BIR BABU PANDEY,GOPALGANJ V. ITO WARD 2(4), SIWAN

ITA 223/PAT/2024

AI Insights

The case involves Bir Babu Pandey, the appellant, who contested the additions made to his income by the Income Tax Officer (ITO), Siwan, for the Assessment Year 2017-18. The additions were primarily based on unexplained cash deposits during the demonetization period and discrepancies in the accounts of sundry creditors, specifically the JVL Group of Companies. The Commissioner of Income Tax (Appeals) upheld these additions, leading to the appeal before the Tribunal. The Tribunal found that the assessee had adequately explained the source of the cash deposits and thus directed their removal, while the issue of the sundry creditors' account was remanded for further verification due to the liquidation status of the JVL Group.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 707032 (ITAT-PATNA)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Appeal Filed On: 22-01-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Liquidation
• Section: 143(3); 142(1); 40(a)(ia)

Judgement Text

"आयकर अपीलीय अधिकरण पटना पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH AT KOLKATA [वर्चुअल कोटु] [Virtual Court] श्री जॉजु माथान, न्याधयक सदस्य एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI GEORGE MATHAN, JUDICIAL MEMBER & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey Vs. ITO, Ward-2(4), Siwan (Appellant) (Respondent) PAN: BRAPP9843C Appearances: Assessee represented by : G.P. Tulsiyan, FCA. Department represented by : Ashwani Kr. Singal, JCIT. Date of concluding the hearing : 08-April-2025 Date of pronouncing the order : 07-July-2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)-3, Patna [hereinafter referred to as Ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) for AY 2017-18 dated 28.11.2023, which has been passed against the assessment order u/s 143(3) of the Act, dated 24.12.2019. Page | 2 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. The order of AO is not based on facts and more based on surmises. 2. In the proceeding before CIT(A), a remand report was called for by the CIT(A) on the issues of cash deposit, Sundry Creditors considered for addition by AO. In the remand report, no evidence- based findings have been narrated by AO and only on surmises AO alleged that the source of cash deposit remains unexplained. The allegation of unverifiable sales and purchases were met before AO & CIT(A) by the producing independent evidence in the form of FORM RT-3 which is a VAT Annual Return under Bihar VAT Act, 2005. Therefore, partial disallowance of cash deposit during demonetization period is not legal and therefore fifty percent of quantification of disallowance Rs.17,13,500/- is arbitrary and is therefore requested to be deleted. 3. The addition difference of Sundry creditors of Rs. 10,94,345/- was done arbitrarily without examining books of accounts & evidences produced before AO during scrutiny, AO in remand report & CIT(A), therefore this addition of Rs. 10,94,345/- is requested to be deleted.” 3. Brief facts of the case are that the assessee had filed return of income showing total income of ₹7,91,470/- which was selected for scrutiny in order to examine the issue of cash deposit during the demonetization period. Subsequently, statutory notices u/s 143(2) and 142(1) of the Act were issued and the Assessing Officer (hereinafter referred to as Ld. 'AO') passed the assessment order determining the total income of the assessee at ₹55,09,850/-. Aggrieved with the assessment order, the assessee filed an appeal before the Ld. CIT(A) who has reproduced the finding of the Ld. AO, the submissions of the assessee, called for the remand report from the Ld. AO which has been reproduced from pages 5 to 8 of the appeal order and thereafter confirmed the addition of 50% of ₹34,27,000/- i.e. ₹17,13,500/- made u/s 69A of the Act, confirmed the addition of ₹10,94,345/- and also the addition of ₹1,97,037/- made u/s 40(a)(ia) of the Act which was not Page | 3 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. pressed by the assessee and partly allowed the appeal of the assessee. The finding of the Ld. CIT(A) is as under: “I have carefully gone through the findings of the AO in the assessment order as well as in the remand report. During the remand proceedings, the appellant has submitted the cash book for the period from 01.11.2016 to 31.12.2016 and the cash flow statement for the period from 01.04.2016 to 