SHRI MOHD MANZOOR,RAJOURI vs. INCOME TAX OFFICER WARD -2 (3), JAMMU

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER

I.T.A. No.166/Asr/2022 Assessment Year: 2017-18

Sh. Mohd. Manzoor, Vs. ITO, Ward-2(3), Tehsil Kotranka, Village Jammu. Budhal Distt. Rajouri 185133, Jammu & Kashmir. [PAN: BKKPM9572Q] (Respondent) (Appellant)

Appellant by Sh. Rohit Kapoor, CA & Sh. V.S. Aggarwal, ITP. Respondent by Sh. Yashender Garg, Sr. DR

Date of Hearing 19.09.2023 Date of Pronouncement 21.09.2023

ORDER Per:Anikesh Banerjee, JM:

The instant appeal of the assessee is directed against the order of the ld.

Commissioner of Income Tax (Appeal), NFAC, Delhi, [in brevity the ‘CIT (A)’] bearing appeal DIN & Order No.ITBA/NFAC/S/250/2022-23/1043429584(1), date of order 14.06.2022, the order passed u/s 250of the Income Tax Act 1961, [in

I.T.A. No.166/Asr/2022 2 Assessment Year: 2017-18

brevity the Act] for A.Y. 2017-18.The impugned order was emanated from the

order of the ld. Income Tax Officer Ward-2(3), Jammu,(in brevity the AO) order

passed u/s 144 of the Act.

dated 26.12.2022. The order was passed ex parte without considering the

submission of the assessee. The assessee had filed Miscellaneous Application

against the order pf appeal bearing ITA 166/Asr/2022. The Miscellaneous

application of the assessee was allowed by the bench. The matter is re-fixed for

hearing before the bench for further adjudication after hearing both the parties.

I.T.A. No.166/Asr/2022 3 Assessment Year: 2017-18

for non-explanation of bank deposit during demonetisation amount of

Rs.11,24,000/-. During Financial Year the cash was deposited in different bank

amount of Rs.94,05,033/-. Due to non-submission of the books of account and the

explanation, the ld. AO has taken the deposit as the assessee’s business turnover

and calculated net profit rate @ 8% u/s 44AD of the Act which is computed to

I.T.A. No.166/Asr/2022 4 Assessment Year: 2017-18

Rs.7,52,402/- u/s 28 of theAct. The net profit amount of Rs.7,52,402/- and the

cash deposited in SBN during demonetisation Rs.11,24,000/- both the amount was

addedwith the total income of the assessee which works out total amount of Rs.

18,76,402/-. The aggrieved assessee filed an appeal before the ld. CIT(A).Due to

non-filingof explanation against the addition, the ld. CIT(A) upheld the order of

the ld. AO and confirmed the findings accordingly. Being aggrieved assessee filed

an appeal before us.

kept in the record. The ld.AR first argued that the calculation made by the ld.

CIT(A) is erroneous. The entire cash deposit was duly added back with the total

income of the assessee except the cash deposit for demonetisation period amount

of Rs.11,24,000/-. But in the bank, there is not only cash deposit but also lot of

entries are there like receiving of bank interest, subsidy received for purchase of

gas and contra entries between the bank accounts. The ld. AR invited our attention

in the written submission which was filed before the bench in paragraph 7.1. The

relevant paragraphs are duly extracted as below: “7.1 The CIT(A) has erred in confirming the addition of Rs. 752402/- i.e. 8% of total alleged credits of Rs. 9405033[excluding deposits during demonetization period]. Furthermore, the CIT(A) has erred in making addition of Rs. 1124000/-

I.T.A. No.166/Asr/2022 5 Assessment Year: 2017-18

[deposits during demonetization period] without giving the benefit of cash in hand as on 08.11.2016 irrespective of the fact that sufficient amount of cash was available with the appellant as on 08.11.2016. The CIT(A) has further erred in not giving the benefit of amount withdrawn in cash during the same financial year out of the bank accounts relied upon by the AO.

