IN THE INCOME TAX APPELLATE TRIBUNAL
‘A’ BENCH : BANGALORE
BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
AND
SMT. BEENA PILLAI, JUDICIAL MEMBER
ITA No. 1121/Bang/2022
Assessment Year : 2017-18
M/s. Jwalamala Jewellers,
The Assistant
No. 17, 9th Main,
Commissioner of
36th Cross, 5th Block,
Income Tax,
Jayanagar,
Circle – 7 (2)(1),
Bangalore – 560 041.
Vs. Bengaluru.
PAN: AADFJ8948H
APPELLANT RESPONDENT
Assessee by : Smt. Suman Lunkar, CA
Revenue by : Shri K. Sankar Ganesh, JCIT DR ITAT
Date of Hearing : 12-01-2023
Date of Pronouncement : 06-03-2023
ORDER
PER BEENA PILLAI, JUDICIAL MEMBER
Present appeal is filed by assessee against order dated
24.11.2022 passed by National Faceless Appeal Centre, Delhi for
A.Y. 2017-18 on following grounds of appeal:
“1. The impugned appellate order passed by learned
Commissioner of Income-Tax (Appeals) is bad in law and is
against the principles of natural justice is required to be
quashed in toto.
2. The very succinct conclusions drawn by the learned
Commissioner of Income tax (Appeals) in a small Para 6.8
is totally against the Appellate Proceedings to be followed,
especially when the appellant had submitted detailed
written submissions which is reproduced in the Pages 8 to
12 of the Appellate Order. Such an order passed by the
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ITA No. 1121/Bang/2022
learned Commissioner of Income tax (Appeals) is totally
against the principles of law and against the established
proceedings of law is therefore required to be quashed.
3. In any case and without prejudice, the learned
Commissioner of Income tax (Appeals) has erred in
confirming the treatment of sum of Rs. 43,19,100/- as
unexplained cash credit u/s. 68 of I.T. Act, 1961 and
taxing the same under the provisions of sec. 115BBE of the
Act. On the facts and circumstances of the case and law
applicable there was no unexplained cash credit and
therefore, the treatment as given by the Learned Assessing
Officer to the sum of Rs.43,19,100/- and as confirmed by
the learned Commissioner of Income tax (Appeals) being
erroneous is to be disregard and quashed.
4. The addition as made by the learned Assessing Officer
and as confirmed by learned Commissioner of Income tax
(Appeals) are without basis and evidence and are totally
relied on assumptions and surmises and the treatment of
a sum of Rs. 43,19,100/- by the authority below being
wholly erroneous and is to be deleted.
5. The sum of Rs. 43,19,100/- was actual business sale
made by the appellant and is to be accepted as such. And
the treatment given by the authorities below is to be
deleted.
6. The learned Assessing Officer had erred in taxing sum
of Rs. 43,19,100/- under the provisions of section 115BBE
of the Act, and the learned Commissioner of Income tax
(Appeals) has erred in not considering and deciding this
ground. The levy of taxes at special rates u/s 115BBE of
the Act being erroneous is to be deleted.
7. The appellant denies to pay interest u/s 234B & C of
the IT Act, 1961. As the interest so levied being erroneous
has to be deleted.
8. In view of the above and other grounds to be adduced at
the time of hearing, it is requested that the treatment of Rs.
43,19,100/- as unexplained cash credits u/s. 68 of the
Act, be deleted, it be also held that provisions of section
115BBE of the Act, are not applicable to the facts of the
case and interest levied u/s. 234B and 234C be also
deleted.”
2. Brief facts of the case are as under:
2.1 Assessee is a partnership firm and is carrying on the
business of retail trade in gold jewellery. For year under
consideration it filed its return of income on 25.10.2017
declaring total income of Rs.62,23,150/-. The assessee has also
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ITA No. 1121/Bang/2022
maintained regular books of accounts that is subjected under
audit u/s. 44AB of the Act. For the year under consideration, the
case was selected for scrutiny under CASS for following reasons:
High value receipt of cash shown from third parties in
response data.
Large increase in unsecured loan during the year.
Large value of cash deposit during demonetization period
reported.
