BHAKKAR MARBLES PRIVATE LIMITED,NEW DELHI V. ITO, WARD 4(4), NEW DELHI

ITA 3521/DEL/2023

AI Insights

The case involves Bhakkar Marbles Private Limited, which appealed against the order of the Commissioner of Income Tax (Appeals) that upheld the addition of Rs.63,37,500 as unexplained cash credit under section 68 of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer, who doubted the genuineness of sales recorded during October and November 2016, a period coinciding with demonetization in India. The Tribunal examined whether the sales were non-genuine and if the taxability of such sales under section 68 was justified. The Tribunal concluded that the additions were not supported by sufficient evidence and thus ruled in favor of the appellant.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 22838 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: Ramesh Kochar, ITA No. 171/Del/2022 dated 26.04.2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRATIBHA MEENA
• Assessee Lawyers: T.N. SINGLA
• Keywords: Set aside; Business income; Unexplained cash credit; Principle of natural justice; Bogus
• Section: 68

Judgement Text

" 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER AND SHRI AVDHESH KUMAR MISHRA, ACCOUNTANT MEMBER ITA No.3521/Del/2023, A.Y. 2017-18 Bhakkar Marbles Private Limited 32, Bank Enclave, Mansarover Garden, New Delhi PAN: AADCM7497H Vs. Income Tax Officer, Ward-4(4), New Delhi (Appellant) (Respondent) Appellant by Sh. T. N. Singla, CA Respondent by Ms. Pratibha Meena, Sr. DR Date of Hearing 13/01/2025 Date of Pronouncement 29/01/2025 ORDER PER AVDHESH KUMAR MISHRA, AM This appeal for the Assessment Year (hereinafter, the ‘AY’) 2017- 18 filed by the Assessee is directed against the order dated 02.11.2023 passed by the Commissioner of Income Tax (Appeal), NFAC, Delhi [hereinafter, the ‘CIT(A)’]. 2. Following grounds have been raised in this appeal: “1. That the order of Ld. CIT(A) is bad and against the facts and law. 2. That the ld. CIT(A) has wrongly upheld the addition made by the learned assessing officer amounting to Rs.63,37,500/- u/s 68 of the Act. ITA No.3521/Del/2023 Bhakkar Marbles Pvt. Ltd. 2 3. That the ld. CIT(A) has wrongly upheld genuine sales of Rs. 63,37,500/- as unaccounted cash credit u/s 68 of Income Tax Act to levy tax at higher rate. 4. The ld. CIT(A) has not passed speaking order about the higher tax rate of 60% u/s 115BBE wrongly applied by the learned assessing officer on the addition confirmed by CIT(A) on the addition confirmed by CIT(A) on account of cash deposited by the appellant out of its sales proceeds u/s 68 of the Act. 5. That the Ld. CIT(A) has wrongly upheld the addition made by the learned assessing officer amounting to Rs.63,37,500/- ignoring the documentary evidences filed by the appellant during the appellate proceedings. 6. That the CIT(A) wrongly upheld additions made by AO amounting to Rs.63,37,500/- on account of cash deposit of sales in the bank account of the appellant during November, 2016 without any justification and against the principles of natural justice. 7. That the Ld. CIT(A) wrongly upheld the addition made by the learned assessing officer on surmises and conjectures without any justification. 8. That the ld. CIT(A) wrongly upheld the addition made by the learned assessing officer without rejecting audited books of accounts of the appellant. 9. That the Ld. CIT(A) learned Assessing Officer has wrongly upheld penalty u/s 271AAC initiated by the learned assessing officer. 10. That the appellant craves leave to add, alter, amend or withdraw any grounds of appeal before the final hearing.” 2.1 In nutshell, two issues have been raised (i) the taxability of cash deposit of Rs.63,37,500/- in bank account, during the demonetization period, as unexplained credit under section 68 of the Income Tax Act, 1961 (hereinafter, the ‘Act’) and (ii) the initiation of penalty under section 271AAC of the Act. ITA No.3521/Del/2023 Bhakkar Marbles Pvt. Ltd. 3 3. The brief facts of the case relevant for deciding this appeal are that the assessee, engaged in the business of trading of Marbles and Granite, filed its Income Tax Return (hereinafter, the ‘ITR’) for the relevant year on 26.10.2017 declaring income of Rs.7,67,700/-. The case was picked up for scrutiny and the consequential assessment was completed at income of Rs.71,04,700/-, wherein the Assessing Officer (hereinafter, the ‘AO’) held that the assessee has introduced its own unaccounted cash through the Profit & Loss Account. Accordingly, the AO held the sum of Rs.63,37,500/- as unexplained and taxed the same under section 68 r.w.s. 115B of the Act. Aggrieved, the assessee filed appeal, which was dismissed by the Ld. CIT(A). 4. The Ld. Authorized Representative (hereinafter, the ‘AR’) submitted that the AO had questioned sales without rejecting the books of accounts of the appellant/assessee. It was categorically submitted that the appellant/assessee who used to trade in domestic Marbles & Granites earlier had also traded in the imported granite, for the first time, in the relevant year, which resulted rise in sales and new customers including those of other states. Hence, doubting the interstate sales by the AO was not based on the proper appreciations of facts. The AO had doubted sales of October and November, 2016 on the reasoning that the average par day sale just before the demonetization ITA No.3521/Del/2023 Bhakkar Marbles Pvt. Ltd. 4 (from 1st October, 2016 to 8th November, 2016) was Rs.1,84,512/- as against the average per day sale of Rs.7,340/- for Financial Year 2015- 16 (from 01.04.2015 to 08.11.2015) Rs.7,340/- and Rs. 8,070/- for Financial Year 2016-17 (from 01.04.2016 to 30.09.2016). It was contended that sales of the relevant year were bound to be different than those of earlier year as the appellant/assessee was also dealing in imported granites. 