7.2The additions made by the AO vide assessment order for the AY 2017-18 passed u/s 144 dated 29.10.2019 are being reiterated for the sake of convenience: -

Particulars Period Amount of Treated as Addition Amount of deposit addition

Cash Excluding 94,05,033/- Business Profit @ 8% 752402 Deposit demonetization Income period

Cash 09.11.2016 to 11,24,000/- Unexplained Unexplained 1124000 Deposit 31.12.2016 Money u/s Money u/s 69A 69A

Total 1876402

7.3The additions made vide assessment order passed u/s 144 are bad in law as, the same is made on the basis of glaring mistakes ignoring the inter-bank transfers, interest received, etc which are highlighted in the following table: -

TABLE A:

Detail of contra entries from J&K Saving Bank account no 145 to CCL Account

I.T.A. No.166/Asr/2022 6 Assessment Year: 2017-18

No 018

Name of the bank Date Remarks Remarks

Date Remarks Remarks

02-04-2016 75000.00 Page 23 and 13

02-04-2016 75000.00 Page 23 and 13

11-04-2016 20000.00 Page 23 and 13

12-04-2016 200000.00 Page 24 and 13

13-05-2016 60000.00 Page 24 and 14

20-05-2016 200000.00 Page 24 and 14

13-06-2016 90000.00 Page 25 and 15

02-07-2016 80000.00 Page 25 and 16

02-07-2016 100000.00 Page 25 and 16

22-07-2016 95000.00 Page 26 and 17

26-07-2016 200000.00 Page 26 and 17

19-08-2016 90000.00 Page 27 and 17

05-09-2016 100000.00 Page 27 and 18

23-09-2016 49000.00 Page 28 and 18

07-10-2016 30000.00 Page 28 and 19

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16-01-2017 6000.00 Page 31 and 21

28-02-2017 20000.00 Page 32 and 21

1490000.00

TABLE B:

Detail of contra entries from CCL Account No 018to J&K Saving Bank account no 145 J&K Bank 0145 02.08.2016 16500.00 Page 26 and 17

Therefore, the Ld. CIT(A) has erred in confirming the order of the AO ignoring the fact that credits to the tune of Rs. 15,062,500/- were on account of contra entries as explained above. As such, the CIT(A) has erred in applying 8% on alleged credits which includes a sum of Rs. 15,06,500/- on account of contra entries.

TABLE C

Particulars Amount Remarks

Subsidy [A/c No 0145] 1428.00 Capital ReceiptsLedger Account enclosed with reply.

Saving Account Interest 4597.00 Page 15

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3048.00 Page 18 Received [A/c No 0145] of Rs. 11518.00 2337.00 Page 20

1536.00 Page 22

The Ld. AO has failed to TOTAL 12,946.00 provide the deduction u/s 80TTA from the total saving account interest and as such, the income taxable after giving the deduction u/s 80TTA works out to Rs. 2946.00.

7.4 The Ld. CIT(A) has erred in differentiating the credits during pre and post demonetization period from the credits during demonetization period. The addition of amount of Rs. 1124000/- deposited during demonetization period has been made ignoring the fact that same pattern of deposits has been followed in earlier period. The summary of cash deposits made in earlier period is as under: -

Table D

Detail of month wise cash deposit

Month Deposit Page No

April 2016 454500 45 of PB

I.T.A. No.166/Asr/2022 9 Assessment Year: 2017-18

May 2016 824500 45 of PB

June 2016 704100 45 of PB

July 2016 712500 45 of PB

August 2016 774000 45 of PB

September 2016 936000 45 of PB

October 2016 631650 45 of PB

November 2016 942000 45 of PB

December 2016 340000 45 of PB

January 2017 243000 45 of PB

February 2017 266000 45 of PB

March 2017 708360 45 of PB

Total 7536610

From the above chart, your Honor will find that the appellant was regularly depositing cash in the CCS Limit account and other account. Therefore, the CIT(A) has erred in making the addition of Rs. 11,24,000/- ignoring the fact that the cash deposits in demonetization period was available with the appellant out of cash in hand as on 08.11.2016. Moreover, there is no abnormal increase in cash deposit per month taking into consideration the earlier period.

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7.5 It is a matter of record that sufficient cash withdrawals were available with the appellant and the month wise summary of cash withdrawals is as under: -

Detail of cash withdrawal

Month Withdrawal from Saving Withdrawal from CCS Account 0145 Limit Account 018

April 2016 0 100000

May 2016 40000 0

June 2016 180000 0

July 2016 80000 14500

August 2016 80000 2000

September 2016 40000 0

October 2016 140000 0

Total 560000 116500

7.6 The total turnover excluding the contra entries, rotation of funds, saving account interest and subsidy by taking into consideration the summary as tabulated in point no 7.3 above is as under: -

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Particulars Amount

Actual Deposit in both bank accounts including demonetization 10544406.00 period as per point no 2 above

Less: Inter Bank transfer as per table A above -1490000.00

Less: Inter Bank transfer as per table B above -16500.00

Less: Subsidy [A/c No 0145]as per table C above -1428.00

Less: Interest Received [A/c No 0145]as per table C above -11518.00

Less: Deposit during demonetization period out of cash in hand -1124000.00 as on 08.11.2016

Total Turnover for the whole year 79,00,960.00

6,32,076.80 Profit @ 8% on deposit during pre and post demonetization period

The sales made by the appellant up to 08.11.2016 as per the bank statements works out to Rs.65.10 Lakh and the post demonetization sales works out to Rs.13,90,960/- . The profits earned pre demonetization period and post demonetization period is tabulated as under:-

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TABLE F

Particulars Amount Profit @8%

Sales Up to 08.11.2016 6510000 520800

Sale from 09.11.2016 to 31.03.2017 1390960 111277

Total 7900960 632077

7.7That the appellant is an individual and is engaged in running the business of provisional store at Rajouri. The fact that the appellant has been carrying out business activities is undisputed and duly accepted by the AO. This is in view of the fact that the AO has himself treated the deposits during pre and post demonetization period as business receipts. The relevant para of the order of the AO[Refer Page no 4 of the PB] is as under: -

From the perusal of the assessee’s bank statement(s), it is observed that the assessee was running a business of Provisional Store during the F.Y 2016-17 since the assessee’s bank statements show frequent cash/non-cash deposits & outward payments made to various persons/parties. Moreover, the type of the assessee’s bank account is also CCS, which establishes that he was running the business. Based on the assessee’s bank statements, it is seen that the assessee has made total deposits of Rs 9405033/- in the F.Y 2016-17 excluding the demonetization period. The assessee has also made deposits of Rs 1124000/- in old currency notes during the demonetization period. Both the above deposits clearly constitute the business turnover of the assessee and as such, N. P. rate of

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8% (u/s 44AD since the turnover is within the limits specified under this section) is being applied to the said deposits totaling to Rs 9405033/(excluding demonetization period)- This will result in the assessee’s business income/profit to be recomputed at Rs 752402/- u/s 28 of the Income Tax Act, 1961. Since this business income was not offered to tax, no return of income was filed and the business income assessed is greater than the maximum amount not chargeable to tax, penalty proceedings u/s 270A(2)(b) for under-reporting of income are being initiated separately.

7.8Thatthe Ld. CIT(A) has failed to appreciate that the AO has made addition to the tune of Rs. 1124000/- u/s 69A and has relied upon the judgement of Supreme Court in the case of Chuharmal Vs CIT reported in 172 ITR 250. The said judgement is not applicable in the present case there was a raid on premises of assessee by customs authorities and wrist watches of substantial value were seized there from. However, in the present case, the appellant has only deposited cash in the limit account which has only reduced the liability and cannot be attributed to the mischief of section 69A.

