INCOME TAX OFFICER , VIJAYAPUR V. VIKRAM DALICHAND BANDARI , VIJAYAPUR

ITA 1390/BANG/2024

AI Insights

The case involves Vikram Dalichand Bhandari, a proprietor of Vikram Traders, who was assessed for unexplained cash deposits amounting to Rs.6,84,68,020 in his bank account. The Income Tax Department reopened his assessment for the year 2014-15 under section 147 of the Income Tax Act, 1961, based on information received about these deposits. Initially, the Assessing Officer (AO) treated these deposits as unexplained money under section 69A, but the CIT(A)/NFAC later deleted this addition, accepting the assessee's explanation that these were proceeds from his business activities. The revenue appealed against this decision, leading to the current proceedings before the Tribunal.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 34071 (ITAT-BANGALORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUDHEENDRA B.R.
• Assessee Lawyers: D.K. MISHRA
• Keywords: Business income; Additional evidence; Reason to believe
• Section: 148; 142(1); 143(2); 250; 143(1); 13; 69A

Judgement Text

"ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura IN THE INCOME TAX APPELLATE TRIBUNAL “A’’BENCH: BANGALORE BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI KESHAV DUBEY, JUDICIAL MEMBER ITA No.1390/Bang/2024 AssessmentYear:2014-15 ITO Vijayapur Vs. Vikram Dalichand Bhandari Prop: Vikram Traders, Kirana Bazar Vijayapura Karnataka 586101 PAN NO : AIGPB0693L APPELLANT RESPONDENT CO No.32/Bang/2024 Assessment Year: 2014-15 Vikram Dalichand Bhandari Prop: Vikram Traders, Karnataka 586101 Vs. ITO Vijayapur APPELLANT RESPONDENT Appellant by : Sri Sudheendra B.R., A.R. Respondent by : Shri D.K. Mishra, D.R. Date of Hearing : 06.12.2024 Date of Pronouncement : 05.03.2025 O R D E R PER KESHAV DUBEY, JUDICIAL MEMBER: This appeal at the instance of revenue is directed against the order of ld. CIT(A)/NFAC dated 19.6.2024 vide DIN & Order No. ITBA/NFAC/S/250/2024-25/1065779012(1) passed u/s 250 of the Income Tax Act, 1961 (in short “The Act”) for the assessment year 2014-15. The assessee has also filed cross objection against the said appeal of the revenue. ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 2 of 15 2. The revenue has raised the following grounds of appeal: 3 The assessee has raised the following grounds of cross objection: ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 3 of 15 ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 4 of 15 4. The brief facts of the case are that the assessee being an individual engaged in the wholesale trading business of Kirana items and filed his return of income on 5.9.2014 declaring total income of Rs.14,08,240/- for the assessment year 2014-15. The said return was processed u/s 143(1) of the Act by accepting the returned income. The information in this case was received on insight portal under high risk cases that the assessee had made cash deposit of Rs.6,84,68,020/- in the bank account maintained with Shri Gurubasava Urban Credit Souhardha Co-operative Bank Ltd. Bijapur. Based on this information, the case was reopened u/s 147 of the Act and notice u/s 148 of the Act was issued. In response to notice u/s 148 of the Act, assessee filed return of income declaring total income of Rs.32,07,070/-. Subsequently, notices u/s 143(2) as well as 142(1) of the Act was issued requesting the assessee to furnish the relevant details and documents and more particularly on the reasons the assessment is reopened. During the course of assessment proceedings, the assessee submitted that the transaction in above referred bank account has not been disclosed in the original return of income and hence he had revised the return of income after declaring the same gross profit of 2.56% on the undisclosed transactions of Rs.6,84,68,020/- which worked out to be Rs.17,52,781/-. It is also submitted by the assessee that assessee has carried out business of purchasing and sales out of books of Account to the extent of Rs.6,84,68,020/- and the realization was deposited in the bank account No.19 with Shri Guru Basava Urban Credit Souhardha Co-operative Bank Ltd., Bijapur. It is also submitted that since the transactions are not accounted, accordingly the assessee has revised the return showing an additional amount of Rs.Rs.17,52,781/- to the original disclosed income. The purchase and sales transactions for month-wise are also furnished before the ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 5 of 15 AO. The Ld. AO observed that the accounts of the assessee