Case Law Details
Gaurangi Merchandise Pvt. Ltd. Vs ITO (ITAT Delhi)
In the case of Gaurangi Merchandise Pvt. Ltd. Vs ITO for Assessment Year 2017-18, the Income Tax Appellate Tribunal (ITAT), Delhi, addressed the issue of unexplained cash deposits made by the assessee during the demonetization period. The assessee had made cash deposits amounting to ₹30.18 lakhs between November 29, 2016, and December 14, 2016. These deposits were treated as unexplained cash credits by the assessing authorities, and the addition was made under Section 68 of the Income Tax Act, 1961, subject to tax at 60% under Section 115BBE.
Both parties presented their arguments, with the assessee contending that the cash deposits were sourced from its textile trading business, specifically from sales outside the books of accounts. The assessee’s gross receipts from the business were ₹34.72 lakhs, with a net profit of ₹1.32 lakhs. However, the department argued that the cash deposits were unexplained, thus subject to taxation under Section 68. While the assessing authority did not dispute the business activity of the assessee, they found that the cash deposits could not be fully explained or substantiated by the assessee.
After reviewing the facts, the ITAT concluded that while the assessee failed to provide adequate evidence to support its claim that the deposits were from unaccounted sales, it was plausible that some part of the cash deposits might be from the business’s retail sales. Considering the circumstances, the ITAT decided to limit the addition to ₹10 lakhs, granting a relief of ₹20.18 lakhs to the assessee. The tribunal clarified that this decision should not be treated as a precedent, and necessary adjustments would be made as per the law.
The appeal was allowed in these terms, providing partial relief to the assessee while upholding the general principle of taxation on unexplained deposits during the demonetization period.
FULL TEXT OF THE ORDER OF ITAT DELHI
This assessee’ s appeal for Assessment Year 2017-18, arises against the order of CIT( A)/ NFAC, Delhi dated 06.01 .2024 in case No. ITBA/NFAC/ S/250/2023-24/1059438490(1) in proceedings u/ s 143 (3) of the Income Tax Act, 1961 ( in short “The Act”).
2. Heard both parties at Case files perused.
3. It is emerges during the course of hearing that both the learned lower authorities have added the assessee’ s cash deposits made during demonetization amounting to 30.18 lacs on various instances from 29.11.2016 to 14. 12.2016 as its unexplained cash credits u/s 68 liable to be assessed u/s 115BBE @ 60%.
4. Both the learned representatives reiterate their respective submission against and in support of the impugned addition. I noticed in this factual background that even learned assessing authority is fair enough in not disputing the crucial fact that the appellant herein is engaged in textile trading business having gross receipts of 34 ,72,380 /- and NP of Rs. 1,32,631/-.
5. Coming to the sole substantive issue of correctness of the impugned addition herein, it is sourced its entire purchase of 33 ,09,890 /- from M/ s Aggarwal Enterprises. Meaning thereby that even if the assessee’s said claim is termed as a mere accommodation entry, the department could not rebut its case that it had also made textile retail sales thereof which could be taken as source of the impugned cash deposits. Be that as it may, it is noticed that neither the assessee has been able to support its case to the satisfaction of the learned lower authorities that the cash deposits are in fact its sales outside books of account nor the department could controvert the assessee to have been engaged in textile trading business activities wherein such sales outside books could not all together ruled out. It is in these peculiar facts of the case that it is deem it appropriate to restrict the impugned addition of Rs. 30.18 lacs to a sump sum figure of Rs. 10 lacs only with a rider that the same shall not be treat as precedent. The assessee gets relief of Rs. 20.18 lacs in other words. Necessary computation shall follow as per law.
This assessee’ s appeal is allowed in above terms. Order Pronounced in the Open Court on 21 /11/2023.
Author Bio
