Case Law Details
Bhoopalam Marketing Services Pvt. Ltd Vs ACIT (ITAT Bangalore)
Learned Assessing Officer has passed an order u/s 144 by making addition of Rs.2,98,08,080/-U/s 69A read with section 115BBE, being cash deposited during the demonetization period as unexplained money, without considering the turnover of Rs.70,40,80,419/-, the figures which were readily available in the IT portal when the form 3CA/3CD was filed by the auditor. Entire sales are only in cash as the buyers of currency are small and sundry shop keepers whose purchases on an average is Rs.150/. In each case at each time the purchases range from Rs. 10/- to Rs. 5000/- which are made in cash.
CBDT instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money.
The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not.
The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash.
The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law.
Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Present cross appeals are filed by assessee and revenue against the order dated 11/03/2022 passed by National Faceless Appeal Centre, Delhi for A.Y. 2017-18.
2. Brief facts of the case are as under:
2.1 The assessee Bhoopalam Marketing Service Pvt. Ltd. is a company registered under the Companies Act and carrying on the business as franchise for various telecom and DTH service providers.
2.2 During the year under consideration, the assessee declared a turnover of Rs.70,40,80,419/- and a profit of Rs.23,92,516/- as per statement of Profit and loss, which was uploaded by the auditor while filing form 3CA/3CD on 31.03.2018, and the taxes were also paid on such profits. However, the Ld.AR stated that there was delay in filing the return of income. He submitted that the assessee had entrusted the work of filing return to a Statutory Auditor who was appointed for a period of 5 years from 30.09.2014 at the Annual General Meeting held on 30.09.2014.
2.3 It is submitted that, he was also the tax auditor under Income Tax Act, 1961. The assessee had furnished required particulars and books in time for audit and finalisation for preparation of the return and the assessee was under the bonafide belief that, the Statutory Auditor had discharged his duty promptly. Subsequently, the assessee found out that, he had not filed the return, though he filed online Form 3CA/3CD and the financials on 31.03.2018. The return was filed belatedly on 31.12.2019 on enquiring about the lapse with Statutory Auditor.
2.4 It is submitted that:
the assessee is into purchase and sale of currency for mobile phones. Entire business is digitized. All purchases and sales are done online. The currency is purchased from various telecom operators online and purchases are stored in the systems automatically. The customers, who are usually small time traders, make payment online or remit the money to Canara Bank or branches of State Bank of India and purchase the currency. In a few cases payments are made to a collection centre from where the amounts are remitted to bank. There is no human factor involved in affecting sales which is completely transacted electronically.
2.5 It is submitted that the business has two streams:
a) Franchisee to various telecom companies / purchases from other wholesalers. In these cases the net margin ranges from 0.25% to 0.30%.
b) Business is on commission basis in the case of Dish TV, Cyber Plat Private Limited and Airtel DTH. Commission is on sales which ranges from 0.75% to 4%. Tax Deduction at Source (TDS) is effected on commission.
2.6 It is submitted that, during the assessment proceedings, the Ld.AO issued notices / communications electronically to the mail address that was not in use. The Learned Assessing Officer has passed an order u/s 144 by making addition of Rs.2,98,08,080/-U/s 69A read with section 115BBE, being cash deposited during the demonetization period as unexplained money, without considering the turnover of Rs.70,40,80,419/-, the figures which were readily available in the IT portal when the form 3CA/3CD was filed by the auditor. Entire sales are only in cash as the buyers of currency are small and sundry shop keepers whose purchases on an average is Rs.150/. In each case at each time the purchases range from Rs. 10/- to Rs. 5000/- which are made in cash.
2.7 Further, it was submitted that the Ld.AO did not grant the exemption given to the assessee’s line of business for payment up to Rs.500/- per top-up, vide notification dated NEW DELHI, THURSDAY, NOVEMBER 24, 2016/AGRAHAYANA 3, 1938 bearing no. 2774.
2.8 It is submitted that the Ld.AO presumed that the cash deposited during the period of demonetization as unexplained money, without verifying the fact that the assessee was permitted to collect specified bank notes of any denomination during the period of demonetization for top up to Rs.500/-. Therefore the addition made is purely on surmise, assumptions, presumptions, lack of consideration and hastiness.
2.9 In this manner, the Learned Assessing Officer completed the assessment proceedings by passing the impugned order u/s. 144 of the Act, dated 30/10/2019 determining the total income of the appellant at Rs. 5,82,76,300/-.
2.10 Being aggrieved by the same the assessee filed appeal before the Ld.CIT(A) who upheld the order of Ld.AO. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before this Tribunal.
3. The only issue that arises is in respect of addition made u/s. 69A r.w.s. 115BBE being the cash deposited during demonetisation period as unexplained. The Ld.AR submitted as under:
a) Non service of statutory notice either electronically or through physical means on the assessee to the last recorded email, has rendered the order passed U/s 144 NULL and VOID
b) That, the entire process is online and all the transactions are accounted automatically. There is no scope for omission or commission and the assessee gets his gross margin which is around 1.75%. After meeting all the expenditures, the assessee’s net profit will be around 0.25% to 0.30% of the gross collection.
c) Business net profit adopted at the rate of 4% is unfounded, groundless, uncorroborated, not backed up by any evidence or data and not based even on earlier year assessments. Hence it is not Best Judgement Assessment Order
d) The assessee has maintained regular computerized books of account and all receipts are recorded in books. The Ld.AO made addition of Rs.2,98,08,080/- U/s 69A read with section 115BBE, being cash deposited during the demonetization period and the assessee’s total turnover during the year as per the profit and loss account, which was readily available in the IT portal, was Rs.70,40,80,419/-.
e) The deposits are only of sundry customers who purchase currency for cash in small sums. Profit as per audited financials is only Rs.23,92,516/-. Entire taxes in this regard have been paid.
4. The Ld.AR further submitted that for the year under consideration, notice u/s 142 and other notices and communications were served to the assessee’s defunct email address bmspvtltd®yahoo.co.in to file the income tax returns on 25.11.2017. It is submitted that this email id was not in use by the assessee during the said period. He submitted that the assessee had updated in the IT portal and the new email ID is [email protected] which is the functional email address of the company. The Ld.AR submitted that the notices were not received by the assessee, physically or through post at the registered address of the company, therefore notices including orders were never served on the assessee either electronically to the email id in usage or physically. It was under such circumstances the assessee could not respond, resulting in ex-parte order.
5. The Ld.AR referred to the statement of Ld.AO regarding enquiry caused through ITI (inspector) about the existence of the assessee in the given address and ITI reported that the assessee had closed his business in the given address and shifted to Basavasadana, BH Road, Shimoga, which is factually incorrect. The Ld.AR submitted that even till this day the assessee is carrying on the business in the given address and even in the ROC record, the same address is available. The Ld.AR submitted that;
it is only when someone from the income-tax office, during the last week of December, informed the assessee telephonically about non-compliances to the demand and penalty notices, he logged into the old email-id on 30.12.2019 and found the ex-parte order, demand notice and penalty notices.
6. Based on the above, the Ld.AR submitted that in the interest of justice, the issue may be remanded for proper verification.
The Ld.DR did not object to this submission made by the Ld.AR.
7. We have carefully considered the rival contention and perused the orders of the lower authorities.
Admittedly the assessee has deposited Rs.298,08,080/- during the post-demonetization between 09/11/2016 and 30/12/2016.
Therefore Ld.AO made addition of INR 5,82,76,300/- as income of the assessee u/s. 68 of the income tax act, by passing assessment order u/s. 144 of the Act. The Ld.AO made such addition as the assessee could not file requisite details as the notice was issued to the email address that was not functional. In the interest of justice, we deem it proper to remand the issues back to the Ld.AO for a de novo verification.
7.1 We have carefully gone through the various standard operating procedures laid down by the central board of direct taxes issued from time to time in case of operation clean. The 1st of such instruction was issued on 21/02/2017 by instruction number 03/2017. The 2nd instruction was issued on 03/03/2017 instruction number 4/2017. The 3rd instruction was in the form of a circular dated 15/11/2017 in F.No. 225/363/2017-ITA.II and the last one dated 09/08/2019 in F.no.225/145/2019-ITA.II. These instructions gives a hint regarding what kind of investigation, enquiry, evidences that the assessing officer is required to take into consideration for the purpose of assessing such cases.
8. In 1 of such instructions dated 09/08/2019 speaks about the comparative analysis of cash deposits, cash sales, month wise cash sales and cash deposits. It also provides that whether in such cases the books of accounts have been rejected or not where substantial evidences of vide variation be found between these statistical analyses. Therefore, it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money.
8.1 The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not.
8.2 The assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash.
The Ld.AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law.
Needless to say that proper opportunity of being heard must be granted to the assessee. The assessee may be granted physical hearing in order to justify its claim.
In the result, the appeal filed by assessee as well as the appeal of revenue stands allowed for statistical purposes. Order pronounced in the open court on 15th September, 2022.
