DCIT-CC-1, Ludhiana V. M/s Roopam Silk International, Ludhiana

ITA 168/CHANDI/2021

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 5989 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-08-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Appeal Filed On: 28-06-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Search and seizure
• Section: 69A; 44AB; 145(3)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ,च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, “B”, CHANDIGARH BEFORE SHRI N.K. SAINI, VICE PRESIDENT & SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER आयकरअपीलसं ./ITA No.168/CHD/2021 नधा रणवष / Assessment Year :2017-18 The DCIT, Central Circle-1, Ludhiana बनाम M/s Roopam Silk International, Dr. Gujjar Mal Road, Ludhiana थायीलेखासं./PAN NO: AAEFR2821C अपीलाथ /Appellant यथ /Respondent C.O. No. 5/Chd/2021 (Arising out of आयकर अपील सं./ITA No. 168/CHD/2021) नधा रणवष / Assessment Year : 2017-18 M/s Roopam Silk International, Dr. Gujjar Mal Road, Ludhiana बनाम The DCIT, Central Circle-1, Ludhiana थायीलेखासं./PAN NO: AAEFR2821C अपीलाथ /Appellant यथ /Respondent नधा रती क ओर से/Assessee by : Sh. SudhirSehgal, Advocate राज व क ओर से / Revenue by : Sh. Sarabjeet Singh, CIT DR स ु नवाई क तार%ख/Date of Hearing : 24.05.2022 उदघोषणा क तार%ख /Date of Pronouncement : 18.08.2022 आदेश /Order Per SudhanshuSrivastava, Judicial Member: This appeal is preferred by the Department and the Cross Objection by the assessee and both are against the order dated 2 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana 29.04.2021 passed by the Ld. Commissioner of Income Tax-5, Ludhiana [hereinafter referred to as ‘CIT(A) ]’ and pertain to assessment year 2017-18. 2.0 The brief facts of the case are that the assessee belongs to M/s Roopam Square group of cases where a search and seizure operation under section 132(1) of the Income Tax Act, 1961 (hereinafter called ‘the Act’) was conducted on 01.11.2017 and the assessee’s case was also covered under the said search. The return of income for the captioned assessment year had earlier been filed on 11.08.2017 declaring income of Rs. 10,80,540/-. The assessee’s case was centralized and in response to the statutory notice, the assessee again filed the return of income declaring income of Rs.10,80,540/-. 2.1 During the course of assessment proceedings, the AO noted that the assessee had deposited huge cash in the various bank accounts during the demonetization period i.e. 09.11.2016 to 30.12.2016. The AO required the assessee to explain such deposits but since, as per the AO, the assessee could not explain the same satisfactorily, an amount of Rs.79,00,000/- (being 30% of sales) was held to be unexplained cash deposited during the 3 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana demonetization period and the same was added to the income of the assessee. The AO also applied provisions of section 115BBE of the Act and completed the assessment at Rs.89,80,540/-. 2.2 Aggrieved, the assessee preferred appeal before the Ld. first appellate authority who deleted the addition by holding that the AO had made the addition without giving any basis. 2.3 Aggrieved with this order of the Ld. CIT (A), the department has filed the present appeal before the Tribunal and the assessee has also filed a Memorandum of Cross Objection supporting the order of the Ld. CIT (A) and has also challenged the impugned assessment order on the ground of non-application of mind by the Addl. CIT while giving the approval to the impugned assessment order under section 154D of the Act. 2.4 The Grounds taken by the respective parties are as under: ITA No. 168/Chd/2019 – Department’s appeal 1. Whether upon facts and circumstances of the case, the Ld. CIT (A) was justified in deleting the addition made on account of unexplained cash deposits during demonetization period u/s 69A of the Income Tax Act, 1961 amounting to Rs. 79,00,000/-. 2. The appellant craves leave to add, amend, modify, vary, omit or substitute any of the 4 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana aforesaid grounds of appeal at any stage before or at the time of hearing of the appeal. C.O. No. 5/Chd/2021 – by the assessee. 1. That the Ld. CIT (A) has rightly deleted the addition of Rs. 79 lacs on account of alleged unexplained cash deposits u/s 69A. 2. Notwithstanding the above said ground of appeal, the assessment as framed by the Assessing Officer deserves to be quashed since "Mandatory Approval" as given by the Ld. Addl. CIT u/s 153D is without any application of mind and being a 'Mechanical Approval’ only, the assessment as framed by the Assessing Officer at an income of Rs. 89,80,540/- deserves to be quashed in view of the binding judgment of Hon'ble Jurisdictional Bench of ITAT, in the case of Inder International in ITA No.1573/Chd/2018. 3. That the respondent craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off. 3.0 At the outset, the Ld. Authorized Representative (AR) submitted that the CO filed by the assessee was not being pressed. Accordingly, the CO of the assessee is dismissed as not pressed. 