GOPAL KRISHAN,VILL AMTRAR V. INCOME TAX OFFICER , WARD-DHARMSHALA

ITA 675/CHANDI/2023

AI Insights

The case involves Gopal Krishan, who served as a Business Correspondent for Punjab National Bank, facilitating cash deposits during the demonetization period. The Income Tax Department scrutinized his returns for AY 2017-18, questioning the source of substantial cash deposits totaling Rs. 10,59,980 during demonetization and Rs. 41,46,547 in other deposits. The Assessing Officer (AO) made additions to his income, treating these as unexplained cash credits under Section 69A of the Income Tax Act, 1961. The CIT(A) upheld the AO's decision, leading to the appeal before the Tribunal. The Tribunal, after considering the nature of the assessee's business and the consistent acceptance of this modus operandi by the Department in previous years, ruled in favor of the assessee, deleting the addition of Rs. 10,59,980.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107988 (ITAT-CHANDIGARH)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIVEK VARDHAN
• Assessee Lawyers: VIDHI MALHOTRA
• Keywords: Unexplained cash credit
• Section: 142(1); 143(2); 250; 69A

Judgement Text

"आयकरअपीलीयअिधकरण,चǷीगढ़ Ɋायपीठ “B” , चǷीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “B”, CHANDIGARH HEARING THROUGH: PHYSICAL MODE ŵी राजपाल यादव, उपाȯƗ एवं ŵी क ृणवȶ सहाय, लेखा सद˟ BEFORE: SHRI. RAJPAL YADAV, VP &SHRI. KRINWANT SAHAY, AM आयकर अपील सं./ ITA No.675 /Chd/ 2023 िनधाŊरण वषŊ / Assessment Year : 2017-18 Gopal Krishan, SuneharNagrota, Bagwan Kangra Himachal Pradesh-176056 बनाम The ITO Ward Dharamshala, Himachal Pradesh ˕ायीलेखासं./PAN NO: DQOPK4266F अपीलाथŎ/Appellant ŮȑथŎ/Respondent िनधाŊįरती की ओर से/Assessee by : Ms. Vidhi Malhotra, Advocate राजˢकी ओर से/ Revenue by : Shri Vivek Vardhan, Addl. CIT सुनवाई की तारीख/Date of Hearing : 16/01/2025 उदघोषणा की तारीख/Date of Pronouncement : 11/04/2025 आदेश/Order PER KRINWANT SAHAY, AM: This is an appeal field by the Assessee against the order of the Ld. CIT(A)/NFAC, Delhi dt. 06/09/2023 pertaining to A.Y. 2017-18. 2. In the present appeal, Assessee has raised following grounds: 1. The CIT(A) has erred in law and in facts in confirming the assessment order passed by the AO assessing the total income at Rs. 13,56,070/-as against returned income of Rs. 2,96,090/- 2. That the CIT(A) erred in confirming the action of the AO based upon surmises and conjecture without there being any evidence contrary to the contention of the assessee which is duly supported by documents. 2 3. That the CIT(A) has erred in confirming the addition of Rs. 10,59,980/- being cash deposited in bank account without appreciating that the said cash was part of the cash deposits made by the general public during demonetization, accepted by the assessee in the capacity of the Bank Business Correspondent/Facilitator, which were further duly transferred from the assessee's bank account to each depositors account by the Punjab National Bank. 3. Briefly the facts of the case are that The Assessee, Shri Gopal Krishan, filed his return for AY 2017-18 declaring an income of Rs. 2,96,090/-. The case was selected for scrutiny, and the Assessing Officer (AO) issued multiple notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961, seeking explanations for cash deposits totaling Rs.10,59,980/- during the demonetization period and Rs. 41,46,547/- in other deposits. The Assessee failed to respond to these notices. Thereafter, the AO completed the assessment ex-parte under Section 144, making two additions: (i) Rs. 10,59,980/- under Section 69A as unexplained cash credits during demonetization, and (ii) Rs. 1,18,565/- by applying a 10% profit rate on the remaining deposits. 4. Against the order of the Ld. AO the assessee went in appeal before the Ld. CIT(A). The CIT(A) upheld the addition of Rs. 10,59,980/- under Section 69A, noting the Assessee’s non- compliance and failure to substantiate the source. However, the CIT(A) deleted the Rs. 1,18,565/- addition, holding that the AO provided no rationale for applying the 10% profit rate. The appeal was partly allowed. 3 5. Against the order of the Ld. CIT(A) the assessee is in appeal before us. 6. During the course of hearing the assessee submitted that he deposits during demonetization amounting to Rs. 10,59,980/- and other transactions amounting to Rs. 41,46,547/- pertained to his role as a Business Correspondent for Punjab National Bank (PNB).The deposits were made on behalf of clients and immediately transferred to their accounts, hence not his income. 7. Per contra, the Ld. DR relied on the order of the lower authorities. 8. We have heard the rival contentions and perused the material available on the record. 8.1. Ground Nos. 1 and 2 are general in nature, therefore, do not require adjudication. Accordingly, the same are dismissed. 9. Ground No. 3 is against the confirmation of addition of Rs. 10,59,980/- being cash deposited in bank account. 10. We have considered the findings recorded by the Ld. AO in the assessment order, as well as those of the Ld. CIT(A) in the appellate order. 10.1 During the course of the proceedings before us, the learned Counsel for the assessee submitted a statement of fact on this issue, which is reproduced below: The Appellant is a Business Correspondents Agent (BCA) for Punjab National Bank. The Appellant filed his Income Tax Return for FY 2017-18, declaring Income of Rs., 2,96,090/- on 26/08/2019. The Appellant’s case was selected for scrutiny 4 and notice under section 143(2) of Income Tax Act, 1961 was generated through an online system of the Income Tax Department. Notice u/s 142(1) of the IT Act, 1961 along with the detailed questionnaire was issued on 19.08.2019. Again notice u/s 142(1) of the IT Act, 1961 along with the detailed questionnaire was issued on dated 10.10.2019. After a series of Show Cause Notices and limited response from the Appellant the AO issued the Assessment Order ex-parte on 18/12/2019. The AO in the Assessment Order held that the deposited money of Rs. 10,59,980/- being cash deposits during the demonetization period, is added to taxable income of the assessee as un-explained cash credits. The addition was made as per provisions of section 69A of Income Tax Act, 1961 and was added to the taxable income subject to tax as provisions of section 115BBE of IT Act, 1961 (Para 2 of Assessment Order), Another addition of Rs. 1,18,565/- was made by the AO which has been deleted by the Order u/s 250 of Income Tax Act, 1961. Being aggrieved by the findings of the AO the Appellant filed an Appeal with the Commissioner of Income Tax (Appeals), NFAC, Delhi. The Appellant’s written submission for the proceedings before the Ld. Commissioner (Appeals) are annexed herewith and market as Annexure-3. The Ld. CIT(A) passed the impugned order and upheld the ex-parte decision of the Ld. AO which is the subject matter of the instant Appeal. 10.2 We find that the assessee is engaged in the business of acting as a Bank Business Correspondent/Facilitator. In this line of business, the assessee collects money from small depositors and deposits it into a bank account, subsequently transferring the amount to the lead bank after deducting a certain percentage as commission, as permitted by the bank. As submitted by the learned Counsel for the assessee that this business model has been followed by the assessee for several years, and the Department has consistently accepted both the assessee’s reported income and the modus operandi—i.e, collecting money from small depositors, depositing it into the bank account, and eventually transferring it to the lead bank. 10.3 We observe that the order passed by the Ld. AO in this case is an ex parte order, and the Ld. CIT(A) has relied upon the same while deciding the issue against the assessee. After hearing the arguments 5 of the Ld. Counsel for the Assessee during the proceedings before us, and upon perusal of the statement of facts, we find that the assessee has been engaged in this line of business for several years, and the Department has consistently accepted the modus operandi followed by the assessee during the year under consideration. No new material has been brought on record either by the AO or by the Ld. CIT(A) to justify any deviation from the past practice accepted by the Department. Therefore, there is no justification for disturbing the settled position. Accordingly, the assessee’s appeal on this issue is allowed. 11. In the result, appeal of the Assessee is partly allowed. Order pronounced in the open Court on 11/04/2025. Sd/- Sd/- राजपाल यादव क ृणवȶ सहाय (RAJPAL YADAV) (KRINWANT SAHAY) उपाȯƗ/VICEPRESIDENT लेखासद˟/ ACCOUNTANT MEMBER AG आदेशकीŮितिलिपअŤेिषत/ Copy of the order forwarded to : 1. अपीलाथŎ/ The Appellant 2. ŮȑथŎ/ The Respondent 3. आयकरआयुƅ/ CIT 4. आयकरआयुƅ (अपील)/ The CIT(A) 5. िवभागीयŮितिनिध, आयकरअपीलीयआिधकरण, चǷीगढ़/ DR, ITAT, CHANDIGARH 6. गाडŊफाईल/ Guard File आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar "