HINABEN OJASHKUMAR PATEL,SURAT, GUJARAT V. INCOME TAX OFFICER, WARD 2(3)(7) SURAT, SURAT, GUJARAT

ITA 243/SRT/2024

AI Insights

The case involves Hinaben Ojashkumar Patel, who appealed against the addition of Rs.20,00,000 to her income for the assessment year 2017-18, which was treated as unexplained cash deposits under section 69A during the demonetization period. The Income Tax Officer had added this amount after finding discrepancies between the cash book and sales bills. The Commissioner of Income-tax (Appeals) upheld this addition. However, the Tribunal found that the cash deposits were part of the assessee's business turnover and directed a lesser addition of Rs.2,65,878 due to irregularities in the accounts.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 26434 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Next Hearing Date: 24-09-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 05-03-2024
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Keywords: Business income; Presumptive income
• Section: 143(2); 250; 44AD; 13; 69A

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.243/SRT/2024 (Assessment Year: 2017-18) (Physical Hearing) Hinaben Ojashkumar Patel, 6/1245, Bhut Sheri, Mahidharpura – 365002, Vs. Income Tax Officer, Ward – 2(3)(7), Surat, Room No.414, 4th Floor, Income Tax Office, Anavil Business Center, Adajan Hazira Road, Surat-395 007 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ABLPP5941 K (Appellant) (Respondent) Appellant by None Respondent by Shri Mukesh Jain, Sr. DR Date of Hearing 24/09/2024 Date of Pronouncement 28/10/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the of the Income-tax Act, 1961 (in short, ‘the Act’) by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] dated 08.01.2024 for assessment year (AY) 2017-18. 2. Grounds of appeal raised by the assessee are as under: “[1] On the facts and circumstances of the case as well as law on the subject, NFAC Ld. CIT(A), Delhi erred in confirming the addition of Rs.20,00,000/- by treating the cash deposits made during demonetization period as unexplained cash deposits u/s 69A. The addition confirmed by Ld. CIT(A) is arbitrary, illegal and not justified. [2] The appellant reserves the right to add, amend or alter any of the grounds of appeal.” 2 ITA No.243/SRT/2024/AY.2017-18 Hinaben Ojashkumar Patel 3. Notices for hearing were issued and hearing was posted on 06.05.2024, 19.06.2024 29.07.2024, 18.09.2024 and 24.09.2024. None appeared on behalf of the assessee nor any application was filed for adjournment. It is, therefore, clear that no useful purpose will be served by keeping the appeal pending. Accordingly, we have heard the Learned Senior Departmental Representative (Ld. Sr. DR) for the Revenue, perused the materials available on record and decide the appeal as below: 4. The facts of the case in brief are that the assessee filed her return of income for AY 2017-18 on 01.08.2017 declaring total income of Rs.12,36,230/-. The case was selected for scrutiny and notice u/s 143(2) was issued on 29.09.2018. During the demonetization period, the assessee had deposited cash of Rs.22,60,0000/- in her bank account maintained with Surat National Co-operative Bank. However, the assessee has not disclosed such cash deposits in her return of income. The assessee was asked to explain the source of cash deposited in the bank account. She explained that the cash deposited in the bank account was generated through retail cash sales of readymade garments. She furnished copies of purchase register, sales register, cash book and sales bills. The Assessing Officer (in short, ‘the AO’) found discrepancy between cash book and bills. The relevant copies of bills nos. 1 to 13 were not matching with total amount of cash sale as per cash book. The month-wise cash deposits made by the assessee in her bank account are mentioned by AO at page nos.2 to 3 of the assessment order. 3 ITA No.243/SRT/2024/AY.2017-18 Hinaben Ojashkumar Patel Accordingly to AO, the assessee has not disclosed cash deposited in her bank account. The AO invoked the provisions of section 69A of the Act and observed that (i) the assessee is found to be owner of the money, (ii) money was not recorded in books of account and (iii) its nature and source are not identifiable. The AO also observed that the assessee failed to explain the source of the cash deposited in the bank account with supporting documentary evidence. Hence, the AO computed the total income of Rs.32,36,320/- by adding Rs.20,00,000/- u/s 69A of the Act on account of unexplained money. 5. Aggrieved by the addition, the assessee filed appeal before the CIT(A). The assessee submitted written submission which is extracted at page Nos.4 to 9 of the appellate order. The CIT(A) has also reproduced assessment order at pages 10 to 19 of his appellate order. Finding of the CIT(A) is at para-6.3 of the order. The CIT(A) noted that the cash was generated from retail cash sales of readymade garments. He observed that the cash sales were deposited up to October 2016 in the bank account. The receipts from sales to the extent of Rs.31,00,000/- deposited in bank account is much more than the turnover in the Value Added Tax (VAT) returns required to be furnished as evidence of cash sales. Further, the CIT(A) observed that cash deposited of Rs.20,00,000/- (SBN) was in addition to regular sales and the appellant failed to explain the sources of such cash deposits. Hence, the addition made by AO was confirmed. 