4.0 Arguing the for appeal of the department, the Ld. CIT DR submitted that the assessee had made huge deposits of cash 5 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana during the demonetization period which was not in accordance with the past trend of cash deposits i.e. in the earlier assessment years. Our attention was drawn to the assessment order wherein the AO had reproduced a tabular chart for financial years 2014- 15, 2015-16, 2016-17 comparing month-wise and year-wise total sales, cash sales and cash in hand and it was submitted that it was apparent that there was a sharp increase in cash sales of the assessee as well as of cash deposits during the demonetization period which had not been explained satisfactorily by the assessee before the AO and, therefore, the addition had rightly been made. It was further argued that the assessee could not provide information about PANs of most of the persons to whom it is claimed that cash sales were made during the demonetization period. The Ld. CIT DR submitted that, apparently, the assessee had brought in unaccounted cash in the books of the company under garb of the sale. 4.1 It was further submitted that no books of account had been produced before the AO as has been brought on record by the AO. It was further argued that the Ld. CIT (A) had not considered these very relevant observations of the AO while directing that the addition should be deleted. He also referred to the case of 6 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana another group company M/s Saakshat and submitted that in that particular case it had been clearly established that the said company had back-dated the bills in an attempt to bring in unaccounted cash in the books of accounts and apparently the same modus operandi was being followed in the present case also. 4.2 The Ld. CIT DR also submitted that the AO had rightly held that 30% of the sale was unexplained money but the Ld. CIT (A) had only doubted such percentage but had he himself not given any percentage in the impugned order indicating as to what would have been the correct percentage while making the addition. 5.0 In response to the arguments of the Ld. CIT DR, the Ld. AR vehemently argued that the Ld. CIT DR has wrongly contended that no books of accounts had been produced in as much as the assessee has been maintaining proper and regular books of accounts which have been duly audited and audit report under section 44AB of the Act is duly found on the record of the AO and further no defects whatsoever have been pointed out by the AO as to validly make any addition on account of alleged unexplained cash deposits. It is further pointed out that the assessee has also 7 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana been maintaining day to day stock records both in terms of quantity as well as value which has not been doubted by the AO. 5.1 It was further submitted that there is no allegation by the AO that the assessee did not have sufficient stock in hand to make the sales against which the impugned cash had been received. It was further submitted that the purchases, the opening stock, the sales as well the closing stock have duly being accepted by the AO and, therefore, making addition on account of cash deposits by treating them unexplained was without any basis. 5.2 Referring to the reliance of the Ld. CIT DR on the case of another group company M/s Saakshat, the Ld. AR submitted that the Ld. CIT (A) had deleted the addition in that particular case also vide order dated 29.04.2021. A copy of the said order was also placed before us. 5.3 The Ld. AR further argued in view of all these facts, the AO had no reason to make any addition and, further, there was no logic behind taking the percentage of 30% of sales as being unexplained cash deposit and, thus, in light of the various documentary evidences and the books of accounts, the impugned addition had been made on mere suspicion. 8 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana 5.4 The Ld. AR placed reliance numerous orders of the ITAT wherein cash deposits during demonization period had been added to the income of the assessee but had been deleted by the ITAT as the addition was not based on proper appreciation of facts. 6.0 We have heard rival submissions and have also perused the material on record. The only dispute before us is whether the Ld. CIT (A) was right in deleting the addition made by the AO to the tune of Rs.79,00,000/- being alleged unexplained cash deposited in the bank accounts of the assessee during the demonetization period. It is seen that all these cash deposits, undisputedly, have been routed through the books of accounts of the assessee. However, what stands out as glaring is that although the AO has not accepted the submission of the assessee that such cash deposits were out of the sales, he has not rejected the books of accounts under section 145(3) of the Act. We also note that the AO has not rejected the figures of opening stock, purchases, sales or closing stock but has only discarded the claim of cash deposit. We also note that the AO as well as the Ld. CIT DR have placed reliance on the case of the group concern M/s Saakshat wherein the said concern was found to have back-dated 115 invoices. 