7.9 The addition of Rs. 11,24,000/- is bad in law as the appellant as having sufficient cash in hand on 08.11.2016. However, the AO has made addition of Rs. 11,24,000/- u/s 69A without even allowing the benefit of the opening cash in hand as on 01.04.2016 of Rs. 51470/-.The summary of cash available as on 08.11.2016 is as under:-

Table G Remarks Particulars Amount

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Please refer page no.44 of the Opening Cash In Hand as on 01.04.16 51470 paper book Please refer table D above. cash available out of cash withdrawal as on till 8.11.16 676500 Profit on sales up to 08.11.16 520800 Please refer table F above. Less Drawings up to 31.10.16 -120000 Total 1128770

In this regard reliance is being placed upon the following case laws in which it has been held that the benefit of cash withdrawals shall be given while making any addition: - a) ShivcharanDass vs. CIT 126 ITR 263 [1980] (Punj. &Har.) "Income from undisclosed sources—Unexplained investment— Amount disclosed by HUF under Voluntary Disclosure Scheme— Thereafter kept lying in assessee's house with his wife till her death— ITO questioning its source after the same had subsequently been deposited with a bank in the names of assessee's then major daughters—In the absence of any evidence to the effect that the said sum was utilized by the assessee in any other manner, the Department was not justified in unreasonably rejecting a good explanation and adding the amount as income from undisclosed sources.

b) 2022 (9) TMI 924 - ITAT AMRITSAR LATE SH. PARVEEN KOCHHAR, LEGAL HEIR KAMINI CHOUDHARY VERSUS ITO WARD-5 (4) , AMRITSAR. Unexplained Cash withdrawn out of bank account - Gap between withdrawal and deposit of the cash - withdrawn and deposit of cash with a gap of 70 days - HELD THAT:- The withdrawn and deposit of cash with a gap of 70 days which was considered by the ld. AO as seven months. The ld. Counsel clearly stated that the sufficient cash was withdrawn in same bank account and after part utilization of the same; the amount was deposited in

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same HDFC Bank account. Appellate authority without considering the proper fact and submission of the assessee had passed the order ex parte. CIT(A) was failed to dispose the appeal on merits and has not contended the explanation of the assessee. As stated in the submission that the assessee was not able to present before the CIT(A) due to the fact that the appellant expired on 23.10.2020 thereafter her husband also expired on 03.11.2020. The copy of the death-certificate of the assessee and her husband are being enclosed - In these circumstances here the genuine cause for non-appearance before the CIT(A). We are in opinion that the assessee has sufficient cause during the depositing of cash in her bank account. The heafty amount was withdrawn 70 days ago for utilising the same for the business of her son. Unused amount was deposited in the same bank account of the assessee. The source of deposit of cash was well explained before the revenue authorities by the assessee. Therefore, AO was indeed in error in adopting a wrong fact in his order. The grievance raised by the ld. Sr. Dr. in this appeal, is, therefore, devoid of any legally sustainable merits. We reject the addition amount of made by the ld. AO. - Decided in favour of assessee.

c) [2018] 93 taxmann.com 66 (Karnataka) HIGH COURT OF KARNATAKA Principal Commissioner of Income-tax, Belagavi vs. Basetteppa B Badami Section 69A of the Income-tax Act, 1961 - Unexplained money (Cash deposits) - Assessment years 2006-07, 2008-09, 2010-11 and 2011-12 - For preceding assessment year, sufficient amount of cash in hand to be brought forward had reached finality - During current year, on basis of cash deposits in assessee's bank accounts, Assessing Authority made addition of unexplained money - Whether since brought forward cash in hand of preceding assessment year was sufficient, addition on account of unexplained cash deposit in bank account of assessee was unjustified - Held, yes [Para 9] [In favour of assessee]