31.10.2016. The AO has analyzed the cash deposits in the bank account of the appellant. The AO has observed that the appellant had the average cash balance of Rs. 4 to 5 lakh in his bank account from the period from April to September. However, the total cash balance in the month of October was Rs. 21,49,961/-. The opening balance in the month of November was Rs. 21,49,961/- and the closing balance on 08.11.2016 was Rs. 42,95,408/- out of which the cash deposit of Rs. 14,20,000/- was made on 08.11.2016. Later on, the total cash of Rs. 34,27,000/- was deposited in the bank account of the appellant on 11.11.2016. Further, the cash deposit was once again decreased to the average cash of Rs. 4 to 5 lakh per month. Accordingly, the AO has given the findings that the cash book and the cash flow statement submitted by the appellant is an afterthought. Thus, the appellant has failed to explain the cash deposits even during the remand proceedings. The Ld. AR has objected the findings of the AO recorded in the remand report and submitted that the appellant was following the practice of depositing cash from the sale proceeds in the bank account for months and years. The audited books of the appellant we resubmitted before the AO during the remand proceedings but he did not bring the same on record and arbitrarily made it the ground for rejection. Further, the book profit has been duly accepted by the AO and the sales and purchases of the appellant have not been disputed. Therefore, the addition of the same would result in double taxation of income. The Ld. AR has also submitted the copy of VAT return for the period from 01.04.2016 to 31.03.2017, cash books from 01.11.2016 to 31.12.2016 and extracts of cash flow statement from 01.04.2016 to 31.10.2016. On perusal of the GST returns submitted by the appellant, I find that the appellant has shown the turnover of Rs. 13,75,08,826/- during the FY 2016-17. Further, there is no dispute that the appellant was in regular practice for making cash sales and depositing the same in his bank account. The AO has accepted the book profit of the appellant which also consists of the transactions recorded in the cash book. Further, no evidence of excess stock or any other unexplained investment was found during the survey. The sales were duly reflected in the GST return filed by the appellant. It can also not be denied that the appellant has been able to fully justify the amount of cash deposited during demonetization by furnishing independent corroborative evidence, Hence, considering all the facts and circumstances of the case, it would be most Page | 4 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. judicious and fair to restrict the addition to 50%. Accordingly, the AO is directed to restrict the addition to Rs. 17,13,500/- being 50% of Rs. … The ledger accounts produced at Ann-L matches with S.No. 01, Ann-N matches with S.No. 02 and Ann-K&M match with S.No. 03, which consists of Sundry Debtors having a debit entry of Rs. 34,98,793.33 in the name of the debtor M/s. Adarsh General Store and a credit entry of Rs. 18,89,343.33 in the name of JVL Rice, a JVL Group of Co. The net debit balance of Rs. 16,09,400/- was accordingly, shown as sundry debtors in the Audited Accounts (Not acknowledged by the AO and straightaway treated as difference). Now, if, we compare the supplier companies' account confirmation with that of audited books of accounts, the resultant figures are as below:- Comparison as on 01.04.2016 S. No. Title of Entry Amount as per Audited Books Of Accounts Amount as per Supplier’s Confirmation Difference 01. JVL Group of Companies 5,60,924.38 02. JVL Rice 18,89,393.33 24,50,370.71 23,85,527.38 64,790.33 03. JVL Group of Companies (M) 13,25,625.00 13,25,625.00 NIL Comparison as on 31.03.2017 S. No. Title of Entry Amount as per Audited Books Of Accounts Amount as per Supplier’s Confirmation Difference 01. JVL Group of Companies (-)2,34,124.27 02. JVL Rice 18,89,393.33 16,55,269.06 16,55,269.06 NIL 03. JVL Group of Companies (M) 1,950.10 1,950.10 NIL Therefore, there is an apparent difference of Rs.64,790.33 only, which should be made. The subject matter of addition instead of Rs. 10,94,345/- as done in assessment order OR Rs. 18,89,393.33 as done in remand report. Appellate findings: Page | 5 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. The increase in the liability of Rs. 10,94,345/-, in respect of M/s JVL group of companies, has not been disputed by the Ld. AR. The