Back
2024 Supreme(Online)(ITAT) 1316
INCOME TAX APPELLATE TRIBUNAL (KOLKATA BENCH)
Shri Rajpal Yadav, VP, Dr. Manish Borad, AM
Maa Sharada Enterprise – Appellant
Versus
Income Tax Officer – Respondent
I.T.A. No. 586/KOL/2024
For the Appellants/Petitioners: Shri Giridhar Dhelia
For the Respondents: Shri Kapil Mondal
The Tribunal ruled that cash sales recorded in accounts negate the presumption of unexplained income under the Income Tax Act, affirming the necessity of coherent evidence in taxation.
Headnote:(A) Income Tax Act, 1961 - Section 69A - Addition of unexplained money - Assessee's deposits of Rs.1,29,23,200/- during demonetization period were deemed unexplained by the Assessing Officer due to lack of adequate evidence. The tribunal ruled that recorded cash sales and prior deposits establish legitimacy, leading to deletion of addition. (Paras 4, 12)
(B) Appeal process - It was determined that statutory notice issued without proper jurisdiction did not affect the ruling concerning the addition of unexplained money as the merits supported the appellant's position. (Paras 17)
Facts of the case:
The assessee claimed to have a total sales of Rs.48,79,27,027/- for A.Y. 2017-18, depositing Rs.1,29,23,200/- in bank during demonetization. The Assessing Officer deemed this amount as unexplained due to insufficient explanation regarding the source. The assessee contested the addition, asserting legitimate business operations.
Findings of Court:
The Tribunal found the Assessing Officer’s rejection of the deposits arbitrary and concluded the assessee's explanations were plausible, lacking proper basis for the addition made.
Issues: The main issue was whether the deposits of Rs.1,29,23,200/- could be classified as unexplained income under Section 69A. The Tribunal focused on prior recorded sales as credible evidence.
Ratio Decidendi: The Tribunal held that unexplained money under Section 69A cannot apply if cash sales produced adequate records and demonstrated legitimacy. It also disregarded jurisdictional objections due to the substantive merits of the case.
Result: Appeal allowed.
| Table of Content |
|---|
| 1. the assessment focused on unexplained deposits during demonetization. (Para 1 , 3 , 4) |
| 2. court's examination of evidence supporting cash deposits. (Para 5 , 10 , 12) |
| 3. arguments presented by the assess counsel regarding cash sales. (Para 6 , 8) |
| 4. standards for determining unexplained money under the income tax act. (Para 7 , 11) |
| 5. overall court decision on the merits of the case. (Para 13 , 14 , 17) |
ORDER
Per Rajpal Yadav, Vice-President (KZ):-
The present appeal is directed at the instance of assessee against the order of ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dated 26th January, 2024 passed for Assessment Year 2017-18.
2. The assessee has pleaded four grounds of appeal at Serial No. 10 of Form 36. Out of these four grounds of appeal, Grounds No. 1 & 4 are general grounds, which do not call for recording of any specific finding.
3. In Ground No. 2, the assessee has pleaded that ld. CIT(Appeals) has erred in confirming the addition of Rs.1,29,23,200/- under section 69A of the Income Tax Act, 1961 , which was added by the ld. Assessing Officer as unexplained money.
4. Brief facts of the case are that the assessee has filed its return for A.Y. 2017-18 on 13.11.2017 declaring total income of Rs.23,83,240/-. According to the ld. Assessing Officer, the case of the assessee was selected for scrutiny under CASS and a notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the ld. Assessing Officer that during demonetization period between 8th November to 31st December, 2016, the assessee has deposited a sum of Rs.1,29,23,200/- in two Bank accounts, namely (i) Axis Bank, New Barrackpore Branch Current Account Rs.1,19,30,000/- and (ii) HDFC Bank, Madhyamgram Branch Current Account Rs.9,93,200/-. The ld. Assessing Officer has directed the assessee to explain the source of such deposits and as to how it should not be treated as unexplained money under section 69A of the Income Tax Act. The assessee has submitted requisite details, but ld. Assessing Officer did not discuss them. He made the addition of the above amount by recording following finding:-
“In this regard, notice u/s 142(1) was sent to the assessee on different dates and was served upon the assessee via e mail and speed post and he was requested to explain the source of the above money but the assessee submitted some documents in favour of his financial results but he did not specifically mention the nature and source of the amount of Rs. 129232007- that has been deposited in demonetized currency after 08/11/2016 in his bank accounts. However, in the replies filed the assessee claimed that the cash deposits in the bank accounts were from his sale proceeds.
Having said that, the assessee did not file his books of accounts as well the names of the persons from whom such amount has been received. As such he was requested to show cause vide notice dated 16/12/2019 as to why the amount of Rs. 12923200/- would not be added back to his income as unexplained money u/s 69A of the Income tax act, 1961 and taxed u/s 115BBE since the source and nature of acquisition of the money remains unexplained. He was requested to substantiate the deposits by production of appropriate documentary evidence.
In response to the said notice, the assessee only said via the e proceeding module that all the deposits were from sales turnover. The assessee did not mention as to whether the sales was effected before or after 08/11/2016. Because after 08/11/2016, when the legal tender of currency notes of denominations Rs. 500 and Rs. 1000/- was withdrawn, it is illogical that anybody will accept a “piece of paper” in return of goods sold. Also, the assessee could not furnish his books of accounts to show that the said amount was recorded in his books of account maintained for the FY 2016 -17 and also failed to substantiate how the amount accumulated in his hands.
To explain the source of a depos
