DHARAN BATH FITTINGS,HOSUR V. ACIT, CIRCLE -1, HOSUR, HOSUR

ITA 1393/CHNY/2024

AI Insights

The case revolves around the appeal by Dharan Bath Fittings against the order of the Commissioner of Income Tax (Appeals), which confirmed the addition of Rs.3,98,500 as unexplained income under section 69A of the Income Tax Act, 1961. The addition was initially made by the Assessing Officer, who considered the deposits made after the announcement of demonetization as unexplained. The Tribunal, however, found that the assessee had maintained proper books of accounts, which were audited, and the source of the cash deposits was explained. The Tribunal also noted that the cash balance as of November 8, 2016, was not disputed by the Assessing Officer, and the deposits made were out of income already offered for taxation.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29877 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Other Referred Cases: S. Thulasidoss Nedunselian vs ACIT, S. Balaji Mech Tech Private Limited vs ITO, Sureshkumar Agarwal vs ITO, Preeti Bhardwaj K vs ITO Ward 29(3) Civic Centre
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P. VIJAIDEEPAN
• Assessee Lawyers: Y. SRIDHAR
• Keywords: Business income
• Section: 143(3); 69A; 44AB

Judgement Text

" आयकर अपीलीय अिधकरण, ‘ए’ ᭠यायपीठ, चे᳖ई IN THE INCOME TAX APPELLATE TRIBUNAL ‘A’ BENCH, CHENNAI ᮰ी मनु कुमार िगᳯर, ᭠याियक सद᭭य एवं ᮰ी एस. आर. रघुनाथा, लेखा सद᭭य के समᭃ BEFORE SHRI MANU KUMAR GIRI, HON’BLE JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, HON’BLE ACCOUNTANT MEMBER आयकर अपील सं./ITA No.: 1393/Chny/2024 िनधाᭅरण वषᭅ / Assessment Year: 2017-18 Dharan Bath Fittings, 40/41, Seelanaickenpatty Bye-pass, Salem – 636 201. [PAN: AAJFD-0104-F] v. The Assistant Commissioner of Income Tax, Circle -1, Hosur. (अपीलाथᱮ/Appellant) (ᮧ᭜यथᱮ/Respondent) अपीलाथᱮ कᳱ ओर से/Appellant by : Shri. Y. Sridhar, FCA ᮧ᭜यथᱮ कᳱ ओर से/Respondent by : Shri. P. Vijaideepan, JCIT सुनवाई कᳱ तारीख/Date of Hearing : 11.02.2025 घोषणा कᳱ तारीख/Date of Pronouncement : 20.02.2025 आदेश /O R D E R PER S. R. RAGHUNATHA, ACCOUNTANT MEMBER: This appeal by the assessee is filed against the order of the Commissioner of Income Tax (Appeals), Addl/JCIT(A)-2, Ludhiana, for the assessment year 2017-18, vide order dated 28.03.2024. 2. The assessee has filed the following grounds of appeal: “1. The Commissioner of Income-tax (Appeals) is not justified in confirming that demonetized cash of Rs.3,98,500/- deposited into Bank after 17-11-2016 constituted income taxable under section 69A. :-2-: ITA. No: 1393/Chny/2024 2. Not having found any defect in the tax audited books of account, or in copy of cash book filed before Assessing Officer, cash balance of Rs.57,20,600/- as on 08-11-2016 ought to have been. accepted to be available to deposit Rs.35,10,000/- on 10-11-2016 and 16-11-2016 and the balance of Rs.3,98,500/- between 17-11-2016 and 23-11- 2016. 3. Commissioner (Appeals) has not given any basis to hold that deposits made after lff-11-2016 were belated ones. 4. Commissioner (Appeals) should have accepted copies of certificates filed from two banks and of an appeal by the then Finance Minister filed before Assessing Officer advising public to wait and deposit cash in installments and not at one go. 5. \"As there was ostensible source of business income from dealing in bath ·fittings, citations relied on to claim that special higher. rates of Section 115BBE were inapplicable, should have been discussed. Commissioner (Appeals) ought to have considered all contentions raised by Written Submissions dated 13-02-2024 filed (Copy attached). 6. For these and other reasons which may be stated, at the' time of hearing of the appeal, it is prayed that the income returned may please be directed to be accepted.” 3. The brief facts of the case are that, the assessee is a firm engaged in the business of trading in bath fittings, filed its return of income for the assessment year 2017-18, admitting a total income of Rs.11,50,740/-. The case was selected for scrutiny under CASS and statutory notices were issued. On perusal of the submissions made by the assessee, the Assessing Officer completed the assessment u/s. 143(3) dated 26.12.2019 by making an addition of Rs.3,98,500/- as unexplained income of the assessee u/s. 69A of the Income Tax :-3-: ITA. No: 1393/Chny/2024 Act, 1961 (hereinafter referred to as “the Act”) by holding as under: “3. The cash balance of the assessee as on 08.11.2016 is Rs.57,20,599-. It is seen that the assessee has made cash deposits in SBNs of Rs.39,08,500/- during demonetization period. Out of this, sum. of Rs.35, 10,000/- is deposited· in two installments on 10.11.2016 and 16.11.2016 which is within a reasonable period of time. The balance amount of SBNs of Rs.3,98,500/- is deposited from 17.11.2016 to 29.11.2016. Since demonetization was announced on 08.11.2016, the assessee had no reason to hold such huge amount of cash. The assessee also has made deposits into the bank accounts on five different dates after 