Case Law Details
DCIT Vs Chiranjeet Kundu (ITAT Kolkata)
ITAT Kolkata held that addition under section 69A of the Income Tax Act towards unexplained cash deposits rightly deleted since it is already part of the turnover of the business. Accordingly, appeal of revenue dismissed.
Facts- AO has recorded a finding that there were large sums of money deposited as cash in the bank accounts during demonetization period. It is recorded in the assessment order that the said cash deposits could not be verified in the absence of books of accounts etc. which the assessee was required to produce before AO. Thereafter, AO proceeded to add Rs. 2,27,98,730/-u/s 69A of the Act.
CIT(A) deleted the impugned addition. Being aggrieved, the present appeal is filed by revenue.
Conclusion- Held that the findings of the Ld. CIT(A) are relevant in as much as the issue has been placed in perspective. It is seen that the Ld. AO went ahead in making the impugned addition, overlooking the fact that the allegedly doubtful receipts were very much part of the turnover of business and had been duly disclosed in the return of income. Furthermore, it is clear that the turnover etc. has not been doubted by the Ld. AO. All in all, the findings of Ld. CIT(A) are worth upholding and the addition made u/s 69A of the Act by the Ld. AO cannot be sustained. Accordingly, it is held the impugned addition has been rightly directed to be deleted.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal arises from an order dated 06.08.2024, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereafter ‘the Ld. CIT(A)’], u/s 250 of the Income Tax Act, 1961 (hereafter “the Act”).
1.1 In this case, the Revenue/Department has filed the present appeal. The facts in brief are that the Ld. AO (vide order dated 27.11.2019) has recorded a finding that there were large sums of money deposited as cash in the bank accounts during demonetization period. It is recorded in the assessment order that the said cash deposits could not be verified in the absence of books of accounts etc. which the assessee was required to produce before the Ld. AO. Thereafter, the Ld. AO proceeded to add Rs. 2,27,98,730/-u/s 69A of the Act.
1.2 Aggrieved with this action of Ld. AO, the assessee approached the Ld. CIT(A) whereby based on a comparison of deposits in cash for comparable 3 years period (09.11.2015 to 31.11.2017 to 31.12.2017) the deposits were found to be consistent in quantum and thereby he gave a finding that the deposits in cash were not abnormal. The Ld. CIT(A) also proceeded to give relief to the assessee on the ground that the said receipts were disclosed as business receipts in the return of income. The Ld. CIT(A) deleted the impugned addition accordingly.
2. Aggrieved with this action of Ld. CIT(A), the Department has filed the present appeal before the ITAT with the following grounds of appeal:
“1. Whether the Ld. CIT(A) has erred in deleting the addition of Rs. 2,27,98,730/-made by the AO on account of unexplained cash deposit in the bank account for non-production of books of accounts when the assessee claims the source of cash deposits from sales in the business of FMCG item as well as recharging of mobile SIMs of Reliance communication during the period under consideration.
2. Whether the Ld. CIT(A) has erred in deleting the addition without getting books examined in/through remand proceedings by the AO.
3. That the appellant begs to add/alter delete any ground during the course of appellate proceedings.”
2.1 Before us, the Ld. DR vehemently argued that the assessee was duty bound to produce the books of accounts etc. for the verification of the Ld. AO and once that was not done, for whatever reasons, then the addition u/s 69A of the Act was sustainable. The Ld. DR read out various relevant portion from the Ld. AO’s order.
2.2 Per contra, the Ld. AR pointed out the detailed finding of fact given by the Ld. CIT(A) in para 5.2.1 on pages 19,20, and 21 of the impugned order. The Ld. AR argued that once the entire receipts have been considered for the purposes of taxation then without rejecting the book results, the Ld. AO could not have made the impugned addition.
3. We have perused the documents before us and heard the rival submissions at length. To begin with the relevant findings of the Ld. CIT(A), deserves to be extracted since they would be relevant for deciding the issue at hand:
“5.2.1. I have considered the submissions made by the Appellant. I have also perused the assessment order. I find that the AO has made the addition u/s 69A mainly on ground that the Appellant has failed to produce books of accounts and supporting vouchers before the AO while recording the statement u/s 131 of the Act. In this regard, however, I find that the Appellant has stated in the statement recorded u/s 131 of the Act that books of accounts cannot be produced now. Meaning thereby that the Appellant sought time for the same. In this regard, relevant part of the assessment order is reproduced below:
“2.2 To examine this issue further, assessee was summoned with books of accounts/bills/vouchers, But the assessee could not be able to produce books of accounts to explain the source of cash credits appearing in bank accounts. While examining this issue an statement u/s 131 of the Act was also recorded on oath of the assessee, the relevant portion of the is reproduced as under:
Q.6. As observed from bank statement and details filed by you that you have made huge cash deposit during the year. Please explain the source of the same with supporting documents.
