J.B. Nuts, New Delhi V. ITO, Ward-47(1), Delhi

ITA 104/DEL/2022

AI Insights

The case involves an appeal by J.B. Nuts, a partnership firm engaged in the wholesale trading of dry fruits, against an order by the National Faceless Appeal Centre (NFAC), which confirmed an addition of Rs. 35,65,000 to the assessee's income for the assessment year 2017-18. The addition was made under section 68 of the Income Tax Act, 1961, due to alleged unexplained cash credits linked to increased cash sales during the demonetization period. The Assessing Officer suspected that the assessee had manipulated cash sales to adjust undisclosed income, a suspicion based on the abnormal increase in cash deposits compared to pre-demonetization periods. The Tribunal, however, found no defects in the books of account or the sales invoices provided by the assessee, and concluded that the addition was not substantiated by any concrete evidence.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 113326 (ITAT-DELHI)
• Duration Of Justice: 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-11-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 19-01-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Rejection of books of accounts
• Section: 68; 44AB

Judgement Text

I.T.A.No.104/Del/2022 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “SMC” NEW DELHI SHRI SAKTIJIT DEY, JUDICIAL MEMBER आ.अ.स ं /.I.T.A No.104/Del/2022 िनधा रणवष /Assessment Year: 2017-18 J.B. Nuts 95-97, 1 st Floor, Gandhi Gali, Tilak Bazar, Delhi. बनाम Vs. ITO Ward 47(1) Delhi. PAN No. AALFJ0416G अपीलाथ Appellant यथ /Respondent िनधा रतीक ओरसे /Assessee by Shri S.K. Goyal and Shri Mohit Gupta, CAs राज वक ओरसे /Revenue by Shri Toufel Tahir, Sr. DR स ु नवाईक तारीख/ Date of hearing: 21.11.2022 उ ोषणाक तारीख/Pronouncement on 28.12.2022 आदेश /O R D E R This is an appeal by the assessee against order dated 24.12.2021 passed by National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2017-18. The dispute in the present appeal is confined to addition of Rs.35,65,000/- made under section 68 of the Income Tax Act, 1961. 2. Briefly the facts are, the assessee is a partnership firm engaged in the business of trading in dry fruits. For the assessment year, under dispute, the assessee filed its return of income on 27.10.2017 declaring income of Rs.2,37,790/-. Assessee’s case I.T.A.No.104/Del/2022 2 selected for scrutiny to examine abnormal increase in cash deposits during the demonetization period as compared to pre- demonetization period. After calling for and examining the details of purchase and sales relating to financial years 2015-16, 2016-17 and 2017-18 in course of assessment proceeding, the Assessing Officer noticed that the cash sales in financial year 2016-17 is 74% of the total sales compared to very less cash sales reported in financial year 2015-16 and financial year 2017-18. He further found, assessee had booked cash sales of Rs.43,53,900/- in October, 2016 out of which Rs. 8 lakhs was deposited in bank accounts. According to the Assessing Officer, the fact that out of the cash sales made in October 2016 the assessee had neither used the cash in his business or has deposited in the bank is surprising. He further noticed that the assessee had shown cash sales of Rs.30,82,300/- in the first week of November 2016. Thus, basis the aforesaid facts, the Assessing Officer concluded that the assessee has booked concocted cash sales in the month of October and November 2016 to adjust his undisclosed income during the demonetization period. Thus, ultimately, he concluded that out of the total cash deposit of Rs.71,30,000/- in the bank account, 50% has to be treated as unexplained cash credit under section 68 of the Act representing I.T.A.No.104/Del/2022 3 the undisclosed income. Accordingly, he added back the said amount to the income of the assessee. Though, the assessee contested the addition before learned Commissioner (Appeals), however, the addition was confirmed. 3. Before me, learned Counsel appearing for the assessee submitted that the assessee is in the business of wholesale trading in dry fruits and kirana items. He submitted, assessee’s accounts are subject to statutory audit under section 44AB of the Act and the assessee maintains regular books of account. He submitted, the Assessing Officer has not found any deficiencies or defect in the books of account maintained by the assessee, as, he has not rejected the books of accounts. Thus, he submitted, without rejecting the books of account the Assessing Officer cannot allege that the assessee has manipulated the cash sales. Proceeding further, he submitted, the reason for excess cash sales in the month of October and November was due to festival of Dussehra and Diwali, wherein, sale of dry fruits substantially increases. He submitted, in response to the statutory notices issued and queries raised in course of assessment proceedings, the assessee has furnished every detail including the details of purchases and sales supported by purchase and sale invoices. He submitted, without I.T.A.No.104/Del/2022 4 pointing out any defect in the sales and purchases or the invoices, merely on presumption and surmises the Assessing Officer has treated a part of the cash deposit as unexplained cash credit under section 68 of the Act. He submitted, learned Commissioner (Appeals) also failed to properly appreciate the facts and confirmed the addition made by the Assessing Officer. Thus, he submitted, the addition made, being without any basis, should be deleted. 4. The learned Departmental Representative strongly relied upon the observations of the departmental authorities. 5. I have considered rival submissions and perused materials on record. 6. It is a fact on record that the assessee is a wholesale trader in dry fruits and kirana items. Not only the assessee maintains regular books of account but it’s account are subjected to statutory audit under section 44AB of the Act. A perusal of the assessment order reveals that in response to the notices issued and queries raised the assessee not only furnished its books of account but all necessary evidences including details of sales and purchases, sales invoices, purchase invoices, bank statement, confirmation of the parties, etc. The Assessing Officer has not pointed out any deficiency or defect I.T.A.No.104/Del/2022 5 in the books of account or the invoices furnished before him. In fact, the Assessing Officer has not rejected the books of accounts. Only because the assessee has shown increased cash sales in the month of October 2016 and first week of November 2016, the Assessing Officer has entertained a doubt and suspected that the assessee has manipulated its cash sales to deposit his undisclosed income by way of cash during the demonetization period. The aforesaid allegation of the Assessing Officer is not based on any concrete evidence brought on record, but merely on conjecture and surmises. No adverse material has been brought on record by the Assessing Officer to demonstrate that the cash sales made by the assessee either are non-genuine or bogus. Further, the Assessing Officer has treated 50% of the cash sales as concocted and has accordingly made the addition. The Assessing Officer has provided absolutely no reason why he took the figure of 50%. Thus, the addition made is purely on ad hoc / presumptive basis without being backed by any material. Unfortunately, learned Commissioner (Appeals), without properly appreciating the facts, has confirmed the addition. When no deficiency or defect has been found either in the books of accounts or invoices raised and further, books of account have not been rejected, the addition made on purely guess I.T.A.No.104/Del/2022 6 work and presumptive basis cannot be sustained. Accordingly, I delete the addition. 7. In the result, appeal is allowed. Order pronounced in the open court on 28/12/2022 Sd/- (SAKTIJIT DEY) JUDICIAL MEMBER Dated: 28 .12.2022 *Kavita Arora, Sr. P.S. Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order Assistant Registrar, ITAT: Delhi Benches-Delhi