AVIAN LIFESTYLE,NEW DELHI V. .ITO WARD 29(7), NEW DELHI

ITA 52/DEL/2024

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The case involves Avian Lifestyle, a furniture trading company, which appealed against the order of the Commissioner of Income Tax (Appeals) confirming an addition of Rs. 45,49,000 to its income for the assessment year 2017-18. The addition was made under section 69A read with section 115BBE of the Income Tax Act, 1961, concerning unexplained cash deposits during the demonetization period. The company argued that these deposits were from regular business activities and provided detailed records to substantiate its claims. The Tribunal examined the submissions, including month-wise details of cash sales and deposits, and found that the company's explanations were consistent and supported by documentary evidence. Consequently, the Tribunal set aside the CIT(A)'s order and allowed the appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 29192 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: CIT vs. Kailash Jewellery House, DCIT Central Circle 29 vs. Subhash Chand Gupta, ACIT vs. Hirapanna Jewellers, ITO vs. Zee Bangels Pvt. Ltd., Karimtharuvi Tea Estate Ltd. vs. State of Kerala
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY TRIPATHI
• Assessee Lawyers: UMA UPADHYAY; CHARTERED ACCOUNTANT
• Keywords: Set aside
• Section: 142(1); 69A; 44AB

Judgement Text

" आयकर अपीलीय अिधकरण िदʟी पीठ “एस एम सी”, िदʟी ŵी िवकास अव̾थी, Ɋाियक सद˟ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC”, DELHI BEFORE SHRI VIKAS AWASTHY, JUDICIAL MEMBER आअसं.52/िदʟी/2024(िन.व. 2017-18) ITA No.52/DEL/2024 (A.Y.2017-18) Avian Lifestyle, 349, M.G. Road, Sultanpur, Delhi 110030 PAN: AAZFA-1004-H ...... अपीलाथᱮ/Appellant बनाम Vs. Income Tax Officer, Ward 29(7), New Delhi ..... ᮧितवादी/Respondent अपीलाथŎ Ȫारा/ Appellant by : Ms. Uma Upadhyay, Chartered Accountant ŮितवादीȪारा/Respondent by : Shri Sanjay Tripathi, Sr. DR सुनवाई कᳱ ितिथ/ Date of hearing : 19/09/2024 घोषणा कᳱ ितिथ/ Date of pronouncement : : 18/12/2024 आदेश/ORDER PER VIKAS AWASTHY, JM: This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi (hereinafter referred to as 'the CIT(A)') dated 19.12.2023, for assessment year 2017-18. 2. The assessee in appeal has assailed the order of CIT(A) in confirming addition of Rs.45,49,000/- u/s. 69A r.w.s 115BBE of the Income Tax Act, 1961(hereinafter referred to as ‘the Act) on account of cash deposits. 2 ITA No. 52/DEL/2024 (AY 2017-18) 3. Ms. Uma Upadhyay appearing on behalf of the assessee narrating facts of the case submitted, that the assessee is engaged in the trading of furniture. The assessee filed its return of income for AY 2017-18 declaring loss of Rs.6,78,748/-. She further stated that the Assessing Officer (AO), without considering submissions of the assessee, has passed the assessment order dated 26.12.2019. The ld. Authorized Representative (AR) placing on record copy of the screenshots from the official e-portal of the Income Tax Department pointed that the assessee had furnished reply on 27.11.2019 in response to the notice issued u/s. 142(1) of the Act. Therefore, on 10.12.2019, in response to the notice u/s. 142(1) of the Act issued on 09.09.2019 & 21.10.2019 the assessee furnished the pending details. Further, in response to the notice issued u/s. 142(1) of the Act dated 06.12.2019, the assessee furnished reply on 12.12.2019 which included the details of cash deposits, total income, cash sales, month wise cash sales, VAT returns, Bank statements, stock register, etc. The assessee furnished further details on 16.12.2019. The assessee has been consistently furnishing details as sought by the AO from time to time. The AO without referring to the details furnished by the assessee completed the assessment stating that no reply was received by the assessee in response to show-cause notice dated 24.12.2019. Explaining source of cash deposits, consistent stand of the assessee before the AO and the Tribunal is that the cash deposits are from regular business, i.e. from cash sales. The books of assessee are subject to audit, the AO without pointing any defect in books of the assessee and without rejecting the same has made addition. The assessee has time and again stated before the AO and the CIT(A) that cash deposits are from cash sales, to substantiate the assessee has furnished month wise details of cash deposits. To buttress of her submissions that where no discrepancy is pointed in 3 ITA No. 52/DEL/2024 (AY 2017-18) books of account and cash position as well as stock position as per the books have been accepted, cash sales cannot be treated as undisclosed income, the ld. AR placed reliance on the following decisions:- (i) CIT vs. Kailash Jewellery House in ITA No. 613/2010 decided on 09.04.2010; (ii) DCIT Central Circle 29 vs. Subhash Chand Gupta decided on 25.05.2023 (5) TMI 1110; and (iii) ACIT vs. Hirapanna Jewellers, 2021 (5) TMI 447 decided on 12.05.2021. 3.1. The ld. AR further submitted that the AO has invoked provisions of section 69A of the Act to make addition whereas proviso to section 69A is not attracted as cash deposits are dully recorded in the books of account. The accounts of assessee are duly audited in accordance with the provision of section 44AB of the Act. The cash deposits are duly recorded in books of account of the assessee, on the basis of said books the assessee has filed its return of income. In support of her argument she placed reliance on the decision in the case of ITO vs. Zee Bangels Pvt. Ltd. in ITA No. 815/Mum/2022. The entire assessment has been framed on surmises and conjectures without considering submissions and explanation furnished by the assessee. She asserted that the AO cannot reject the explanation furnished by the assessee without their being any contrary evidences. She further submitted that the CIT(A) in impugned order has not fully understood factual matrix. The CIT(A) in para 6.3 of the impugned order has recorded wrong finding of fact. 3.2. Without prejudice to the primary submissions, she submitted that provisions of section 115BBE of the Act were amended by the Finance Act 2016 and tax rate was increased from 30% to 60%. The second amendment to section 2016 was notified via official gazette on 15.12.2016 and was made applicable with effect from 01.04.2017 i.e. from Financial Year 2017-18 relevant to AY 2018-19. The 4 ITA No. 52/DEL/2024 (AY 2017-18) amended provisions to section 115BBE of the Act cannot be applied retrospectively. Any amendment in the Act which comes into force after the first day of April of Financial Year would apply to the assessment year of the next Financial Year, even if the assessment is actually made after the amendments came into force. To support her argument, she relied on the decision in the case of Karimtharuvi Tea Estate Ltd. vs. State of Kerala (1996) 60 ITR 262 (SC). Hence, the tax rates applicable u/s. 115BEE of the Act on the amount of addition made u/s. 68/69/69A of the Act till AY 2017-18 would be 30%. Thus, she prayed for deleting the addition. 4. Per contra, Shri Sanjay Tripathi representing the department vehemently defended the impugned order. The ld. DR submits that show-cause notice was issued to the assessee on 24.12.2019. The assessee did not furnish any details in response to the said notices. Since, the assessee failed to discharge its onus in proving source of cash deposits during demonetization, the possibility of assessee’s unaccounted money being deposited in cash during demonetization period cannot be ruled out. The amounts have been written off in the same year, the assessee should have awaited for some time before writing off to the amounts. 5. Rebutting the contentions made on behalf of the Department, the ld. AR submits that the details of advances received from customers were furnished to the AO. The details are at page 7 of the paper book and are part of books of the assessee. Further, the assessee had furnished details/source of cash deposits in the bank (details at page 197 of the paper book) and had also furnished month wise cash sales and cash deposits during Financial Year 2016-17 relevant to assessment 5 ITA No. 52/DEL/2024 (AY 2017-18) year under appeal. The details are at page 227 of the paper book. The AO has failed to take note of submissions made by the assessee. 6. Both sides heard, order of the authorities below, details furnished by the assessee and the decisions on which AR of the assessee has placed reliance considered. During demonetization period, the assessee had deposited cash amounting to Rs.45,49,000/- in his bank account maintained with HDFC Bank Ltd. The contention of the assessee is that cash deposits during the aforesaid period were out of cash sales as well as advances received from customers. To substantiate its contention the assessee has furnished month wise details of cash sales as well as cash deposits. The assessee has also given the details of customers from whom alleged cash advances were received during the relevant period. The assessee while explaining source of cash deposits has also raised question on validity of the addition made u/s. 69A of the Act. Section 69A of the Act contemplates that in any Financial Year, the assessee found to be owner of ‘any money, Bullion, Jewellery or other valuable article and such money Bullion, Jewellery or valuable article is not recorded in the books of account, if any maintained by him…………..’. The contention of the assessee is that the cash deposits in bank are duly reflected in the books and the source of same has also been explained with documentary evidence. Hence, provisions of section 69A of the Act are not attracted. 7. After examining books of the assessee, I find that in Schedule 5 to the Balance Sheet as on 31.03.2017, the assessee has given details of advances from customers aggregating to Rs.92,57,114/-. The assessee has furnished details of cash deposits in the bank on various dates between 1st April 2016 to 02nd December 6 ITA No. 52/DEL/2024 (AY 2017-18) 2016 at page no. 197 of the paper book. A perusal of the table shows that the cash deposits in the bank are from either cash sales or advances from the customers. The assessee has also given comparative analysis of cash sales during Financial Year 2015-16 & 2016-17 at page no. 226 of the paper book. The comparative details of the cash sales during Financial Year 2015-16 & 2016-17 are as under:- A Total cash sales for FY 2015-16 16,60,783 B Total cash sales from 01/04/2015 to 08/11/15 (Including Taxes) 13,68,104 C Total cash sales from 09/11/2015 to 31/12/15 (Including Taxes) 1,61,893 D Total cash sales from 01/01/2016 to 31/03/16 (Including Taxes) 1,30,786 I1 Amount received(in Cash) from debtors as Advance or against Sales 141,46,925 E Total cash sales for FY 2016-17 6,02,050 F Total cash sales from 01/04/2016 to 08/11/16 (Including Taxes) 4,34,460 G Total cash sales from 09/11/2016 to 31/12/16 (Including Taxes) 1,67,590 H Total cash sales from 01/01/2017 to 31/03/17 (Including Taxes) - I 2 Amount received(in Cash) from debtors as Advance or against Sales 108,07,701 8. A comparative analysis of above tables reveal that cash sales during Financial Year 2016-17 are less than in Financial Year 2015-16 and there has been no cash sales in Financial year 2016-17 after December 2016. The assessee has also furnished month wise details of cash sales vis-a-vis cash deposits from April 2015 to 8 November 2015 and for the same period in the following Financial Year the same are reproduced here in below:- 7 ITA No. 52/DEL/2024 (AY 2017-18) Monthwise cash sales vis a vis cash deposits from 01.04.2015 to 08.11.2015 MONTH OPENING CASH IN HAND TOTAL CASH SALES (Including Cash) TOTAL CASH DEPOSITED IN BANK TOTAL CASH WITHDREW FROM BANK CLOSING CASH IN HAND APRIL 2526188 31182 1600000 0 1538738 MAY 1538738 53054 1107000 0 813365 JUNE 813365 1150000 0 427928 JULY 427928 1171439 1600000 0 166142 AUGUST 1661442 31168 1804800 0 1462286 SEPTEMBER 1462286 37271 802000 0 2458463 OCTOBFR 2458463 338 22985500 0 672129 NOVEMBER TILL 08/11/16 672129 43652 0 0 1147661 Monthwise cash sales vis a vis cash deposits from 01.04.2016 to 08.11.2016 MONTH OPENING CASH IN HAND TOTAL CASH SALES (Including Cash) TOTAL CASH DEPOSITED IN BANK TOTAL CASH WITHDREW FROM BANK CLOSING CASH IN HAND APRIL 799755.36 258543 206840 0 2081951.36 MAY 2081951.36 69369 1056500 900000 28/2667.36 JUNE 2872667.36 35363 1015000 0 2780290.36 JULY 2780290.36 0 2648000 0 1591935.36 AUGUST 1591935.36 11250 820500 0 1830273.36 SEPTEMBFR 1830273.36 0 1049000 0 2463773.36 OCTOBER 2463773.36 54460 1102300 0 3494368.36 NOVEMBER TILL 08/11/16 3494 368.36 5475 0 0 4405593.36 9. A perusal of above details furnished by the assessee reveals that there has been consistent cash deposits in the bank. It is not a case where cash deposits were only during the period of demonetization. The cash deposits in the bank were evenly spread out during whole year. The assessee has also given details of cash 8 ITA No. 52/DEL/2024 (AY 2017-18) deposits during preceding assessment year. The assessee in the normal course of business has been depositing cash every month in the bank account. Thus the explanation furnished by the assessee cannot be rejected out rightly. The assessee has substantiated that in normal course of business, the assessee has been making cash sales and has been depositing same in bank account and has also been receiving cash advances from the customers which were also deposited to the bank account of the assessee. I find that the AO and the CIT(A) have taken a pedantic view in rejecting explanation furnished by the assessee especially when entire sales including cash sales are duly reflected by the assessee in books of account and the same has been accepted by the AO. 10. I find merit in appeal of the assessee, hence, impugned order is set aside and appeal of the assessee is allowed. Order pronounced in the open court on Wednesday the 18th day of December, 2024. Sd/- Sd/- (VIKAS AWASTHY) ᭠याियक सद᭭य/JUDICIAL MEMBER िदʟी/Delhi, ᳰदनांक/Dated 18/12/2024 NV/- 9 ITA No. 52/DEL/2024 (AY 2017-18) ᮧितिलिप अᮕेिषतCopy of the Order forwarded to : 1. अपीलाथᱮ/The Appellant , 2. ᮧितवादी/ The Respondent. 3. The PCIT 4. िवभागीय ᮧितिनिध, आय.अपी.अिध., िदʟी /DR, ITAT, िदʟी 5. गाडᭅ फाइल/Guard file. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, DELHI "