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d) 2017] 88 taxmann.com 400 (Cochin - Trib.) IN THE ITAT COCHIN BENCH Smt.SuryakalaGopakumar v. Income tax Officer, Ward-4, Thiruvalla Section 69 of the Income-tax Act, 1961 - Unexplained investments (Immovable property) - Assessment year 2010-11 - Where cashdeposited in bank account of assessee was explained from sale proceeds of her husband's property and assessee's husband, a NRI, had declared said sale consideration and paid capital gain tax, Assessing Officer erred in treating said deposit as unexplained investment of assessee [In favour of assessee]

e) 2017] 83 taxmann.com 246 (Mumbai - Trib.) IN THE ITAT MUMBAI BENCH ' J'Jaspal Singh Sehgal v. Income-tax Officer WD 21(2)(1), Mumbai* Section 68 of the Income-tax Act, 1961 - Cash credit (Cash) - Assessment year 2009-10 - Where assessee submitted detailed cash summary showing inflow and outflow of cash for relevant year, in absence of any materials to show that cash withdrawn was utilized elsewhere by assessee, benefit of cash withdrawn by assessee from bank account against amount of cashdeposit into bank should be given [In favour of assessee]

f) 2015] 61 taxmann.com 425 (Chandigarh - Trib.) IN THE ITAT CHANDIGARH BENCH 'A' Gurpreet Singh v. Income-tax Officer* Section 68 of the Income-tax Act, 1961 - Cash credit (Bankdeposits) - Assessment year 2008-09 - Assessee made deposits of certain sum in bank account - He made various withdrawals from bank account - Assessing Officer in assessment order had given a list of cashdeposits in bank account and asked assessee to explain source of cashdeposits - Assessing Officer found certain deposits as explained.

g) [TS-8479-ITAT-2019(DELHI)-O] IN THE ITAT OF DELHI AMIT SHUKLA, JM, (SMC) ITA NO 4958 AND 4959/DEL/2018 NAND KUMAR TANEJAVSINCOME TAX OFFICER Tax return filed after 07.11.2016 and cash deposit reported in Statement of Financial Transactions (SFT) – ITAT: Provisions of section 69A can be invoked if, in any financial

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year, the assessee is found to be the owner of any money, etc... which has not been recorded in the books of accounts – ITAT rules in assessee ‘favour, holding that mere cash deposit in bank account after the date of demonetization, i.e., 08.11.2016 does not mean that the cash-in-hand as on 31.3.2015 and 31.03.2016 duly shown in the balance sheet and disclosed to the department in the respective income tax returns filed much earlier, is unexplained.

h) IN THE HIGH COURT OF DELHI SANJIV KHANNA AND CHANDER SHEKHAR, JJ ITA NO 315/2005 JAYA AGGARWALVSINCOME TAX OFFICER Addition u/s 68 for cash withdrawn and cash deposited - Assessee withdrew Rs.2 lakhs to buy immovable property in cash from bank account and re-deposited cash of Rs. 1,60,000/- from the amount withdrawn after more than 7 months as the deal could not be finalized. HC held that addition u/s 68 of amount re-deposited was unjustified, noting that one should not consider and reject an explanation as concocted and contrived by applying the prudent man's behavior test; Principle of preponderance of probability as a test is to be applied and is sufficient to discharge the onus. Probability here means likelihood of anything to be true.

i) IN THE ITAT OF DELHI IT(SS)A NOS. 92 TO 95/DEL/2007; BLOCK PERIOD 1ST APRIL, 1996 TO 24TH SEPT., 2002 ASSISTANT COMMISSIONER OF INCOME TAXVSBALDEV RAJ CHARLA & ORS ITAT - Merely because there was a time gap between the withdrawals and corresponding cash deposits, the assessee’s explanation cannot be rejected, and hence the addition confirmed by the learned CIT(A) is not correct.

j) IN THE ITAT OF DELHI PERIOD 1ST APRIL, 1996 TO 24TH SEPT., 2002 ACIT VSBALDEV RAJ CHARLA & ORS

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ITAT - Merely because there was a time gap between the withdrawals and corresponding cash deposits, the assessee’s explanation cannot be rejected, and hence the addition confirmed by the learned CIT(A) is not correct.