9 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana However, this reliance does not come to the aid of the department in the present case in as much as each taxpaying entity is an independent entity and is not necessary that two firms within the same group might be indulging in the same kind of unlawful activity. Further, the reliance on the case of M/s Saakshat is not backed by any cogent evidence pointed out by the AO in the case of the assessee which could be of any help to the department. We also note that in the case of M/s Saakshat, the Ld. CIT (A) was pleased to delete the addition vide order dated 29.04.2021 which has been placed before us and, further, since the department has not filed any appeal against the order of the Ld. CIT (A), such addition does not carry any kind of persuasive value. 6.1 Therefore, looking into the facts of the case, we are of the considered view that the assessee has been able to establish beyond doubt that the cash deposits in the bank accounts during the demonization period were linked to cash sales and it is in fact the department who should have brought cogent evidence on record to establish otherwise. In absence of such cogent evidence having been furnished by the department, the impugned addition assumes the character of an addition made on mere surmises 10 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana and conjectures and, therefore, we find no reasons to interfere with the order of the Ld. CIT (A) in deleting the said addition. 6.2 The Hon'ble Apex Court in the case of Umacharan Shaw and Brothers Vs. CIT reported in (1959) 37 ITR 271 (SC) had held that suspicion however strong, cannot take place of evidence. 6.3 We have also gone through the order of the Chandigarh Bench of the ITAT in the case of “Kalaneedhi Jewellers” reported in (2022) 96 ITR Trib. 66 (Chd) which has been relied upon by the Ld. AR and wherein, by relying upon the judgment of the Hon'ble Delhi High Court in the case of Agson Global Ltd. and PCIT Vs. Akshit Kumar, the co-ordinate Bench in the same combination has deleted the addition by observing as under: “10.11 In the present case also the opening stock, purchases and sales and closing stock, declared by the assessee has not been doubted, the sales were made by the assessee out of the opening stock and purchases and the resultant closing stock has been accepted, the sales had not been disturbed either by the Assessing Officer or by the Sales Tax/VAT Department and even there was no difference in the quantum figures of the stock at the time of search on April 12,2017, therefore, the sales made by the assessee out of the existing stock were sufficient to explain the deposit of cash (obtained from realization of the sales) in the bank account and 11 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana cannot be treated as undisclosed income of the assessee.” 10.13 In the present case also the cash deposited post demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the Assessing Officer, there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October,2016 prior to the making of the cash deposit in the bank account out of sales. So, respectfully following the aforesaid referred to orders by the various Hon'ble High Courts and the co-ordinate Benches of the Income Tax Appellate Tribunal, we are of the view that the impugned addition made by the Assessing Officer and sustained by the Learned Commissioner of Income Tax (Appeals) was not justified, accordingly the same id deleted.” 6.4 Before parting, we would also like to refer to another order of the Tribunal, this by the co-ordinate Bench at Vishakhapatnam in the case of CIT Vs. Hira Panna Jewellers reported in 96 ITR 128 (Trib) wherein the co-ordinate Bench held that there was no reason to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in 4 hours, non-availability of KYC documents, non-availability of CCTV footage etc. during the demonization period. The Bench went out to hold that since the assessee had 12 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana established the sale with the bills and out-go of stocks and there were no abnormal profits, the addition in respect of cash deposits could not be sustained. 6.5 Therefore, in view of the above cited judicial precedents and in view of our observations in the preceding paragraphs vis-à-vis the AO being unable to lead with cogent evidence that the assessee had introduced unaccounted cash in the garb of sale and further since the book results of the assessee had been duly accepted by the AO and even the books of account had not been rejected by the AO, we find no reason to interfere with the impugned order of the Ld. CIT (A) and we uphold the same. 7.0 In the final result the appeal of the Department as well as the CO of the assessee stands dismissed. Order pronounced on 18.08.2022. Sd/- Sd/- ( N.K. SAINI) (SUDHANSHU SRIVASTAVA) Vice President Judicial Member Dated : 18.08.2022 “आर.के .” आदेशक त,ल-पअ.े-षत / Copy of the order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकरआय ु /त/ CIT 13 ITA 168-c-2021 & C.O. 5-c-2021(AY 2017-18) – Roopam Silk International, Ludhiana 4. आयकरआय ु /त (अपील)/ The CIT(A) 5. -वभागीय त न2ध, आयकरअपील%यआ2धकरण, च4डीगढ़/ DR, ITAT, CHANDIGARH 6. गाड फाईल/ Guard File आदेशान ु सार / By order, सहायकपंजीकार/ Assistant Registrar