Kanodia Vs. ITO-4(1) evidences, viz. (i) copies of purchase bills; (ii) confirmations from certain individuals of having purchased imitation jewelry from her; (iii) copies of screen shots of whats app chats etc.; which have been admitted by me U/rule 29 of the Appellate Tribunal Rules, 1963, therefore, I am of the considered view that as the A.O had no occasion to look into the said documents in the course of the assessment proceedings, the matter in all fairness requires to be restored to the file of the A.O with a direction to re-adjudicate the claim of the assessee of having carried out genuine business of trading in imitation jewellery after considering the aforesaid additional documentary evidences and carrying out necessary verifications as he may deem fit.
Before parting, I may herein observe that as the matter is restored to the file of the A.O for the limited purpose of verification of the assessee’s claim of having carried out genuine business of trading of imitation jewellery, therefore, no observation on the said aspect is being made on my part, and the A.O shall remain at a liberty to carry out necessary verifications as he may deem fit. In case the A.O is satisfied that the assessee was carrying on genuine business of trading in imitation jewellery, then, her explanation that part of the cash deposits of Rs. 10,44,500/- (supra) were sourced out of the cash receipts from the said stream of her business shall be accepted by him to the said extent. Needless to say, the A.O shall in the course of set-
13 Vaishali Kanodia Vs. ITO-4(1) aside proceeding afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate her claim on the basis of fresh material/evidence.
In the result, the appeal of the assessee is partly allowed /allowed for statistical purposes in terms of my aforesaid observations.