k) TS-10298-ITAT-2018(LUCKNOW)-O] IN THE ITAT OF LUCKNOW ITA NO 215/LKW/2016 DEPUTY COMMISSIONER OF INCOME TAXVSVEENA AWASTHI ITAT: there is no law in the country which prevents citizens from frequently withdrawing and depositing his own money – ITAT dismisses revenue’s appeal, notes that entire transaction of withdrawals and deposits are duly reflected in the assessee’s bank account and even documentary evidences furnished before the Revenue clearly clarify that on each occasion at the time of deposit in her bank account, assessee had sufficient availability of cash, which is also not disputed by the Revenue; ITAT upholds Ld. CIT(A)’s order that the AO was not justified in treating the deposits as unexplained deposits, and the AO’s addition is unjustified and contrary to the provisions of the IT Act and was liable to be deleted.

l) [TS-5908-ITAT-2011(DELHI)-O] IN THE ITAT OF DELHI G L SETHI, JM AND B C MEENA, AM ITA NO 2605/DELHI/2007 MOONGIPA INVESTMENT LTDVSINCOME TAX OFFICER

Mere existence of a time gap between cash withdrawal and cash deposits cannot be made a basis for addition u/s 68 – ITAT rules in assessee ‘favour and notes that assessee has to maintain margins with NSE at short notice and for that, ready cash in hand has to be maintained and the deposits are from the cash balance available to the assessee in its books of account, no addition is called for. The addition cannot be made or sustained on the basis that there was a time gap between withdrawal and deposits. When cash balance is available in cash book maintained, no addition can be made. In view of this factual position, the orders of the authorities below were set aside.

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m) TS-6605-ITAT-2015(AHMEDABAD)-O], (2015) 44 ITR 135 (AHDMEDABAD)(TRIB) ITA NO 788/AHD/2012 SUDHIR BHAI PRAVINKANT THAKERVSINCOME TAX OFFICER

Cash withdrawn during the years 2006 &2007 and deposited in the years 2007 &2008 – ITAT: Merely on the basis of speculation that the amount might have been utilized for any other purpose and was not available with the assessee for making the deposits, it is not open to the lower authority to make the addition on the basis that the assessee failed to explain the source of deposits.

n) [TS-6767-ITAT-2014(MUMBAI)-O] IN THE ITAT OF MUMBAI N K BILLAIYA, AM AND AMIT SHUKLA, JM ITA NO 6091/MUM/2012 INCOME TAX OFFICERVSBABURAO K PISAL

No provision in the Act requiring that cash once withdrawn has to be re-deposited immediately if not utilized - ITAT dismisses revenue’s appeal, upheld the order passed by Ld. CIT(A) that once the source of these cash deposits is not in doubt, the same cannot be termed as unexplained - Assessee has maintained regular cash book and all its accounts are audited. Ld.CIT(A) has analyzedeach and every deposit made by the assessee in the bank account from the withdrawals made by the assessee from the bank, and the cash available in the cash book. The assessee has also shown sufficient cash in hand in the balance sheet of the earlier years and explains source of cash available with the assessee.

o) [TS-6602-ITAT-2015(DELHI)-O] IN THE ITAT OF DELHI ITA NO 811/DEL/2015 GORDHANVSINCOME TAX OFFICER

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ITAT: No addition can be made u/s 68 of the IT Act on the sole reason that there is a time gap of 5 months between the date of cash withdrawal and re-deposit of the same in the Bank Account, unless the AO demonstrates that the amount in question has been utilized for any other purpose.