4.1 It was argued that questioning &comparing the appellant/assessee’s sale for the month of October and November, 2016 were not based on the correct and complete facts. Therefore, the AO’s presumption that the inter-state sales were shown on higher side because the appellant/assessee required to pay VAT @ 5% as against VAT @ 12.5% on local/intra-state salesto disclose/accommodate more sales/ cash for laundering black money in the garb of sales was not corroborated by any cogent evidence, submitted by the Ld. AR.It was categorically submitted that the inter-state sales had been accepted by the VAT Department. Hence, the AO’s observations with respect the interstate sales for the period 01.10.2016 to 08.11.2016 were uncalled for. Accordingly, the Ld. AR requested for relief of Rs. 63,37,500/-. 4.2 The Ld. AR contended that the AO had not doubted any purchase, stock-in-trade, book results, etc. It was submitted that the ITA No.3521/Del/2023 Bhakkar Marbles Pvt. Ltd. 5 imported goods were only after paying custom duty and the Custom Authority had not doubted any import. It was further reiterated that the books of account had not been rejected by the AO; therefore, doubting sales were not justified at all. It was further submitted that the VAT returns were not revised; therefore, raising suspicion on the VAT return by the AO on the reasoning that the original VAT return for the demonetization period filed on 25.01.2017 was not justified. The Ld. AR further argued that the AO had taxed sales once as regular sales as per the Trading, Profit & Loss Account and again the same under section 68 of the Act, which tantamount to double taxation being contrary to the law and accounting principles. He questioned the AO’s finding treating cash sales shown in the Trading, Profit & Loss Account as genuine by accepting book result & taxing the business income embedded in such sales and again taxing such sales as unexplained cash credits. 4.3 Before us, the Ld. AR submitted that the cash deposits were out of sales made by the appellant/assessee. He further submitted that the details of the deposits in bank account along with sales register and VAT returns were also filed before the AO and the CIT(A). However, the AO brushing aside all these documents, held cash sales for the period 01.10.2016 to 08.11.2016 as non-genuine. All these sales were shown ITA No.3521/Del/2023 Bhakkar Marbles Pvt. Ltd. 6 in books of account and VAT returns also. The sales as per the sales registers tallied with the VAT returns. 5. On the other hand, the Ld. Sr. Departmental Representative (hereinafter, the ‘Sr. DR’) vehemently argued the case emphasizing the details highlighted in para 4 to 4.5 of the assessment order submitted that the unaccounted cash had been shown in the garb of abnormal cash sales and in particular the inter-state sales only because the VAT return for the period 01.10.2016 to 08.11.2016 was not filed within time with intention to launder black money and to evade taxes. The Ld. AO also doubted the cash sales on the reasoning that sales taken place during October had not been deposited within the reasonable time of 02-05 days from the date of cash receipts, before 08.11.2016 i.e. the date of demonetization as normal prudent man would deposit cash sales within the reasonable time period after cash sales. She further contended that the AO had doubted sales for the period 01.10.2016 to 08.11.2016 and that was why such sales were taxed as cash credits. She further submitted that doubting cash sales were nothing but non- acceptance of book results. She also drew our attention to various paras of the impugned order to buttress her inference. 6. We have heard both parties and have perused the material available on the record. The issue before us is that whether sales taken ITA No.3521/Del/2023 Bhakkar Marbles Pvt. Ltd. 7 place in October and November, 2016 are non-genuine and taxability of such sales under section 68 of the Act is justified. The AO doubted such sales because the average cash sales were highly abnormal than the average sales during the corresponding period of preceding years and backdating of sales during October and November, 2016 could not be ruled out as the due date of filing of VAT Return for the third Quarter (October, November & December, 2016) was 31.01.2017. However, there is no reference of any corroborating material to buttress such inference in the assessment order. Before us, the Revenue has not placed any material to demonstrate that the details of cash sales shown by the appellant/assessee are fictitious/bogus. The books of account have not been rejected by the AO. The AO has notdoubted/questioned either purchases or stock-in-trade. Further, the AO has taxed the net profit of such sales by computing the income as per the ITR. In other words, the AO has taxed the income embedded in the doubted/questioned sales of Rs.63,37,500/- @ 30% and again taxing the doubted/questioned sales of Rs.63,37,500/- under section 68 of the Act @ 60%. Such contradictions; prima-facie, do not seem justified. The Revenue has also failed to place any material on the record to demonstrate that the VAT returns of the relevant year have not been accepted by the VAT authority. ITA No.3521/Del/2023 Bhakkar Marbles Pvt. Ltd. 8 7. We therefore, following the reasoning given in the case of Ramesh Kochar, ITA No. 171/Del/2022 dated 26.04.2022, hereby hold that this case is squarely covered. Accordingly, we are of the considered view that the addition of Rs.63,37,500/- under section 68 of the Act is uncalled for as the AO’s action is not get corroborated by any contradictory material. Thus, we are of the considered view that the Ld. CIT(A) is not justified in upholding the addition of Rs.63,37,500/-. We therefore, set aside the impugned order and delete the addition of Rs.63,37,500/-. 8. In the result, appeal of the assessee is allowed. Order pronounced in open Court on 29 January, 2024. Sd/- Sd/- (SATBEER SINGH GODARA) (AVDHESH KUMAR MISHRA) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated:29/01/2025 Binita, Sr. PS Copy forwarded to: 1. Appellant 2. Respondent 3. PCIT 4. CIT(A) 5. Sr. DR-ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "