Ahmedabad ITAT upholds CIT(A) order deleting the addition of Rs. 86.75 Cr under Section 69A as Assessee’s unexplained income; Holds that the cash deposited in bank account cannot be treated as unexplained as the Revenue himself in the remand report and on verification accepted that the entire cash deposited was accounted for as sales in the books of the Assessee; Assessee-Individual, engaged in the business of trading in gold and silver on wholesale basis, deposited cash of Rs. 86.75 Cr in his current account maintained in a bank account at Jalgaon; During the course of Assessment, Revenue noted that the said bank account in Jalgaon was not disclosed in the Balance Sheet and that the sale invoices were issued to customers in Gujarat and not in Maharashtra; Assessee explained that all the cash deposits in Jalgaon bank account is transferred to the Axis Bank account held in Ahmedabad and the entire amount of deposit is duly reflected in Assessee’s sales account; CIT(A) admitted the additional evidence submitted by the Assessee and deleted the entire addition, against which the Revenue preferred the present appeal; ITAT notes that the Assessee filed additional evidence in the form of revised Balance Sheet and Profit and Loss Account incorporating the Jalgoan Bank account wherein the cash in question was deposited which was not included in the financial statements furnished to the Revenue; Notes Assessee’s submission that the cash deposited in the Jalgaon bank account was transferred to the Ahmedabad bank account and the same was duly accounted for in Assessee’s books; Further notes Assessee’s explanation for non-disclosure of the Jalgaon bank account initially, since all transactions of the Jalgaon account were reflected Ahmedabad bank account, he inadvertently missed out on accounting for the Jalgaon bank account transactions in its books of account; Concurs with CIT(A)’s view that the Assessee had adduced reasonable cause for not filing the revised financial statements during the assessment proceedings and finds no infirmity in CIT(A) order admitting the said additional evidence; Observes that even if additional evidence was not admitted it would not have made any material difference to the factum of cash deposits being explained or not; Notes that the Revenue in its remand report, categorically admitted that all the cash deposited in the Jalgaon bank account are reflected in the Ahmedabad bank account and that the same stands explained; Further notes that the Revenue accepted Assessee’s explanation for the cash deposits of Rs. 77.02 Cr; Rejects Revenue’s contention as regards the remaining amount of deposits, i.e. Rs. 9.72 Cr that the sales invoices for the said amount does not corroborate Assessee’s claim that the sales were made outside the Gujarat, as the invoices were raised for clients in Gujarat, finding no merit therein; Observes that the all cash deposit in Jalgaon bank account was already accounted for as income by way of sales in Assessee’s books of account and the sales and purchases made was shown to tally quantitatively; Thus holds that the any portion of the cash deposits cannot be treated as Assessee’s unexplained income and dismisses Revenue’s appeal. [In favour of assessee] (Related Assessment year : 2012-13) – [ITO v. Rajeshkumar Chhanalal Patel – Date of Judgement : 21.04.2023 (ITAT Ahmedabad)]
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Present appeal has been filed by the Revenue against order passed by the ld. Commissioner of Income Tax (Appeals)-10, Ahmedabad [hereinafter referred to as “Ld.CIT(A)”]dated 21.06.2016 under section 250(6) for the Asst.Year 2012-13.
2. The grounds raised by the Revenue are as under:
(1) That the CIT(A) has erred in law and on facts in deleting addition of Rs.86,75,00,000/- made by the AO on account of unexplained money u/s 69A of the Act.
(2) That the CIT(A) has erred in law and on facts by accepting the additional grounds under Rule 46(A) of the I.T. Rules, 1962 since the assessee was given enough opportunities to furnish all evidences during assessment proceedings and the AO had also strongly opposed it in his remand report.
(3) That the CIT(A) has erred in law and on facts by accepting the Revised Audit Report of the assessee dated 21-06-2016 furnished before him during the course of appeal proceedings.
(4) That in view of the above grounds, the order of the Id. CIT(A) is perverse in law.”
3. At the outset, it was pointed out that the solitary issue in the present appeal related to addition of cash deposited in the bank account of the assessee amounting to Rs.86.75 crores remaining unexplained, which was deleted entirely by the ld.CIT(A).
4. The facts leading to the addition being that the assessee was engaged in the business of trading in gold and silver on wholesale basis and during assessment proceedings it was found that there were cash deposits in its current account maintained with M/s. Prakashchand Jain Nagrik Sahakari Patsanstha Maryadit, Jalgoan, amounting to Rs.86.75 crores. On being asked to explain the same, the assessee contended that the entire cash deposits related to that received on account of cash sales made by the assessee to its customers in and around Jalgaon, of bullion sold . It was contended that the entire such sales had been duly reflected in its sales account. The assessee submitted sales bills, tax invoices and statement of AXIS Bank, but did not submit names and PAN of the customers. Further, the AO noticed from the bills of bullion submitted that the invoices had been issued to the customers not in Jalgaon, Maharashtra, but in Gujarat State i.e. at Patan, Rajkot, Vadodara, Dhinoj, Mehsana, Vijapur, Bharuch, Paldra, Umreth etc. Further, he noted that this bank account of the assessee was not disclosed in its balance sheet also. Therefore, he issued show cause notice to the assessee as to why the cash so deposited in this bank account be not treated as unexplained. To this show cause notice, a detailed reply was filed by the assessee, which is reproduced in the assessment order, wherein the assessee explained that the cash deposited in this bank account in Jalgaon was not unaccounted, but as per the modus operandi adopted by the assessee, this cash deposited in the bank account at Jalgoan was immediately transferred to the assessee’s bank account in AXIS Bank at Ahmedabad, and thereafter invoices were issued to the customers. It was explained by the assessee that being in the business of bullion trade, it had customers outside Gujarat also, from whom trading was done only after receipt of the consideration, which was given in cash. All cash so collected, from and around Jalgoan, was deposited in the bank account at Jalgaon, from where the amounts were transferred to the assessee’s bank account in AXIS Bank in Ahmedabad and after transferring to the bank account in Ahmedabad, the invoices were issued to the customers. The assessee explained that all the transactions with the AXIS Bank had been accounted for in the books of accounts and the receipts were treated as sales, so there was no question of any amount deposited in the Jalgaon bank account being unaccounted in itsbooks. A detailed reconciliation of the Jalgoan bank account and the bank account of the assessee in AXIS Bank was filed explaining each and every entry. Further, the invoices raised subsequently on receipt of these amounts from Jalgoan were also produced before the AO; the stock records were also produced and purchases &sales quantity were tallied to the AO. The assessee admitted that due to oversight the bank account at Jalgoan bank was missed to be accounted for in its books of accounts, and at the same time stated that since all the cash deposits therein had been transferred to the AXIS bank account, the non consideration of the Bank account at Jalgaon did not have much impact on the financial statement of the assessee. The AO however did not accept this contention of the assessee, stating that none of the invoices showed sale of bullion to the customers of Jalgaon nor was there any delivery challan showing receipts by customers outside the Gujarat and in fact all the invoices produced showed the names of the customers from Gujarat only. He accordingly held that the assessee has failed to establish that the cash deposits in its books of accounts at Jalgaon related to the business transaction carried out from the Ahmedabad Office and he treated the entire cash deposits as unexplained money in terms of section 69A of the Act adding a sum of Rs.86.75 crores accordingly to the income of the assessee.
5. The matter was carried in appeal before the ld.CIT(A) where the assessee reiterated the contentions madebefore the AO and also filed a revised balance sheet incorporating the bank account at Jalgoan, as additional evidence before the ld.CIT(A). He further pointed out that after incorporating the bank account, there was no difference in the balances of assets and liabilities of the assessee except for a minor difference on account of interest earned from the said bank account amounting to Rs.13,376/-.
6. The ld. CIT(A) forwarded the assessee’s submissions, and additional evidences to the AO for his comments, who objected to the admission of additional evidences, and also reiterated his finding in the assessment order. He also examined the cash deposited in the bank account at Jalgoan and noted that all the cash deposited therein tallied with the bank account of AXIS Bank. He further pointed out that on examining invoices produced before him, it was found that invoices totaling to Rs.9,73,86,041/- were in the name of customers from Gujarat only, and since these invoices were not in conformity with the explanation of the assessee that the assessee’s cash deposits was on account of sales made on account of customers outside the Gujarat, therefore, he stated in the remand report, that the addition to the tune of Rs.9,73,86,041/- out of addition of Rs.86.75 crores needed to be sustained. The ld.CIT(A) noted that non-inclusion of bank account of Jalgaon was an inadvertent error on the part of the assessee, and therefore, the revised balance sheet now produced by the assessee incorporating such bank account could not have been produced before the AO. He noted therefore that there was a sufficient cause preventing the assessee from filing evidences before the AO, and accordingly admitted the additional evidences for adjudication of the issue. Further, he forwarded the AO’s remand report to the assessee who contended that since admittedly as perthe AO also entire cash deposited in the bank account at Jalgoan was reflected in the AXIS Bank account and which entries were included/treated/accounted for as sales in the books of the assessee, therefore there was no question for treating such cash deposits in the bank account at Jalgoan as unexplained. The ld.CIT(A) finding merit in the contention of the assessee, deleted the entire addition made.
7. Aggrieved by the same, the Department has come in appeal before us, challenging both the admission of additional evidences by the ld.CIT(A),and also deletion of entire addition of Rs.86.75 crores on account of cash deposited in the bank account of the assessee found to be unexplained by the AO.
8. We have heard both the parties. We have also gone through the order of the AO and the ld.CIT(A).
9. Before dealing on merits the grievance of the Revenue relating to the cash deposits in the bank account of the assessee in Jalgaon of Rs.86.75 Crs being treated as explained by the Ld.CIT(A), we shall first deal with the grounds raised by the department objecting to the admission by the Ld.CIT(A) of the additional evidences filed by the assessee, which are raised in ground nos.2 and 3 above.
Admittedly, the only additional evidence filed by the assessee is revised balance sheetand profit& loss account incorporating the assessee’s bank account in Jalgoan wherein the cash of Rs.86.75 crores was found deposited and which was not included in the financial statements furnished to the AO.
10. The findings of the ld.CIT(A) admitting the additional evidence, at para 5.1 of his order is as under:
“5.1 The AO has objected to the admlssibility of additional evidences on the ground that there was no sufficient cause which prevented the assessee to furnish the same evidences during the course of assessment proceedings. It has been submitted by the appellant that the bank account at Jalgaon was inadvertently not shown in his account due to bona fide error of omission. However, the bank account with Axis Bank is duly reflected in the account. The AO also verified the amounts which have been deposited in the bank account of Jalgaon and subsequently transferred to the bank account at Axis Bank, Ahmedabad. Since there was an inadvertent error in not including the bank account at Jalgaon in the return of income filed by the assess evidences which have been produced by the appellant in the appeal proceedings not have been produced before the AO. Therefore, there is a sufficient cause which prevented the appellant in filing these evidences before the AO. In any case, the additional evidences filed by the appellant have been forwarded to the AO and the AO who has tallied all the entries in the bank account and has given a finding that since the cash deposited has been explained, no adverse view may be taken.
11. We do not find any infirmity in the order of the Ld. CIT(A) admitting the additional evidence filed by the assessee of its revised financial statements incorporating the Jalgaon Bank account. The assesses explanation that the cash deposited in the Jalgaon bank account was transferred to the Axis Bank account of the assessee in Ahmedabad, which was duly accounted for in the Books of the assessee as Sales ,was verified by the AO in remand proceedings and found to be correct. The Ld. CIT(A) has noted this fact and it is also corroborated from the contents of the AO’s remand report reproduced in the Ld. CIT(A)’s order as under:
“5. The assessee has submitted revised tax audit report and also submitted reconciliation statement of M/s. Prakashchand Jain Nagarik Sahakari Patsanstha Mariyadit, Jalgaon, with statement of Axis Bank, Ahmedabad. On going through the statement of M/s. Prakashchand Jain Nagarik Sahakari Patsanstha Manyadit, Jalgaon, all the entry of cash deposited by the assessee is tallied with the bank statement of Axis Bank, Ahmedabad. Since the cash deposited has been explained, no adverse view may be taken.”
Since all transactions of the Jalgaon account were reflected so in the Axis Bank account of the assessee, it was the assesses contention that therefore the assessee inadvertently missed out on accounting for the Jalgaon Bank account transactions in its Books and therefore filed revised Financial statements to the Ld.CIT(A) incorporating the transactions in the Jalgaon Bank account .
12. We agree with the Ld. CIT(A) that the assessee had adduced reasonable cause for not filing the revised financial statements during assessment proceedings . And accordingly, we hold, that the Ld. CIT(A) had rightly admitted the said additional evidence for adjudication.
13. Even otherwise, since admittedly all the transactions in the Jalgoan bank accounts were reflected in the AXIS bank account of the assessee which was accounted for in the books of the assessee, non-inclusion of Jalgoan bank account in its financial statements did not have any material consequence as such. Therefore, even if additional evidence in the form of revised balance sheet incorporating the Jalgoan Bank account were not admitted for adjudication, as per the AO’s case also, it would not have any material difference to the factum of the cash deposits being explained or not. The AO in the remand report has categorically admitted that all the cash deposited in the Jalgaon bank are reflected in the AXIS Bank account, and that they stand explained and no adverse view be taken.
Therefore, in our view, the ld. CIT(A) has rightly admitted additional evidences of the revised balance sheet submitted by the assessee, and even if it was not admitted by him, it would not have made any material difference to the adjudication of the issue at hand regarding source of cash deposited in the bank account at Jalgoan bank account.
14. Now reverting to the ground no.1 raised by the department, agitating deletion of addition made by the AO of the cash deposited in the bank account of the assessee of Rs.86.75 crs, the ld. CIT(A) deleted the same holding at para 6.1 of his order as under:
“6.1 The submissions of the appellant were perused. All the sales affected by the appellant during the year have been verified by the AO which were deposited in cash by the appellant in his bank account and the same were thereafter transferred to the bank account of the assessee in Ahmedabad. The AO has tallied the same and has been given a finding that it completely tallies with the books of account of the assessee as well as the bank account and no adverse view should be taken. Once the AO has verified all the sales and the same has been duly recorded in the revised audited books of account, it is immaterial whether the complete names and address of the customers are are therein in the invoices or not. It is not the case of the AO that the sales to the extent of Rs.9,73,86,041- has not been recorded in the books of account of the appellant. The AO’ case is that the sales invoices produced by the appellant shown the address of Gujarat whereas the appellant has claimed that he has made the sales in the Jalgaon and nearby areas. The discrepancy in the name and address of the invoices would not be material if the cash sales are duly recorded and reflected in the books of account of the appellant. It is not the case of the AO that the assessee has indulged in sales outside the books or the sales of the assessee are not reflected in the books of account of the assessee. Therefore, there is no force in the additions proposed by the AO in the Remand Report and the same cannot be upheld. Therefore, the addition suggested and proposed by the AO cannot be made in this case and the same is deleted. This ground of appeal is allowed.”
15. As is evident from the above, the ld.CIT(A) has based his decision on certain factual finding being; that the AO himself had verified that cash deposited by the assessee in his bank account at Jalgoan was transferred to the assessee’s bank account in Ahmedabad in AXIS bank and accounted for as sales in its books. The AO had verified all entries in remand proceedings and had given a finding that it completely tallied and also stated that no adverse view be taken. This factual finding of the ld. CIT(A), we find, is derived from remand report of the AO, contents of which have been reproduced above. The ld. DR has been unable to controvert the same before us. In view of the same, we see no reason to interfere in the order of the ld. CIT(A) deleting entire addition of Rs.86.75 crores, noting that the AO himself was satisfied that the cash deposited in the bank account at Jalgoan was reflected as sales in the books of the assessee.
16. Even otherwise we find that the AO in his remand report had accepted the assesses explanation for the entire cash deposits of Rs.86.75 Crs except that relating to cash deposits of Rs. 9.73 Crs. Therefore to the extent cash deposits were accepted by the AO as explained, of Rs.77.02(86.75 – 9.73),there can be no grievance of the Revenue now before us.
17. As for the cash deposits not accepted as explained by the AO, his contention we find is that the invoices of the sales made in Jalgaon produced by the assessee did not corroborate the explanation of the assessee that the sales were made outside the Gujarat, since the invoices to the extent of Rs.9.73 crores were raised for clients in Gujarat. We agree with the ld. CIT(A)that this argument merits no consideration.
The case of the Revenue is that the cash deposit of Rs.9.73 Crs in Jalgaon bank account, which apparently does not conform to the assesses explanation of being cash sales outside Gujarat, is unaccounted income of the assessee. But the fact of the matter is that all cash deposit in Jalgaon bank account was already accounted for as income by the assessee by way of sales in its Books of accounts and the sales and purchases made by the assessee was shown to tally quantitatively to the Revenue authorities. The AO found no infirmity in the quantitative tally.
In the light of the same, with all the cash deposits in the Jalgaon Bank account of the assessee admittedly treated as sales by the assessee and the sales and purchases found to tally quantitatively also, there cannot be any case for treating any portion of the cash deposits as unexplained income of the assessee.
18. In view of the above, we uphold the order of the ld. CIT(A) deleting the entire addition of Rs.86.75 crores made under section 69A of the Act and grounds of the appeal raised by the Revenue are dismissed.
19. In the result, appeal of the Revenue is dismissed.
Order pronounced in the Court on 21st April, 2023 at Ahmedabad.