p) [TS-5045-HC-1951(PATNA)-O], (1951) 20 ITR 0008 (PATNA) IN THE HIGH COURT OF PATNA RAMASWAMI, J.-SARJOO PROSAD, J. MISC. JUDL. CASES NOS. 231 OF 1949 AND 49 OF 1950 SRI NILKANTHA NARAYAN SINGHVSCOMMISSIONER OF INCOME TAX HC: Assessee produced details of withdrawals for the past 7 years, & claimed the amount encashed on demonetization as out of savings from such withdrawals - AO cannot reject such an explanation; Account books were accepted by ITAT as genuine and there was no material upon which ITAT could reach the inference that the high denomination notes were not saving out of the personal allowance he had drawn. HC notes that assesseeactually showed three such receipts, the first dt. 15th March, 1943, the second dt. 10th Feb., 1945 and the third dt. 24th Sept., 1945 and ITAT remarked that there was no evidence that there was a Rs. 10,000 note in any of these receipts, and that the assessee and his employees had not disclosed from whom each Rs.10,000 note was obtained. HC opined that there is no onus thrown upon assessee to indicate from whom each note of Rs. 10,000 was received, and no adverse inference ought to have been drawn by ITAT against assessee.

7.10 As such, it is evident that the AO has adopted a cherry picking approach by treating a part of the deposits as business receipts and the balance deposits as unexplained income u/s 69A. The AO has treated the deposits during demonetization period as unexplained income u/s 69A without even appreciating that the deposits during demonetization period are consistent with the deposits made during pre and post demonetization period. As such, in view of the aforesaid

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facts and figures, the alleged amount of Rs. 1124000/- cannot be treated as unexplained income u/s 69A particularly considering the fact the sufficient cash in hand was available with the assessee as on 08-11-16amounting to Rs.1128770 as worked out in para 7.9 above

7.11 It is further pertinent to mention here that the appellant is a small businessman and has been filing return of income u/s 44AD. In this regard, the copy of return along with computation for the AY 2015-16 is enclosed at page no 33-38 of the PB and at page no 39-44 of the PBfor the AY 2016-17. In view of the fact that the appellant has been declaring income u/s 44AD, the appellant was not required to maintain account books. Furthermore, the AO has made addition u/s 69A only on the basis of suspicion and without any evidence that the said deposit represent income other than business receipts. As the invocation of section 69A is bad in law in view of the following case laws: -

a) [2013] 35 taxmann.com 306 (Punjab & Haryana)HIGH COURT OF PUNJAB AND HARYANACommissioner of Income-tax, Rohtakv.Smt. Kamlesh Section 44AD of the Income-tax Act, 1961 - Civil Construction Business - Assessee had applied provisions of section 44AD and showed business income in its return - However, Commissioner (Appeals) held that receipts appearing in bank account were not from contract business; therefore, such income was to be assessed as income from other sources - Whether, where there was no finding that transactions entered into by assessee were not genuine, no further amount could be made taxable - Held, yes [Paras 6 & 7] [In favour of assessee]

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b) 2023 (5) TMI 478 - ITAT MUMBAIOther Citation: [2023] 103 ITR (Trib) 546 (ITAT [Mum])MRS. SANJANA R. JAIN VERSUS INCOME TAX OFFICER, WARD (4) , KALYAN Addition u/s 69A - being the amount of cash deposited in Bank Account -assessee being into the business of beauty parlor and tuition work deposited demonetization currency notes - HELD THAT:-Assessee has offered income under section 44AD at 8% on cash receipts. It is the case of the assessee that she was having sufficient income year on year basis and drew the attention of the Bench towards cash book opening balance, bank statement, cash book pertaining to the subsequent years. The assessee has duly explained the cash in hand having been collected from her beauty parlor business and tuition work. All these evidences were there before the AO as well as the CIT(A) but they have brushed aside the same without examining the same and proceeded to make the addition. Since the cash deposit of demonetization currency by the assessee is duly explained the addition made by the AO and confirmed by the CIT(A) is not sustainable. Identical issue was decided in case of DCIT vs. Anuya Jayant Mhaiskar [2022 (8) TMI 438 - ITAT MUMBAI] and NemchandVasanjiChheda [2021 (7) TMI 1412 - ITAT MUMBAI] wherein it is held that when sufficient unutilized funds in the books are available with the assessee no addition can be made. So the closing balance or cash in hand with the assessee is certainly disclosed income and opening balance cannot be considered as undisclosed income. Moreover, the assessee has been regularly filing return of income and has duly shown her income in the preceding as well as succeeding years earned in cash.Appeal filed by the assessee is allowed.”