Ans. Same were out of my cash sales made during the year, however, I am unable to produce any documents.
Q.8 Can you produce books of A/cs, bills/vouchers in support of deposit made by you during the year to explain the source of the same cash
Ans. Right now, I am unable to produce such documents/books of abs
Q. 9 As observed from F.Y.- 2015-16, cash deposits have increased significantly during the year. You are saying that you are unable to produce any documents in support of cash deposit (made during the demonization period). In the light of the above, please explain why the excess cash deposits made during the year specially during demonization period should not be treated as unexplained cash credit?
Ans. It may be out of my cash sales during the year however I am unable to produce any documentary evidence.”
Thus, from above statement, it is clear that the Appellant has been stating that the cash deposits may be out of sales, however, relevant documents cannot be produced right now. In my considered opinion, the AO ought to have provided time to the Appellant for furnishing books of accounts, adhering to the principles of natural justice.
Be that as it may, the fact remains that in spite of non-production of books of accounts by the Appellant (for the reasons stated above), the AO has not rejected books of accounts, in case he had any doubts that the Appellant is not maintaining any books of accounts (which was mandatorily required). Further, the AO has proceeded to accept the book results by accepting the income reported by the Appellant and also by accepting the ‘cash on hand’ shown by the Appellant
Going a step further, the AO has nowhere rejected the submissions made by the Appellant that he is engaged as a distributor agent of Reliance, Bharti Airtel, Link Telecom Pvt. Ltd. and others for selling of Biscuits, Recharge and selling SIM cards and Mobile Phones in the name and style Sona Enterprise. The bank statements of the Appellant was in possession of the AO. A perusal of bank statements clearly show that subsequent to cash deposits, payments have been made to Bharti Airtel Limited & Link Telecom Pvt. Ltd. Thus, substantial sales of the Appellant were in cash as the Appellant was a distributor agent of Reliance, Bharti Airtel, Link Telecom Pvt. Ltd. It is also a fact that the RBI had allowed purchase of mobile recharge for prepaid sim cards up to Rs.500/- till 15/12/2016. Thus, the Appellant was allowed to received cash in SBNs during the demonetization period till 15/12/2016. It is further observed from the cash deposits made by the Appellant during the demonetization period, the same does not vary much when compared with corresponding periods in FY 2015-16 and 2017-18. It can be observed from the details submitted by the Appellant that the percentage of cash deposits made during the demonetization period and the corresponding periods in FYs 2015-16 and 2017-18 is as under.
09/11/2015 to 31/12/2015: 77.12% (of total cash deposits)
09/11/2016 to 31/12 31/12/2016: 81.51% (of total cash deposits)
09/11/2017 to 31/12/2017: 78.57% (of total cash deposits)
Thus, the cash deposits made during demonetization period does not vary much when compared with the corresponding periods from FY 2015-16 and 2017-18. The AO could have carried out these exercises either by calling such details from the Appellant or by obtaining relevant bank statements from the bank. The AO, however, did not make ant field enquiries and simply relied on the statement of the Appellant u/s 131 that books of accounts could not be produced now. In my considered opinion, the AO erred in not perusing the bank statements carefully and also, in not appreciating a universal truth that in the line of business of the Appellant, substantial sales are made in cash.
Thus, in view of the above discussion, I hold that the cash deposits made in the bank accounts are duly explained as being cash on hand as on 08/11/2016 (this has been accepted by the AO as well) and also out of cash sales. Thus, once the source of cash deposits is explained, any addition u/s 69A would amount to double taxation in the same hands, since the Appellant has disclosed in his return, the income arising from such cash deposits. Thus, in my considered opinion, provisions of section 69A can not be invoked in appellant’s case on account of facts as discussed hereinabove. In view of the same, addition of Rs.2.27,98,730/- made u/s 69A Ground is, thus, dismissed. is directed to be deleted.”
3.1 The findings of the Ld. CIT(A) are relevant in as much as the issue has been placed in perspective. It is seen that the Ld. AO went ahead in making the impugned addition, overlooking the fact that the allegedly doubtful receipts were very much part of the turnover of business and had been duly disclosed in the return of income. Furthermore, it is clear that the turnover etc. has not been doubted by the Ld. AO. All in all, the findings of Ld. CIT(A) are worth upholding and the addition made u/s 69A of the Act by the Ld. AO cannot be sustained. Accordingly, it is held the impugned addition has been rightly directed to be deleted.
4. In the result, the appeal filed by the Revenue is dismissed.
Order pronounced in the court on 01.01.2025
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