16.11.2016. The assessee could have deposited the entire amount in one transaction. The assessee has failed to explain the same. Hence, the sum of Rs.3,98,500/- is from his unexplained receipts. Thus, natre and source of the said sum stands unexplained. In the absence of proper explanation from the assessee, sum of Rs. 3,98,500/- is also· treated as unexplained income of the assessee u/s 69A r.w.s. 115BBE of the Income-tax Act,1961 and the same is brought to tax for A.Y.2017-18 under the head \"Income from other sources\". Since the determined income includes income in reference to section 69A, penalty proceedings u/s 271AAC of the Income-tax Act is initiated separately. (Addition: Rs. 3,98,500/-)” Aggrieved by the order of the Assessing Officer, the assessee preferred an appeal before the Ld.CIT(A). 4. The assessee in their submissions stated that the firm has made a turnover of Rs.9.95 crores during the assessment year 2017-18 and the books of accounts of the assessee has been audited u/s. 44AB of the Act. Further, the assessee has submitted the cash book which is having a closing balance of :-4-: ITA. No: 1393/Chny/2024 Rs.57,20,599/- on 08.11.2016. However, the Assessing Officer has made an addition of Rs.3,98,500/- for the reason that the assessee has not deposited the entire specified bank notes one time into their bank account. On perusal of the submissions, the ld.CIT(A) was not convinced and rejected the claim of the assessee by confirming the order of the Assessing Officer by passing an order dated 28.03.2024 by holding as under: “I have carefully considered the facts of the case, the findings of the AO during the assessment proceedings and those filed during the appellate proceedings. It is concluded that, the appellant had no sufficient cause for delay in the deposits of SBNs beyond 16.11.2016, which were done on 5 different dates. No satisfactory explanation has been provided and this-claim couldn't be proved. Had it belonged to the business, the same could have been deposited in a single instance between 10.11.2016 and 16.11.2016. This has been rightly pointed out by the AO. The appellant has relied his claim on the various case laws, which are general in nature and are related to cash credits during the normal times. The cash credits during the Demonetisation period wasn't a regular time period and was declared with the intention to curb the generation of cash by evasion of taxes. Thus, these case laws can't be applied here. The appellant has further relied on the appeal order dated 30.08.23 passed by NAFAC in the case of Subramanium Sengodan. A perusal of this appeal order indicates variance from the facts of the appellant. Sh. Subramanium Sengodan produced certificates from banks regarding multiple deposits during the demonetization period. Also, he was able to successfully co-relate the cash deposits with receipts of contract tender. Hence, this case law is untenable in the case of the appellant. Therefore, the undersigned sees no reason to interfere with the orders of the ld. Assessing Officer. Based upon the above discussion, it is held that, there is no infirmity with the order of the AO and, the addition of Rs.3,98,500/- as unexplained income with the applicability of section 115BBE of the Act and the penalty u/s is :-5-: ITA. No: 1393/Chny/2024 271AAC of the Act is upheld. Thus, the action of the AO is confirmed and all the grounds of appeal are hereby dismissed.” Aggrieved by the order of the ld.CIT(A), the assessee preferred an appeal before us. 5. The ld.AR for the assessee stated that the ld.CIT(A) has not justified in confirming the addition of Rs.3,98,500/- deposited into bank after 17.11.2016 as unexplained cash deposits u/s. 69A of the Act. Further, the ld.AR stated that the Assessing Officer in his order has not disputed the source of cash which was deposited into the bank account. Further, the Assessing Officer also confirms the cash balance held by the assessee on 08.11.2016 as Rs.57,20,599/- and also has not rejected the audited books of accounts furnished before the Assessing Officer. The ld.AR stated that out of the total specified bank notes deposits of Rs.39,08,500/-, the Assessing Officer accepted the cash deposits to the tune of Rs.35,10,000/- by way of specified bank notes made up to the date of 17.11.2016 as explained source of cash and only makes an addition of Rs.3,98,500/- stating that the specified bank notes has not been deposited within the reasonable time from the date of announcement of demonetization. In support of the :-6-: ITA. No: 1393/Chny/2024 arguments, the ld.AR relied on the following decisions of the Tribunal: (i) S. Thulasidoss Nedunselian vs ACIT, ITAT Chennai in ITA No. 466 & 472/Chny/2020 dated 23.08.2023 (ii) S. Balaji Mech Tech Private Limited vs ITO, ITAT Delhi in ITA No. 556/Del/2024 dated 25.09.2024 6. Further, the ld.AR stated that cash was deposited into bank account by way of specified bank notes during demonetization period was out of income already offered for taxation