4 ITA No.243/SRT/2024/AY.2017-18 Hinaben Ojashkumar Patel 6. Aggrieved by the order of CIT(A), the assessee filed appeal before the Tribunal. None attended before the Bench but assessee submitted written submission on 24.09.2024 and enclosed documents vide Exhibits A to E3. It includes sales bills No.1 to 6 & 7 to 13, cash book for FY 2016-17 (AY 2017- 18), VAT return for FY 2016-17 and ITR-V Forms from AYs 2015-16 to 2017- 18. The assessee submitted that the cash sales are entered in the cash book by the accountant. Cash generated from regular sales are deposited in the bank account. The AO found some discrepancies in the cash book wherein one day’s sales bills No.1 to 13 amounted to Rs.6,138/-. However, bill Nos.1 to 13 amounted to Rs.15,904/-. The assessee submitted that there was a mistake committed by the accountant while entering the bills in cash book. The accountant entered the bill Nos.1 to 13 as on 01.04.2016 but bill Nos. 1 to 6 (Rs.9,775/-) was for 01.04.2016 and bill Nos. 7 to 13 (Rs.6,138/-) was from 02.04.2016. Thus, total sales was Rs.15,904/-. The assessee submitted that the total sales of the year was Rs.69,61,956/- [cash sales of Rs.66,76,593 (+) credit sales of Rs.2,85,363]. The month-wise cash deposited in the bank account at the end of the month is furnished in a tabular form at page No.3 of the paper book. During the festive season starting from September, 2016 to November, 2016, sale was more which resulted into generation of higher amount of cash form sales till the date of demonetization i.e., 08.11.2016. It is submitted that the sale bills No.1 to 5109 for AY.2017-18 totaling to Rs.66,76,593/- was on the basis of the cash book. The source of cash deposits is explained with documentary evidences such as cash bills which are 5 ITA No.243/SRT/2024/AY.2017-18 Hinaben Ojashkumar Patel reflected in the cash book. The assessee submitted that addition made by AO u/s 69A of the Act may be deleted. 6. On the other hand, Ld.Sr-DR for the Revenue supported the order of the lower authorities. He submitted that assessee has not been able to explain source of cash deposit and AO has rightly invoked Section 69A of the Act. 7. We have heard Ld.Sr-DR for the Revenue and perused the record. The business of the assessee is that of retail trading in readymade garments, mainly school uniform and some other items. Assessee has filed ROI showing total income of Rs.12,36,230/- including business income of Rs.11,26,513/-. The business income of Rs.11,26,513/- is as per provisions u/s 44AD on total turnover of Rs.69,61,956/-. According to the assessee, she has deposited cash in the bank account as major portion of sales was in cash. The AO found discrepancy in cash sales on 01.04.2016, being Rs.15,904/- which in fact was sales of 2 days i.e., Rs.9,775/- on 01.04.2016 and Rs.6,138/- on 02.04.2016. Nothing otherwise was found regarding sales and cash book except the technical mistake stated above. The CIT(A) dismissed the appeal on ground that sales as per VAT return and sales as per ROI did not tally, as observed in para-6.3 of appellate order. The turnover upto October, 2016 was less than Rs.30,00,000/-. The CIT(A) held that amount of Rs.20,00,000/- deposited after 08.11.2016 was in addition to sale amounts and assessee failed to show the 6 ITA No.243/SRT/2024/AY.2017-18 Hinaben Ojashkumar Patel source of such cash deposits. Hence, he sustained addition of Rs.20,00,000/-. On the order hand, assessee submitted that sale was more than Rs.30,00,000/- upto October, 2016. 7.1 We have perused the details in the light of the rival submission. We find that the assessee had opening balance of cash-on-hand of Rs.2,83,819/- and turnover of Rs.19,27,681/- and Rs.11,30,399/- in Q-1 and Q-2 of the financial year. Therefore, aggregate turnover and opening balance was more than Rs.30,00,000/-. We also find that annual turnover as per VAT – Form 202 (Exhibit-D) and ROI (Exhbiit-E2) are same at Rs.69,61,956/-. Hence, finding of CIT(A) regarding lower turnover is not correct. There is no evidence of excess turnover as well. In absence of any other independent source of income, it would be fair and reasonable to hold that cash deposit Rs.20,00,000/- was part of the turnover of the assessee. However, there is some irregularity in the accounts of the assessee and explanation given by assessee is not fully convincing. The assessee has offered business income on presumptive basis u/s 44AD of the Act. It has disclosed net profit of Rs.11,26,513/- on turnover of Rs.69,61,956/-, which is 16.18% of the turnover. Considering irregularity in the accounts, the net profit is estimated at 20% of the turnover, which comes to Rs.13,92,391/-. The assessee has disclosed business profit of Rs.11,26,513/-. The AO is directed to add the difference of Rs.2,65,878/- to the returned income instead of Rs.20,00,000/-added by him. The ground is partly allowed. 7 ITA No.243/SRT/2024/AY.2017-18 Hinaben Ojashkumar Patel 8. The other related issue is taxation of the addition in the assessment order us/ 115BBE of the Act. Assessee was doing business of retail trading of readymade garments and she had opted for presumptive taxation u/s 44AD of the Act. We have earlier held that the impugned cash deposit of Rs.20,00,000/- was part of turnover of assessee. The assessee had offered income on presumptive basis u/s 44AD of the Act, which was estimated at higher rate of 20% of the turnover instead of rate of 16.18% offered by assessee. The source of deposit of cash was out of trading receipts and hence the source of deposit of cash of Rs.20,00,000/-is explained. Therefore, provisions of Section 69A r.w.s. 15BBE of the Act cannot be invoked. The AO is directed accordingly. 9. In the result, the appeal of the assessee is partly allowed. Order is pronounced in the open court on 28/10/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) Æयाियक सदÖय/ Judicial Member लेखा सदÖय/ Accountant Member सूरत/Surat Ǒदनांक/ Date: 28/10/2024 DKP Outsourcing Sr.P.S आदेश कì ÿितिलिप अúेिषत/ Copy of the order forwarded to :  अपीलाथê/ The Appellant  ÿÂयथê/ The Respondent  आयकर आयुĉ/ CIT  आयकर आयुĉ (अपील)/ The CIT(A)  िवभागीय ÿितिनिध, आयकर अपीलीय आिधकरण, सूरत/ DR, ITAT, SURAT  गाडª फाईल/ Guard File // True Copy // By order/आदेश से, सहायक पंजीकार "