2.2 The Ld.AO issued statutory notices to the assessee during the
assessment proceedings and various details were filed by
assessee. The Ld.AO observed that assessee had huge cash
deposits during demonetisation period. Accordingly, details were
called for to explain the source of the same. It was submitted by
the assessee that the source of cash deposits was out of cash
sales during the month of November 2016 and assessee had
submitted bank statements, sale bill and cash book VAT 240,
audited statement, VAT 100 returns etc. The Ld.AO further
issued notice calling for the details and evidences to explain very
high sales during the month of November 2016 that amounted to
Rs.2,60,49,748/- out of which the total sales from 01.11.2016 to
08.11.2016 itself amounted to Rs.2,27,99,506/- and the sales
from 09.11.2016 to 30.11.2016 was Rs.32,50,242/-. The Ld.AO
further noted that the total sales for the month of November
amounted to Rs.2,03,67,825/- out of which cash sales with PAN
details amounted to Rs.1,60,48,725/- and cash sales without
PAN details amounted to Rs.43,19,100/-. Assessee was asked to
explain the reason why PAN details was not collected in respect of
the said sales in response to which assessee submitted that there
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ITA No. 1121/Bang/2022
was no compulsion to collect PAN as each bill was below Rs. 2
lakhs. The assessee submitted that entire turnover was
supported by bills and invoices and the purchases at stock and
sales were fully accounted for and duly vouched by assessee in
the books of accounts. The assessee further submitted that the
spurt in cash sales was due to Diwali and Dussehra festivals that
happened during the month of October, 2016 due to which the
regular purchases of gold and silver increased. The assessee
further submitted that demonetisation was announced on
08.11.2016 and circulation of SBN was banned from 09.11.2016
due to which the customers rushed to the shop of assessee and
made purchases. The Ld.AO after considering all the above
details, made addition in the hands of the assessee in respect of
the cash sales that was effectuated without PAN details
amounting to Rs.43,19,100/- u/s. 68 r.w.s. 115BBE.
2.3 Aggrieved by the order of the Ld.AO, assessee preferred
appeal before the Ld.CIT(A) who confirmed the addition made in
the assessment.
2.4 Aggrieved by the order of Ld.CIT(A), assessee is in appeal
before this Tribunal.
3. The Ld.AR before us vehemently argued that the sales are
accepted and the quantity tallies. There is no dispute with the
department that the source of cash deposits are due to cash sales
though admittedly during the demonetisation period. She
submitted that assessee cannot be put to such addition based on
any surmises and conjectures.
4. On the contrary, the Ld.DR objected the argument advanced
by the Ld.AR. The Ld.DR submitted that there is no acceptance
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ITA No. 1121/Bang/2022
by the Ld.AO regarding any sales and quantity being tallied.
Infact the authorities are doubting the genuineness of the cash
deposited to the extent of Rs.43,19,100/- for the reason that it is
not supported by any PAN details. He submitted that the
conclusion of the Ld.AO in the assessment order is pertinent
which is reproduced as under:
“As per point no. 3 noted above, no conclusive finding can
be drawn as to the source of the cash. It can either be (a)
the assessee's untaxed moneys lying with him which was
introduced in the books as cash sales or (b) it can be the
demonetised currency notes that he has accepted from
other "customers". In both the above scenarios discussed
in the Sec 68 is triggered. In (a) the genuineness of
transaction is non-existent as it was done by way of illegal
tender. And in (b), the assessee's untaxed money was
introduced into his books by way of unidentified sales.
Also, by the very nature of cash transaction, the
genuineness of the transaction cannot be established
beyond doubt.
At his juncture, it becomes pertinent again to note that the
assessee was unable to furnish the PAN identities of the
sales to the extent of Rs. 43,19,100. He has stated that the
assessee is under no obligation to maintain the identities
of the purchasers by any law. Under regular
circumstances, this office would have been satisfied even
if the assessee was unable to provide identity details of
the counterparty. But in the exceptional scenario of
demonetisation, and the exceptional highs in the
assessee's cash sales, the verification of ccunterparty
identity becomes important. With the assessee's
fantastical "cash sales", in the backdrop of
demonetisation, without identity of the counterparty, this
office is constrained to treat the transactions during the
impugned period of Rs. 43.19,100 as unexplained cash
credits to the books of accounts of the assessee.
