Sureshbhai Bhiukhabhai Patel Vs ITO (ITAT Surat)
ITAT Surat held that addition under section 68 of the Income Tax Act is not sustainable since AO has not made any independent investigation of fact. Accordingly, ad hoc disallowance @10% upheld to avoid the possibility of revenue leakage.
Facts- During assessment, AO noted that there were huge cash deposits by assessee during demonetization period. In absence of satisfactory source of such cash deposit, AO made addition u/s. 68 of the Act of Rs.27,17,000/- and taxed the same u/s. 115BBE of the Act.
CIT(A) upheld the addition. Being aggrieved, the present appeal is filed.
Conclusion- Held that no independent investigation of fact was carried out about agricultural holding nor discarded / rejected the receipt of agricultural produce. Thus, in my view, in order to avoid the possibility of revenue leakage at reasonable disallowance would be sufficient to avoid the possibility of revenue leakage. Thus, considering the various heads of income of assessee, I find that ad hoc disallowance @ 10% of addition of Rs.27,14,000/- would be sufficient to avoid the possibility of revenue leakage. In the result, ground No.1 of appeal is partly allowed.
FULL TEXT OF THE ORDER OF ITAT SURAT
1. This appeal by assessee is directed against the order of National Faceless Appeal Centre, Delhi [for short to as “NFAC/Ld. CIT(A)”] dated 24.01.2024 for assessment year 2017-18, which in turn arises out of assessment order passed by the Assessing Officer under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 04.12.2019. The assessee has raised the following grounds of appeal:-
“1. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Office by sustaining addition to the extent of Rs.27,14,000/- as unexplained cash credits u/s 68 of the I.T. Act, 1961.
2. On the facts and circumstances of the case as well as law on the subject, the learned CIT(A), NFAC has erred in confirming the action of Assessing Officer in invoking provisions of Section 115BBE of the Act and in thereby taxing entire unexplained cash credits at 60 percentages and levying surcharge at 25 percentages which is not applicable on above amount.
3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
2. Brief facts of the case are that assessee is an individual, filed his return of income for assessment year 2017-18 declaring income of Rs.1,55,290/-. The case was selected for scrutiny on the issue of cash deposit during demonetization period. During assessment, the Assessing Officer noted that there were huge cash deposits by assessee during demonetization period. The Assessing Officer issued show cause notice, the assessee in e-proceedings to substantiate the source of such cash deposits. The assessee filed reply on 16.11.2019 and stated that cash was available of Rs.27,17,000/- out of agricultural income and Rs.14,43,000/- on account of cash-in-hand. The Assessing Officer further noted that no supporting evidence was furnished in support of agricultural income and cash-in-hand. The Assessing Officer, thus issued a detailed show cause notice dated 15.11.2019. The contents of show cause notice are recorded in para-4 of the assessment order. The Assessing Officer noted that assessee along with his reply dated 16.11.2019 submitted cash book for the period of 01.04.2016 to 31.03.2017 showing opening cash balance of Rs.20,32,763/- but no supporting evidence was furnished. The Assessing Officer again issued show cause notice pointing out certain discrepancies in the cash book and source of total cash deposit of Rs.27,17,000/- deposited during demonetization period. The Assessing Officer recorded that no further reply was received from assessee and that assessee always furnished part compliance. The assessee made cash deposit in seven bank accounts, out of three bank accounts with Bank of Baroda, one with Corporation Bank and three with Dena Bank aggregating of Rs.27,14,000/-. The assessee was asked to furnish source of opening cash balance, which assessee failed to furnish. The Assessing Officer after recording his finding in para-6.4 in assessment order held that assessee claimed cash-in-hand of Rs.25,31,314/- as on 31.10.2016. The demonetization period started from 08.11.2016. On 11.11.2016, the assessee deposited only Rs. 25,000/- in Corporation Bank, Rs. 3,000/- on 12.11.2016 and Rs. 99,000/- on 15.11.2016. The pattern of cash deposits continued in similar way and assessee deposited cash in different bank accounts. In absence of satisfactory source of such cash deposit, Assessing Officer made addition under section 68 of the Act of Rs.27,17,000/- and taxed the same under section 115BBE of the Act, in assessment order passed on 04. 12.2019.