are thoroughly audited by a qualified CA and the assessee himself admitted that the unaccounted & unrecorded transactions are not brought on record and was also not in the knowledge of the auditor. Further, AO found that in the audited accounts there is no mention about the bank account maintained with Shri Guru Basava Urban Credit Souhardha Co-operative Bank Ltd., Bijapur. The AO was of the opinion that accepting and disclosing additional income when it was brought to the notices does not grant immunity to the assessee from the penal provisions and therefore, held that entire amount of cash transaction as appearing in the information with Shri Guru Basava Urban Credit Souhardha Co-operative Bank Ltd., Bijapur amounting to Rs.6,84,68,020/- is considered as assessee’s income from other sources and added u/s 69A of the Act as unexplained money. 5. Aggrieved by the assessment completed u/s 143(3)/147 r.w.s. 144B of the Act, the assessee preferred an appeal before the ld. CIT(A)/NFAC. 5.1 The Ld. CIT(A)/NFAC partly allowed the appeal of the assessee on the ground that the assessee made cash sales to the retailors and such sale proceeds were deposited in the bank account maintained with Shri Guru Basava Urban Credit Souhardha Co-operative Bank Ltd., Bijapur and subsequently these sale proceeds were utilized to make payment to the vendors against the purchases made. The assessee submitted the party wise breakup of purchases, corresponding cash sales and bank statement. The ld. CIT(A) was of the view that during the assessment proceedings the AO neither rejected the books of accounts nor doubted the purchases made by the assessee. Since the purchases were accepted, the AO could not disallow the sales ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 6 of 15 merely on the basis that sales were made in cash. The ld. CIT(A) was also of the view that addition of cash deposit u/s 69A of the Act would result in double taxation of the same amount once in the form of business income and again at the rate of 60% u/s 115BBE of the Act. The Ld. CIT(A)/NFAC held that as the assessee proved the business activity with sales invoice, purchase payments and the AO did not found any deficiency in the documentary evidences filed by the assessee and accordingly accepted the contention of the assessee and deleted the addition of Rs.6,84,68,020/- on account of cash deposits made during the year under consideration. 5.2. Further with regard to assessee’s claim that the initiation of action u/s 148 of the Act was illegal and invalid as barred by time, the ld. CIT(A)/NFAC did not find any illegality or invalidity in the action of the initiation of notice u/s 148 of the Act and consequent assessment order passed by the AO and accordingly dismissed this ground of the assessee. 5.3. Aggrieved by the order of ld. CIT(A)/NFAC the revenue has filed the appeal in ITA No 1390/B/2024 contesting the deletion of addition made u/s 69A of the Act amounting to Rs. 6,84,68,020/- and the respondent assessee has filed CO 32/B/2024 challenging the validity of notice under section 148. 5.4. The ld. A.R. of the assessee has filed paper book along with case law compilation comprising of total 452 pages along with written synopsis of arguments. 6. Before us, the ld. D.R. submitted that the ld. CIT(A)/NFAC was not justified in deleting the entire addition made on account of cash transactions amounting to Rs.6,84,68,020/- by admitting fresh evidence produced by the assessee during the appellate ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 7 of 15 proceedings without affording reasonable opportunity to the AO to rebut. The ld. D.R. also submitted that ld. CIT(A)/NFAC erred in admitting additional evidence which is not in accordance with the rule 46A (3) of the I.T. Rules, 1962. The ld. D.R. further submitted that the ld. CIT(A)/NFAC is not justified in directing the AO to delete the entire addition made u/s 69A of the Act especially when the books of Accounts of assessee are Audited & there is no mentioned of Bank A/c in the said books of Accounts & this is only an afterthought after receipt of notice u/s 148 of the Act. With regard to Legal issues on notice u/s 148 of the Act allegedly issued on 01/04/2021, the ld. DR vehemently submitted that once the notice is generated on the system on 31st March, 2021, it automatically sent notices to the assessee on the same day as it is completely system driven mechanism. 