authorities. The ld. DR further mentioned that the assessment was completed u/s

144 ex parte, though the assessee was not produced relevant documents before the

ld. AO. But the ld. DR had not controverted the facts of the assessee. The ld. DR

invited our attention in assessment order the relevant paragraph is extracted as

below:

I.T.A. No.166/Asr/2022 23 Assessment Year: 2017-18

“From the perusal of the assessee’s bank statement(s), it is observed that the assessee was running a business of Provisional Store during the F.Y 2016-17 since the assessee’s bank statements show frequent cash/non-cash deposits & outward payments made to various persons/parties. Moreover, the type of the assessee’s bank account is also CCS, which establishes that he was running the business. Based on the assessee’s bank statements, it is seen that the assessee has made total deposits of Rs 9405033/- in the F.Y 2016-17 excluding the demonetization period. The assessee has also made deposits of Rs 1124000/- in old currency notes during the demonetization period. Both the above deposits clearly constitute the business turnover of the assessee and as such, N. P. rate of 8% (u/s 44AD since the turnover is within the limits specified under this section) is being applied to the said deposits totalling to Rs 9405033/(excluding demonetization period)- This will result in the assessee’s business income/profit to be recomputed at Rs 752402/- u/s 28 of the Income Tax Act, 1961. Since this business income was not offered to tax, no return of income was filed and the business income assessed is greater than the maximum amount not chargeable to tax, penalty proceedings u/s 270A(2)(b) for under-reporting of income are being initiated separately.”

record. The entire issue of the assessee is in factual basis. The ld. AR in argument

has not controverted the observations of revenue authorities. The assessee has

I.T.A. No.166/Asr/2022 24 Assessment Year: 2017-18

accepted the net profit @8% on the turnover which is reflected in bank statement.

Both the revenue authorities had scrutinized the bank statement of the assessee.

But the contra entries and bank interest are taken as turnover. The ld. AR has

restricted the turnover of the assessee amount to Rs. 79,00,960/-. The assessee

deducted the contra entries and interest earned from turn over.

The addition amount of Rs. 11,24,000/- is part of demonetization but the amount is

carrying over from opening balance of cash and the part of net profit of previous

month of demonetisation period. We relied on the order of the ITAT-Lucknow in the case of Veena Awasthi (supra) and respectfully relied on the order of the

Hon’ble High Court of Punjab and Haryanain the case of Smt. Kamlesh

(supra). When the revenue had accepted the entire deposit as turn over of sales and

had determined NP @8% on turnover, then a part of turnover cannot be taken as

addition U/s 69 of the Act, Smt. Kamlesh (supra).

Considering the factual matrix, we order to modify the demand as below.

The net profit is restricted to amount of Rs.6,32,076/- i.e.net profit @ 8% on

turnover amount to Rs.79,00,960/-. The total interest received amount to

Rs.12,946/- less Rs.10,000/- u/s 80TTA.The ld. ARhas admitted the addition of

Rs.2,946/- which is directed to add with the total income of the assessee on

I.T.A. No.166/Asr/2022 25 Assessment Year: 2017-18

account of undisclosed saving interest. So, the entire addition is restricted to

Rs.6,35,022/- instead of Rs.18,76,402/-. We order accordingly.

In the result, the appeal of the assessee bearing ITA No. 166/Asr/2022 is 8.

partly allowed.

Order pronounced in the open court on 21.09.2023

Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member

AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The DR, I.T.A.T.