ASHOK AMRITLAL NAYAK,MUMBAI V. ITO 17(1)(2), MUMBAI

ITA 1651/MUM/2024

AI Insights

The case revolves around an appeal by Ashok Amritlal Nayak against the order of the Commissioner of Income Tax (Appeals) - National Faceless Appeal Centre, which confirmed the addition of Rs. 68,50,000 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer (AO) due to substantial cash deposits in Nayak's bank account post-demonetization, which were deemed improbable given the assessee's previous sales figures. The Tribunal, however, found that the cash sales and subsequent deposits were legitimate, supported by the assessee's maintained books and tax compliance under the Maharashtra VAT Act.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 32133 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: ACIT vs. Ms/. Heera Panna Jewellers in ITA No. 253/Viz/2020
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM KRISHN KEDIA
• Assessee Lawyers: ASHOK NAYAK; MAKING DUE ENQUIRIES SUPPLIERS; CUSTOMERS
• Keywords: Set aside
• Section: 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI “A” BENCH : MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI ANIKESH BANERJEE, JUDICIAL MEMBER ITA No. 1651/Mum/2024 Assessment Year : 2017-18 Ashok Amritlal Nayak, 103, Old Sharda Chembers No.1,Bhat Bazar, Masjid Bunder, Mumbai PAN : AAAPN7882M vs. Income Tax Officer-17(1)(2), Pratyakshakar Bhavan, Bandra Kurla Complex, Mumbai (Appellant) (Respondent) For Assessee : Shri Ashok Nayak For Revenue : Shri Ram Krishn Kedia, Sr.DR Date of Hearing : 05-02-2025 Date of Pronouncement : 05-02-2025 O R D E R PER B.R. BASKARAN, A.M : The assessee has filed this appeal challenging the order dt.23-02-2024 passed by the Ld. Commissioner of Income Tax (Appeals)-National Faceless Appeal Centre (NFAC), Delhi [„Ld.CIT(A)‟] and it relates to AY. 2017-18. The assessee is aggrieved by the decision of the Ld.CIT(A) in confirming the addition of Rs. 68,50,000/- made by the AO as un-explained cash credit u/s. 68 of the Income Tax Act, 1961 („the Act‟). 2. Since the authorized representative was not well, the assessee himself appeared in person. 2 ITA No. 1651/Mum/2024 3. The facts relating to the case are stated in brief. The assessee is a proprietor of M/s. Poonam enterprises, which is engaged in the business and distribution of cosmetic products/consumer goods. The assessee filed his return of income for the year under consideration declaring total income of Rs. 41,84,810/-. The AO took up the same for scrutiny, mainly for the reason that the assessee has deposited into his bank account during the demonetization period. During the course of assessment proceedings, it was noticed that the assessee has deposited cashof Rs. 68,50,000/- in his bank account after the announcement of demonetization. The assessee claimed that the cash was deposited out of the cash available in his business books, which, in turn, was generated through the cash sales made by him the period from 1st November to 8th November, 2016, i.e., till the date of announcement of demonetization. From the Books of Account, the AO noticed that the cash sales of Rs. 70.63 lakhs were madein three dates i.e., 06-11-2019 to 08-11-2019. The AO noticed that the cash sales made during the corresponding period of the preceding year was only Rs. 31,109/-. The AO also noticed that the cash sales made by the assessee from 1st April, 2016 to October, 2016 was only Rs. 3,64,722/-. Accordingly, the AO took the view that it is highly improbable that the assessee had made cash sales of such a magnitude in just three days before the declaration of demonetization by the Government. Accordingly, the AO took the view that the cash depositsof Rs. 68.50 lakhs made by the assessee represents un-explained cash credit and assessed the same u/s. 68 of the Act. The Ld.CIT(A) also confirmed the addition, holding that the cash sales shown by the assessee is not at all acceptable as genuine. 4. We heard the parties and perused the record. First of all, we notice that the AO has not rejected the Books of Account. There is no dispute with regard to the fact that all the cash sales shown by the assessee prior to demonetization period has been duly accounted for in the books of accounts. We notice that the Ld CIT(A) has extracted the 3 ITA No. 1651/Mum/2024 cash sales ledger account in his order. The assessee has stated that all the sales made by him have been duly reported under „Maharashtra VAT Act‟. The assessee further submitted that he had collected the VAT on the cash sales so affected and it has also been duly paid to Maharashtra Government. He also submitted that the return of sales filed before the MVAT Act has also been accepted by the concerned authorities. Under these set of facts, we are of the view that there is no reason to suspect the cash sales recorded by the assessee. 5. Further, a perusal of the Profit & Loss Account would show that the assessee was having opening stock of Rs. 1.33 crores; made purchases of Rs. 28.35 crores during the year under consideration and after making sales of Rs. 28.26 crores, the assessee was holding closing stock of Rs. 2.19 crores as on 31-03-2017. The assessee submitted that he was holding sufficient stock during the relevant period and hence he could make cash sales to the tune of around Rs.70 lakhs. Even after making these cash sales, still he was having stock. We notice thatthe AO has not doubted the opening stock available with the assessee and purchases made during the year, meaning thereby the availability of stock with the assessee as on 31-10-2016 could not have been doubted with. 6. We noticed earlier that the cash sales made by the assessee in the first week of November, 2016 cannot be doubted with. We noticed that the tax authorities have doubted the cash sales, only for the reason that the cash sales of the corresponding period of the preceding year and also the cash sales affected during the first seven months of the financial year were very less. In our view, the tax authorities could not have disbelieved the cash sales on suspicion alone. In our view, the above said pattern noticed by the AO should trigger him to probe the matter further. In that case, it is the duty of the AO to examine the correctness or otherwise of the purchases and sales affected by the assessee by making due enquiries with suppliers and customers. 4 ITA No. 1651/Mum/2024 However, in the instant case, the AO did not carry out any investigation to find out the credibility of purchases and sales shown by the assessee. Further, as noticed earlier, the AO also did not reject the Books of Account. Accordingly, after having accepted the Books of Account, in our view, the AO was justified in rejecting the submissions of the assessee that the impugned cash deposits have been made out of the cash available in the Books of Account, which in turn, was generated out of the cash sales. Since the facts prevailing in this case would show that the impugned cash deposits have been made out of cash balance available in the books of account, in our view, there is no reason to suspect the nature and source of deposits made into the bank account of the assessee. Accordingly, he was not justified in makingaddition u/s. 68 of the Act. The assessee also placed reliance on the decision rendered by the Visakhapatnam Bench of the Tribunal in the case of ACIT vs. Ms/. Heera Panna Jewellers in ITA No. 253/Viz/2020, dt. 12- 05-2021,wherein identical view has been expressed by the Visakhapatnam Bench of the Tribunal. 7. Accordingly, we set aside the order passed by the Ld.CIT(A) on this issue and direct the AO to delete the addition of Rs. 68.50 lakhs made by him as un-explained cash deposits u/s. 68 of the Act. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 05-02-2025 Sd/- Sd/- [ANIKESH BANERJEE] [B.R. BASKARAN] JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated: 05-02-2025 TNMM 5 ITA No. 1651/Mum/2024 Copy to : 1) The Appellant 2) The Respondent 3) The CIT concerned 4) The D.R, ITAT, Mumbai 5) Guard file By Order Dy./Asst. Registrar I.T.A.T, Mumbai "