in the return of income filed for the assessment year 2017-18. In respect of such income the necessary tax has already been paid by the assessee and the same was duly reflected in the books of accounts and hence, invoking section 69A of the Act for levying tax on Rs.3,98,500/- is not justified since the primary condition to invoke section 69A is that the money is not recorded in the books of accounts. Further, the ld.AR relied on the followings decisions of the Tribunal, wherein mere time gaps between cash withdrawal and deposits are not sufficient grounds for making an addition u/s. 69A of the Act. (i) Sureshkumar Agarwal vs ITO – ITAT Jaipur in ITA No. 426/JP/2022 dated 03.04.2023 :-7-: ITA. No: 1393/Chny/2024 (ii) Preeti Bhardwaj K vs ITO Ward 29(3) Civic Centre in ITA No. 78/Del/2024 dated 22.03.2024. In light of the above arguments, the ld.AR prayed for setting aside the order of the ld.CIT(A) and delete the addition made u/s. 69A of the Act. 7. Per contra, the ld.DR relied on the orders of the lower authorities and prayed for upholding the order of the ld.CIT(A). 8. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. It is an admitted fact that the assessee has filed its return of income for the assessment year 2017-18 on 02.11.2017 and declared an income of Rs.11,50,740/-. The assessee has maintained proper books of accounts which has been audited u/s. 44AB of the Act, since the turnover of the assessee was Rs.9.95 crores. During the assessment proceedings the assessee has furnished the details called for from time to time and the same have been verified by the Assessing Officer before concluding the assessment u/s. 143(3) of the Act. We noted that the Assessing Officer confirms that the closing cash balance of the assessee as on 08.11.2016 was :-8-: ITA. No: 1393/Chny/2024 Rs.57,20,599/-. During demonetization period the assessee had deposited Rs.39,08,500/- in specified bank notes to the bank account, out of which a sum of Rs.35,10,000/- was deposited in two installments on 10.11.2016 & 16.11.2016 and the balance amount of Rs.3,98,500/- has been deposited from 17.11.2016 to 29.11.2016. The Assessing Officer drew the conclusion that the amount deposited up to 16.11.2016 is within reasonable period of time and the amount deposited beyond 17.11.2016 has been considered as unexplained money which has been deposited into bank account. We also note that the Assessing Officer has accepted the audited books of accounts furnished by the assessee without rejecting it. We also note that the ld.CIT(A) also confirms the view of the Assessing Officer in upholding the addition of Rs.3,98,500/- as unexplained money u/s. 69A of the Act, as these specified bank notes deposited from 17.11.2016 to 29.11.2016 as unreasonable. 9. In the present facts of the case, we note that the assessee’s books of accounts are audited u/s. 44AB of the Act and the return of income has been filed by the assessee on or before the due dates. Further, the closing cash balance shown as on 08.11.2016 of Rs.57,20,599/- has not been disputed by :-9-: ITA. No: 1393/Chny/2024 the Assessing Officer. Therefore, the Assessing Officer and that of the ld.CIT(A) have erred in making an addition of Rs.3,98,500/- u/s. 69A of the Act as unexplained money. The above view is supported by the decisions of the Tribunal relied by the ld.AR in the following cases “5. In the case of- S. Thulasidoss Nedunselian vs ACIT ITAT Chennai in ITA no 466&472/Chny/2020 dated 23-/08/23, it was held that \"addition towards unexplained money u/s 69A of IT Act is unjustified as assessee has filed necessary evidence to explain nature and source for cash deposits. Hence, the above cash deposits cannot be considered as unexplained money in the hands of the appellant\". (ii) S. Balaji Mech Tech private limited vs ITO dated 25/9/24 in ITA no. 556/DEL/2024 ITAT Delhi it was held that- \"AO cannot invoke the provision 69 A when the assessee has already declared the source for cash deposits in the books of account and the lower authorities without their being any material to support on their contrary view, the provisions of section 69A cannot be invoked.” 10. In the present facts and circumstances of the case and respectfully following the judicial precedents (supra), we are of the considered view that the ld.CIT(A) has erred in confirming the addition of Rs.3,98,500/- made by the Assessing Officer in his order u/s. 143(3) of the Act. Hence, we are setting aside the order of the ld.CIT(A) by allowing the grounds of appeal of the assessee. :-10-: ITA. No: 1393/Chny/2024 11. In the result, appeal filed by the assessee is allowed. Order pronounced in the open court on 20th February, 2025 at Chennai. Sd/- (मनु क ुमार िगįर) (MANU KUMAR GIRI) Ɋाियक सद˟/Judicial Member Sd/- (एस. आर. रघुनाथा) (S. R. RAGHUNATHA) लेखासद˟/Accountant Member चे᳖ई/Chennai, ᳰदनांक/Dated, the 20th February, 2025 JPV आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant 2. ŮȑथŎ/Respondent 3.आयकर आयुƅ/CIT– Salem 4. िवभागीय Ůितिनिध/DR 5. गाडŊ फाईल/GF "