Ld. AR has submitted the ledger accounts of JVL company, copy of the audited balance sheet and the ledger accounts of the JVL group in the books of the appellant. However, the Ld. AR has failed to submit the confirmations from the companies and submitted that the JVL group of companies was under liquidation at the time of scrutiny at the time of scrutiny. Considering the findings of the AO and the submission of the Ld. AR, I find that the appellant has been provided with the sufficient opportunities to explain the increase in the liability with corroborative evidence. However, the appellant failed to come up with documentary evidences to prove his claim. All the evidence submitted by the Ld. AR are related to the appellant and the appellant has not been able to present any confirmation from creditors or any other independent evidence. Accordingly, the addition of Rs. 10,34,345/- is sustained and the ground is dismissed. Ground no. 13 pertains to disallowance of Rs. 197037/- u/s 40a(ia). This ground has not been pressed by the Ld. AR. Accordingly, the same is dismissed. Ground no. 15, being general in nature, is not adjudicated upon. 5. In the result, the appeal is partly allowed.” 4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before this Tribunal. 5. Rival contentions were heard and the submissions made and the paper book filed have been examined. The assessee has furnished the written submission as under: “The above appeal has been filed against the order of A.O. passed u/s 143(3) on 24.12.2019 by I.T.O. Siwan which was subsequently appealed before the CIT-A(III) Patna on 08.01.2020 and the learned CIT- A-III passed order in this appeal on 28.11.2023 confirming the following additions made by the A.O. 1. ADDITION OF RS.34,27,000/- ON ACCOUNT OF CASH DEPOSITS DURING THE DEMONETIZATION PERIOD. In the appeal filed before CIT-A, the submission of the assessee was remanded back to the A.O. u/s 250(4) on this issue. On examining the facts & details submitted and lying on the record the only basis of supporting this additions by A.O. narrated at page no. 18 of paper book as below:- Page | 6 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. “On perusal of the cash book from 01.11.2016 to 31.12.2016 it is seen that after depositing the cash into bank a/c on 11.11.16 the day wise cash sales as well as day wise cash balance drastically decreased on an average 4 to 5 lakhs. As discussed above it is clear that the assessee cleverly tried to enhance his cash sale for explaining the source of cash deposited during demonetization period. Hence source of cash deposit remains unexplained in the hands of the assessee.” Subsequently at the CIT-A stage all the above details were examined by the learned CIT-A and CIT-A gave his finding at page 12 of the paper book. The CIT-Appeal has found as below:- “The A.O. has accepted the book profit of the appellant which also consist of transaction recorded in cash book. Further, no evidence of excess stock or any other unexplained investment was found during the survey. The sales were duly reflected in the GST return filed by the appellant. It can also not be denied that the appellant has been able to fully justify the amount of cash deposited during demonetization by furnishing independent corroborative evidence. Hence considering all the above facts & circumstances of the case it would be most judicious & fair to restrict the addition to 50%. Accordingly, the A.O. is directed to restrict the addition to Rs.17,13,500/- being 50% of the Rs.34,27,000/-” In the above finding of the A.O. & learned CIT-A the cash deposit during demonetization period has been accepted completely on the basis of books of a/c and found to be true. Therefore, the arbitrariness exercised by the A.O. in his remand report at page 18 of paper book on the basis of wild guesses & assumptions cannot sustain unless until he proves to the contrary on the basis of corroborative evidence. Further the CIT-A in his finding at page 12 of paper book clearly states that the deposit during demonetization period is fully explained. Then how can learned CIT-A be injudicious in allowing only 50% of the cash deposited during demonetization period as judicious and fair. Once the sources are explained & accepted the question of partly being judicious does not arise and the whole sum of Rs.34,27,000/- should have been allowed instead of 50% of it being Rs.17,13,500/- 2. ADDITION ON ACCOUNT OF SUNDRY CREDITOR IN RESPECT OF M/S JVL