The balance of Rs.43.19,100 treated as unexplained cash
credits to the books of accounts of the assessee within the
meaning of Sec 68 of the IT Act.
Thus, as per clause (ii) of section 115BBE(1), the business
income of the assessee is reduced by Rs.43,19,100.”
He thus supported the order passed by authorities below.
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ITA No. 1121/Bang/2022
We have perused the submissions advanced by both sides in the
light of records placed before us.
5. We note that various details furnished by the assessee in
respect of VAT returns has not been verified by the Ld.AO.
Admittedly, assessee has deposited cash of specific bank notes
during the demonetisation period. There is an explanation
offered by the assessee which is supported by various
documents. We note that the Ld.AO has not verified all the
details filed by the assessee in support of the cash deposited into
the bank account based on the Circular.
We have perused the submissions advanced by both sides in the
light of records placed before us.
6. We are of the opinion that there is a violation of natural justice
in respect of not properly verifying the details filed by the
assessee by the authorities below. Considering the fact that, in
any event, the issue would have to be remanded to the Ld.AO in
order to verify the cash deposit of Rs.43,19,100/- in specified
bank notes during the demonetisation period in its bank account
in accordance with various instructions referred to by the Ld.DR
hereinabove.
7. Admittedly, the assessee accepted the SBNs which were no
longer a legal tender and were to be explained in accordance with
the relevant circular mentioned hereinabove.
These instructions gives a hint regarding what kind of
investigation, enquiry, evidences that the assessing officer is
required to take into consideration for the purpose of assessing
such cases.
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ITA No. 1121/Bang/2022
8. In 1 of such instructions dated 09/08/2019 speaks about the
comparative analysis of cash deposits, cash sales, month wise
cash sales and cash deposits. It also provides that whether in
such cases the books of accounts have been rejected or not
where substantial evidences of vide variation be found between
these statistical analyses. Therefore, it is very important to note
that whether the case of the assessee falls into statistical
analysis, which suggests that there is a booking of sales, which is
non-existent and thereby unaccounted money of the assessee in
old currency notes (SBN) have been pumped into as unaccounted
money.
9. The instruction dated 21/02/2017 that the assessing officer
basic relevant information e.g. monthly sales summary, relevant
stock register entries and bank statement to identify cases with
preliminary suspicion of back dating of cash and is or fictitious
sales. The instruction is also suggested some indicators for
suspicion of back dating of cash else or fictitious sales where
there is an abnormal jump in the cases during the period
November to December 2016 as compared to earlier year. It also
suggests that, abnormal jump in percentage of cash trails to on
identifiable persons as compared to earlier histories will also give
some indication for suspicion. Non-availability of stock or
attempts to inflate stock by introducing fictitious purchases is
also some indication for suspicion of fictitious sales. Transfer of
deposit of cash to another account or entity, which is not in line
with the earlier history. Therefore, it is important to examine
whether the case of the assessee falls into any of the above
parameters are not.
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10. The assessee is directed to establish all relevant details to
substantiate its claim in line with the above applicable
instructions. We are aware of the fact that not every deposit
during the demonetisation period would fall under category of
unaccounted cash. However the burden is on the assessee to
establish the genuineness of the deposit in order to fall outside
the scope of unaccounted cash.
The Ld.AO shall verify all the details / evidences filed by the
assessee based on the above direction and to consider the claim
in accordance with law.
Needless to say that proper opportunity of being heard must be
granted to the assessee. The assessee may be granted physical
hearing in order to justify its claim.
Accordingly, we direct the Ld.AO to verify the cash deposited in
the light of the above circular by granting proper opportunity of
being heard to the assessee.
In the result, the appeal filed by the assessee stands allowed
for statistical purposes.
Order pronounced in the open court on 06th March, 2023.
Sd/- Sd/-
(CHANDRA POOJARI) (BEENA PILLAI)
Accountant Member Judicial Member
Bangalore,
Dated, the 06th March, 2023.
/MS /
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ITA No. 1121/Bang/2022
Copy to:
1. Appellant 2. Respondent
3. DR, ITAT, Bangalore 4. CIT
5. Guard file
By order
Assistant Registrar,
ITAT, Bangalore
