Case Law Details
B.K. Rajanna Vs ITO (ITAT Bangalore)
In B.K. Rajanna vs. ITO, the Bangalore ITAT addressed a dispute over cash deposits made during the demonetization period. The taxpayer, a bar and restaurant owner, deposited ₹44.83 lakh in cash, including ₹24.44 lakh in Specified Bank Notes (SBNs). The Assessing Officer (AO) held that the taxpayer was not authorized to accept SBNs after November 8, 2016, and added ₹9.50 lakh as unexplained cash under Section 68 of the Income-tax Act, subjecting it to a higher tax rate under Section 115BBE. The CIT(A) upheld this assessment, rejecting the taxpayer’s claim that the cash deposits were from legitimate business sales.
The ITAT ruled that the key issue was whether the deposited cash was generated from disclosed business sales. It noted that if the taxpayer could establish a direct link between sales revenue and the cash deposits, no additional tax should apply. The tribunal cited a Supreme Court ruling that emphasized evaluating evidence in such cases. Consequently, the matter was remanded to the AO for fresh adjudication, allowing the taxpayer to provide further evidence linking deposits to recorded business income. The appeal was allowed for statistical purposes.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal is filed by Shri B.K. Rajanna (the assessee/appellant) for the assessment year 2017-18 against the appellate order passed by the CIT(Appeals)-7, Kolkata [ld. CIT(A)] dated 24.01.2024 wherein the appeal filed by the assessee against the assessment order dated 09.12.2016 passed u/s. 143(3) of the Income-tax Act, 1961 (the Act) by the ITO, Ward 2(2)(2), Bangalore was dismissed. Therefore assessee is aggrieved with the appellate order and is in appeal before us.
2. The brief facts of the case show that assessee is an individual, who filed his return of income on 25.10.2017 at a total income of Rs.8,81,230 which is comprising of income from house property, business income and income from other sources, as assessee is carrying on business of Wine Centre Bar & Restaurant.
3. Return was picked up for scrutiny and necessary notice u/s. 143(2) and 142(1) was issued.
4. During the course of assessment proceedings, on perusal of bank statement, it was found that assessee has deposited cash of Rs.44,83,500 during the demonetisation period out of which Rs.24,44,000 is Specified Bank Notes (SBNs). The assessee
furnished necessary explanation stating that on 08.11.2016 assessee had cash in hand of Rs.14,93,698 and further as assessee is running business of Bar & Restaurant, cash was deposited out of the sale. Assessee also shown the sales recorded for that period received in cash. The ld. AO noted that as assessee is carrying on business of Bar & Restaurant, he was not authorised to collected SBNs from 08.11.2016 and therefore Rs.9,50,302 being the excess of SBNs deposited in the bank account of assessee was added u/s. 68 of the Act and charged to tax u/s. 115BBE by passing an assessment order u/s. 143(3) of the Act on 09.122019.
5. Aggrieved with the assessment order, the assessee preferred appeal before the ld. CIT(A). The contention of the assessee is that addition has been made by the ld. AO without any reason, as the cash deposit is out of sale proceeds which is already disclosed by assessee in his return of income. The ld. CIT(A) did not accept the explanation of assessee and held that assessee’s argument that SBNs of Rs.9,58,000 should be accepted as part of trade receipts even after the date of demonetisation as it is generated out of business cannot be accepted as Bar & Restaurants were not in exception category at that time to receive the above sum.
6. Assessee submitted that the order of ld. CIT(A) is not sustainable because of the reason that assessee has received the above cash on account of his business of Bar & Restaurant. The assessee has also filed his return of income where necessary income arising out of cash sale was offered for taxation, may be assessee was not legally authorised or allowed to except the cash post-demonetisation. Money is deposited in the bank account which was received as sales of Bar & Restaurant business was considered by the Bank as legal tender and granted the assessee credit for the same. If the above deposit made by assessee in the bank account post-demonetisation was not a legal tender, the assessee would not get any credit of such sum in the bank account of assessee.
7. It is the case of Assessee that if the addition is sustained in the hands of assessee account of deposit of SBNs which are already disclosed as sales turnover in his books of account and adequate margin of profit is shown therein, it would result into double taxation.
8. The ld. DR submitted that when assessee has deposited the money in bank account, he is duty bound to show the nexus of cash deposit from his business. Therefore, onus lies on the assessee to show that amount deposited in the bank account in the SBNs is the business receipt of the assessee. The ld. DR has vehemently relied upon the decision of the Hon’ble Supreme Court in 1963 2 ITJ 78 of Sreelekha Bannerjee.
9. We have carefully considered the rival contention and perused the orders of the ld Lower Authorities. We have also perused the decision of the Hon’ble Supreme Court in case of Sreelekha Bannerjee {supra} and find that in fact the Supreme Court has categorically held that the whole issue will depend in the manner in which the evidences brought by the taxpayer are viewed. The Hon’ble Supreme Court was also categorical in stating that the issue would be quite different when the assessee has maintained books of account which are accepted and there is a credit balance sufficient to cover the deposit of SBNs. All these facts would have to be examined. Thus, if in this case, the assessee establishes that the amount of cash deposit is generated out of its business, no addition deserves to be made, because the AO has accepted the book results of Bar & Restaurant business. Therefore, it is for the assessee to establish that the cash deposit by the assessee is business income, profit of which is already offered for taxation. If the assessee is able to establish that there is sales recorded in the books of accounts in cash and source of deposit is available with the assessee out of such sales, naturally no addition can be made in the hands in the Assessee. In view of this, Assessee is directed to show the above details before ld AO, which may be examined by him and then decide the issue afresh. Thus, all the grounds of appeal are restored back to the file of ld. AO.
10. In the result, the appeal filed by the assessee is allowed for statistical purposes.
Pronounced in the open court on this 19th day of December, 2024.
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