7. The ld. A.R. for the assessee on merits vehemently supported the order of the ld. CIT(A)/NFAC & submitted that the Order passed by the ld. AO is illegal & bad in law & liable to be quashed as ld. AO erred in not issuing the notice u/s 148 of the Act on or before 31/03/2021. Further the ld. AR submitted that generation of Notice and issuance of Notice is two separate things. Merely because the Notice is generated on 31st March, 2021does not mean the same is issued on 31st March, 2021 as can be seen from the screen shot of the Income Tax Portal which says “issued on 01st April,2021”. Lastly the ld. AR submitted that as the assessee had already declared the additional Income by way of filing the Return & paid the due taxes on the undisclosed turnover, the question of unexplained Money does not arise in the present case. 8. We have heard the rival submissions & perused the material available on record. It is an undisputed fact that in view of the information that the Assessee has made cash deposits of Rs. ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 8 of 15 6,84,68,020/- in the bank account with Shri Gurubasava Urban Credit Souhardha Co-Operative Bank, Bijapur, the notice under section 148 of the Act dated 31/03/2021 was issued by the AO on a reason to believe that the income chargeable to tax had escaped assessment and requiring the Assessee to furnish a return of income. The Assessee furnished the return of income in response to notice under section 148 on 20/09/2021 declaring total income of Rs. 32,07,070/-. The assessee declared gross profit of Rs. 17,98,831 computed at 2.56% on the undisclosed sales of Rs. 7,02,66,851/- in the return of income filed in response to notice under section 148 of the Act in addition to income declared as per original return of income. The assessee has adopted the same GP ratio of 2.56% to the undisclosed transactions. The Assessee has also furnished the month wise purchase and sales transactions before the AO. The fact that the purchases and sales were unaccounted is also not denied by the Assessee. During the course of the assessment proceedings the assessee submitted that he made various sales to retailers in cash and collected all the funds generated from such sales and deposited the amount in the bank account of Shri Gurubasava Urban Credit Souhardha Co-Operative Bank, Bijapur. The funds that were deposited in the bank account were to the extent of the purchases that were made to carry out the sales. The bank subsequently issued certain cheques drawn in favour of various suppliers of goods to the assessee corresponding to the amount of cash deposited in the bank account. Hence, the sales and purchases were not forming part of the books of accounts of the Assessee. 8.1 The ld. AO rejected the claim of the assessee on the ground that the accounts are thoroughly audited by a CA & there is no mention of bank account maintained with Shri Gurbasava Urban Credit Sauhardha Co-op Ltd in the books of A/c and the ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 9 of 15 assessee himself admitted that the unaccounted unrecorded transactions are not brought on record. Further AO held that as the bank account itself shows that there are equal credits and equal debits & there is no balance at the end of the year, the claim made by the assessee does not have any merit in the nature of business transactions. The AO was of the view that the assessee appears to be very clever in accepting & disclosing the additional income which does not grant any immunity to the assessee from the penal provisions and accordingly treated the entire amount of cash transactions amounting to Rs. 6,84,68,020/- as Income from Other Sources and added u/s 69A of the Act as unexplained Money. 8.2 The ld. CIT(A)/NFAC however deleted the impugned addition with the following observations/reasons:- (i) The assessee submitted the party wise break up of purchases, corresponding cash sales, bank account statements. The AO neither rejected the books of A/c nor doubted the purchases made by the assessee. Since the purchases were accepted, the AO could not disallow the cash sales. (ii) The assessee proved that cash deposited was out of business income/receipts and gross profit is already declared in the return of income filed in response to notice u/s 148; (iii) addition of entire cash deposit u/s 69A of the Act would result in double taxation of the same amount once in the form of business income and again at the rate of 60% u/s 115BBE; (iv) On perusing the assessment orders in similar cases of other traders wherein the cash was also deposited in the same bank account with Sri Gurubasava Urban Credit Souhardha ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 10 of 15 Co-Operative Bank, Bijapur, the AO made addition of Gross Profit of the cash deposits. (v) The AO did not find any deficiency in the documentary evidences filed by the assessee. The assessee accepted to be owner of money, satisfactorily explained the source of money and also offered the profit element for taxation. 8.3 Before leaping further it is worthwhile here to take note of the Section 69A of the I. Tax Act for the purpose of this case which deals with unexplained money read as under: Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not recorded in the books of account, if any, maintained by him for any source of income, and the assessee offers no explanation about the nature and source of acquisition of the money, bullion, jewellery or other valuable article, or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the money and the value of the bullion, jewellery or other valuable article may be deemed to be the income of the assessee for such financial year.” 8.4 Thus in order to be levied tax u/s. 69A, three conditions are need to be established by the assessing officer- 1) The assessee is found to be the owner of any money, bullion, jewellery or valuable article 2) Such money, bullion, jewellery or valuable article is not recorded in the books of accounts if any maintained by him for any source of income. ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 11 of 15 3) The assessee offers no explanation about the nature and source of acquisition of money, bullion, jewellery or valuable article or the explanation offered by him in the opinion of the AO satisfactorily. 8.5 Thus, in the present case, to invoke deeming provisions u/s 69A of the Act, the assessee should be owner of any physical assets like money, bullion, jewelry or other valuable article, which is not so in the present case. Further, we are of the opinion that the nature & source of the cash deposited in the bank accounts were duly explained before the authorities below by submitting the party wise break up of purchases, corresponding cash sales, bank account statements. The assessee had also produced the month wise purchase & sales transactions as observed by ld. AO in his Assessment Order. The assessee had also furnished the following declaration in his return of income in pursuance to 148 of the Act- Additional Sales Turnover Rs.7,02,66,851/- Additional amount of Purchases Rs.6,84,68,020/- Total Additional Gross Profit (2.56%) Rs. 17,98,831/- Therefore, we are of the opinion that the provisions of section 69A of the Act do not apply in the case of the assessee especially when the AO has not brought any contrary material on record to disproof the claim of the assessee. Merely by stating that assessee appears to be clever in accepting & disclosing the additional income will not give entitlement to AO to apply rigorous provision of section 115BBE of the Act. 8.6 Now with regard to the first grounds of appeal of the revenue we are of the opinion that the power of the CIT(A) are co-terminus with that of the AO i.e. he can do all that the AO could do. We ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 12 of 15 found the order of ld. CIT(A) to be reasonable and logical on the given state of facts and the grounds raised by the assessee on merits of the case by considering the documents/records produced by the assessee. 8.7 Hon’ble Madras High Court in the case of Arul Murugan and Co. (1982) 51 STC 381 has observed as follows:’ “In a tax appeal, the appellate authority is very much committed to the assessment. The appellate authority can itself enter the arena of assessment, either by pursuing further investigation or causing further investigation to be done. It can do so on its own initiative, without being prodded by any of the parties. It can enhance the assessment, taking advantage of the opportunity afforded by the tax payer’s appeal, even though appeal itself has been mooted only with a view to a reduction in the assessment. These are special and exceptional attributes of the jurisdiction of a tax appellate authority. These attributes undeline the truth that the appellate authority is no different, functionally and substantially, from the assessing authority itself.” 8.8 Therefore, We are of the considered opinion that legislature has conferred very wide powers upon the appellate commissioner once an appeal is preferred to him by the assessee. An appeal is only a rehearing or a retrial. In the absence of any statutory inhibitions or restrictions, the ld. CIT(A) has precisely the same powers, exercisable or in the same manner and to the same extent, as the AO has, in the first instance. Further, u/s 250(4) of the Act, before disposing of any appeal, the ld. CIT(A) is competent to make such further inquiry as he thinks fit or he may direct the AO to make further inquiries and report the result of the same to the Joint Commissioner (A) or the Commissioner (A). 8.9 The assessee on or before the completion of assessment had produced the month wise purchase & sales transactions as observed by ld. AO in his Assessment Order, the same the party ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 13 of 15 wise break up of purchases, corresponding cash sales, bank account statements submitted before the ld. CIT(A)/NFAC cannot be treated as an additional evidence filed before the ld. CIT(A) as these are not filed for the first time before the ld. CIT(A). In our view, the ld. CIT(A) has rightly passed an order by stating the points for determination and the reason for decision by taking into consideration the documents/records/evidences produced by the assessee. We do not find any merits in these grounds raised by the Revenue and accordingly dismiss the same. 8.10 With regard to second grounds of Appeal we are of the opinion that during the course of assessment proceedings, the assessee himself admitted that the unaccounted & unrecorded transactions are not brought on record and was also not in the knowledge of the auditor and accordingly filed the return in response to notice u/s 148 of the act by declaring total income of Rs. 32,07,070/-. The assessee declared gross profit of Rs. 17,98,831 computed at 2.56% on the undisclosed sales of Rs. 7,02,66,851/- in the return of income in addition to income declared as per original return of income. The assessee has adopted the same GP ratio of 2.56% to the undisclosed transactions. The Assessee has also furnished the month wise purchase and sales transactions before the AO. During the course of the assessment proceedings the assessee submitted that he made various sales to retailers in cash and collected all the funds generated from such sales and deposited the amount in the bank account of Shri Gurubasava Urban Credit Souhardha Co-Operative Bank, Bijapur. The funds that were deposited in the bank account were to the extent of the purchases that were made to carry out the sales. The bank subsequently issued certain cheques drawn in favour of various suppliers of goods to the assessee corresponding to the amount of cash deposited in the bank account. Hence, the sales ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 14 of 15 and purchases were not forming part of the books of accounts of the Assessee. Therefore we are of the considered opinion that the assessee has properly explained the nature & source of the transactions. Even if for a moment we presume that it is only a afterthought by the assessee even then the revenue failed to controvert by bringing any material on record. The additions cannot be sustained on surmises. 8.11 We completely agree with the view of the ld. CIT(A)/NFAC in holding that the AO neither rejected the books of A/c nor doubted the purchases made by the assessee. Since the purchases were accepted, the AO could not disallow the cash sales. The assessee proved that cash deposited was out of business income/receipts and gross profit is already declared in the return of income filed in response to notice u/s 148 and therefore the addition of entire cash deposits would result in double taxation of the same amount once in the form of business income and again at the rate of 60% u/s 115BBE and accordingly we dismiss this ground of the appeal of the Revenue. 9. In the result the appeal filed by the revenue is dismissed. 10. Now coming to CO No.32/Bang/2024, since we have dismissed the appeal of the revenue on merits, therefore, we inclined to hold the CO as infructuous and accordingly dismissed and the grounds of CO left open. ITA No.1390/Bang/2024 & CO No.32/Bang/2024 Vikram Dalichand Bhandari, Vijayapura Page 15 of 15 11. In the result, appeal of the revenue is dismissed and CO of the assessee is dismissed as infructuous. Order pronounced in the open court on 5th Mar, 2025 Sd/- (Waseem Ahmed) Accountant Member Sd/- (Keshav Dubey) JudicialMember Bangalore, Dated 5th Mar, 2025. VG/SPS Copy to: 1. The Applicant 2. The Respondent 3. The CIT 4. The DR, ITAT, Bangalore. 5 Guard file By order Asst. Registrar, ITAT, Bangalore. "