GROUP OF COMPANIES BASED ON AUDIT REOPORT AMOUNTING TO RS. 10,94,345/-. A.O. at the time of scrutiny has treated the balance outstanding in the head of JVL group of companies as on 31.03.2017 as per audited Balance Sheet at page no. 26 of the paper book Rs. 16,55,269.06/- LESS balance of JVL Group of companies on 1.04.2016 Rs.5,60,924.3 8 as per the trial balance at page no. 42 of the paper book amounting to Rs. 10,94,344.68/- as Page | 7 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. unexplained cash credit and added to the total income without examining the books of account and the submissions. Subsequently, at the behest of the CIT-A, when the remand on this point was called by the A.O., A.O. in his remand report at page no. 19 of the paper book narrated a different story and came out with a different figure of Rs. 18,89,393/- as suppressed income and replying to the CIT-A in his remand report. In the hearing before the CIT-Appeal all the details, ledgers, vouchers, as appearing at page 12 of paper book were furnished and examined and the CIT-Appeal on the basis of his finding at page 15 of the paper book held as below:-“The increase in the liability of Rs. 10,94,345/-, in respect of M/s JVL group of companies, has not been disputed by the Ld. AR. The Ld. AR has submitted the ledger accounts of JVL company, copy of the audited balance sheet and the ledger accounts of the JVL group in the books of the appellant. However, the Ld. AR has failed to submit the confirmations from the companies and submitted that the JVL group of companies was under liquidation at the time of scrutiny. Considering the findings of the AO and the submission of the Ld. AR, I find that the appellant has been provided with the sufficient opportunities to explain the increase in the liability with corroborative evidence. However, the appellant failed to come up with documentary evidences to prove his claim. All the evidence submitted by the Ld. AR are related to the appellant and the appellant has not been able to present any confirmation from creditors or any other independent evidence. Accordingly, the addition of Rs. 10,34,345/- is sustained and the ground is dismissed”. However, the facts are completely different and the finding of A.O. and CIT- Appeal are defective and unsustainable on the following facts and the ground:- a) The assessee had an audited Balance Sheet & Profit & Loss which is duly filed on the IT portal with Form 3CB-CD at page 26 of the paper book. b) The detailed trial balance of the assessee’s books is given at page 41 to 43 of the paper book. As per the trial balance the opening & closing balances of the JVL Group depicted at page no 42 are as below:- Particulars Balance on 01.04.2016 Debit during the year Credit during the year Balance as on 31.03.2017 JVL Oil & Foods 5,60,924.380 4,95,52,896.00 4,87,57,847.35 2,34,124.27Dr JVL Rice Transfer to JVL Group Company 18,89,393.330 18,89,393.33 Nil Nil JVL Group Of Companies Nil Nil 18,89,393.33 18,89,393.330 Page | 8 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. JVL Agro Industries(M) 13,25,625.000 53,01,241.00 39,77,566.10 1,950.100 On the summation of the above ledgers the balance of JVL Group as on 31.03.2017 shall be as below:- Particulars Credit Balance JVL Group Debit balance JVL Oil & Foods Net balance appearing in Balance Sheet JVL Group Of Companies 18,89,393.33/- 2,34,124.24/- Crl6,55,269.09/- JVL Agro Industries (Nf) NIL NIL Cr1,950.10/- as on B/s The above JVL Group of companies statement enclosed at page 28 to 40 of paper book as Annexure-F also shows a debit balance of Rs.16,55,269.06/- comprising of JVL Rice Mill, JVL Agro Industries balances. The same balance of Rs.16,55, 269. 39 - is appearing in the Balance Sheet at page 26 of the paper book & thus there is no difference. Similarly in case of JVL Agro Industries (M) which is in fact JVL Groups of Companies -Mustard account the companies statement at page 28 of the paper book gives a debit balance of 1,950.10/- as against the audited B/s at page 26 of paper book balance Rs. 1,950.10/-. Therefore, it is true & evident that there is no mismatch of account balances of JVL Group of companies as per companies statement as well as JVL group of companies statement enclosed. Therefore, the arbitrary addition of Rs. 10,94, 345/- sustained by the CIT-A is completely incorrect & is not at all sustainable.” 6. We have considered the submissions made. It was submitted by the Ld. AR that the assessee is a FMCG dealer having turnover of around ₹13,75,08,826/-. During the demonetization period cash was deposited in the bank and as the assessee deals mostly in cash for business transactions. It was the Ld. CIT(A), the GST returns were filed and the cash balance available was shown at ₹42,95,408/- as on 07.11.2016 and deposits of Rs. 14,20,000/- on 08.11.2016 and subsequently were made in the bank account. Our attention was drawn to page 8 of the Ld. CIT(A)’s order which is at page 12 of the paper book. The Ld. CIT(A) upheld the disallowance to the extent of 50% and granted relief for ₹17,13,500/-. It was submitted that the cash book was produced during the remand proceeding as well. As regards the balance of JVL Group being treated as undisclosed, the closing balance as Page | 9 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. on31.03.2016 and the closing balance on 31.03.2017 were considered by the Ld. AO and the difference has been added without examining anything else in this regard. It is submitted that the books of account of the assessee were audited and the confirmation of the suppliers, the ledger copy etc. were filed and the closing balance is less than the opening balance in the case of JVL Group of Companies. Since JVL Group was under liquidation, the confirmation at the time of audit was not available and therefore the auditor had made the note. The assessee submitted that the Ld. AO could have verified with the liquidator these details. The Ld. AR requested that the addition confirmed on account of cash deposit may be deleted and as regards the difference in JVL account, the matter may be sent back to the Ld. AO for verification who may request the liquidator to file the confirmation as JVL is under liquidation. The Ld. DR did not oppose this request of the Ld. AR. 7. We have considered the submission made and also gone through the details. The addition was confirmed on account of failure to furnish the required evidence. Hence, as regards the addition of ₹17,13,500/-, as per the finding of the Ld. CIT(A) at page 8 itself the appellant had shown the turnover of ₹13,75,08,826/- during the FY 2016-17 and was in regular practice for making cash sales and to deposit the same in the bank account. It is also observed that the Ld. AO has accepted the book profit of the assessee which also consists of the transactions recorded in the cash book. No evidence of excess stock or any other investment was found during the survey and the sales were duly reflected in the GST return filed by the assessee. The Ld. CIT(A) on one hand mentions that it can also not be denied that the assessee has been able to fully justify the amount of cash deposited during the demonetization period by furnishing independent corroborative evidence, however, on the Page | 10 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. other hand he has confirmed 50% of the cash deposited during the demonetization period. Once the Ld. CIT(A) had accepted that the assessee had sales of about ₹13.75 Crore during the year and was carrying on cash transactions, the money from which was deposited in the bank account, there was no justification for sustaining 50% of the amount without giving any basis for upholding the addition of 50%. Hence, ground no. 1 relating to addition of ₹17,16,500/- is allowed and the Ld. AO is directed to delete the same. Hence, Ground No. 2 is allowed. 8. As regards the other addition of ₹10,94,345/-, this issue is also remanded to the Ld. AO who shall carry out necessary verification with the liquidator of JVL and after considering the submission of the assessee make the addition in case the same is desired, as no verification for the balance was filed before the Ld. AO. Hence this ground of appeal is allowed for statistical purposes. Hence, Ground No. 3 is allowed for statistical purposes. 9. Ground No. 1 is general in nature and does not require any separate adjudication. 9. In the result, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced in the open Court on 7th July, 2025. Sd/- Sd/- [George Mathan] [Rakesh Mishra] Judicial Member Accountant Member Dated: 07.07.2025 Bidhan (P.S.) Page | 11 I.T.A. No.: 223/PAT/2024 Assessment Year: 2017-18 Bir Babu Pandey. Copy of the order forwarded to: 1. Bir Babu Pandey, Sirsa, Babutola, Dighwa Dubauli, Gopalganj, Bihar, 841409. 2. ITO, Ward-2(4), Siwan. 3. CIT(A)-3, Patna. 4. CIT- 5. CIT(DR), Patna Bench, Patna. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "