Neena Praful Sawlani, Surat V. Income Tax Officer, Wd. 1(3)(8), Surat

ITA 216/SRT/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 0581 (ITAT-SURAT)
• Duration Of Justice: 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 17-11-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Business income; Deemed to accrue or arise in india; Set aside
• Section: 68; 44AD; 69A; 72

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 216/Srt/2021 (Assessment Year: 2017-18) (Virtual hearing) Neena Praful Sawlani, 13, Bhagya Nandini Raw House, B/H Gangeshwar Temple, New Adajan Road, Surat-395009. PAN No. BJVPS 7852 R Vs. I.T.O., Ward 1(3)(8), Surat. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Rajesh Upadhayay, CA Department represented by Shri Vinod Kumar, Sr.DR Date of hearing 29/08/2022 Date of pronouncement 17/10/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of the learned Commissioner of Income Tax (Appeals), Surat (in short, the ld. CIT(A)/National Faceless Appeal Centre, Delhi (in short, the NFAC) dated 20/09/2021 for the Assessment year (AY) 2017-18. The assessee has raised solitary ground of appeal which reads as under: “1. The ld. CIT(A), NFAC has erred in law and on fact to confirm AO’s addition being unexplained investment u/s 69A for Rs. 15,38,500/- in form of cash deposit by appellant in her two bank account with Axis Bank.” 2. Brief facts of the case are that the assessee is an individual and engaged in the business of jewellery designing and shows business income. The assessee filed her return of income for A.Y. 2017-18 on ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 2 15/05/2017 declaring income of Rs. 3,64,130/-. The return of income was selected for scrutiny. During the assessment proceedings, the Assessing Officer noted that as per information available with him, the assessee has made cash deposit of Rs. 12,18,000/-, during demonetization year in her two bank accounts maintained with Axis bank. The Assessing Officer prepared a summary of cash deposit during demonetization year, during remaining period of financial year (FY) and other credit entries in the following manner: Bank Name Account No. Cash deposit during demonetization period (Rs.) Cash deposit during remaining year 2016-17 (Rs.) Credit entry other than cash during the year (Rs.) Total Rs. Axis bank 913010054129047 2,50,000/- 2,15,000/- 5,50,000/- 10,15,000/- Axis bank 915020009055079 9,68,000/- 1,05,500/- 4,69,902/- 15,43,402/- Total 25,58,402/- On the basis of aforesaid details, the Assessing Officer issued show cause notice to explain the source of credit and debit and nature of credit and debit through cheques. The Assessing Officer also noted in his show cause notice that in case, all expenditure, cash book, bank account, debit entry, credit entry and if no explanation is not furnished with documentary evidence, it will be presumed that the assessee has nothing to explain and entire deposits of Rs. 25,58,402/- will be treated as unexplained income derived from undisclosed sources. ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 3 3. The assessee filed her reply. Part of reply of assessee is extracted in para 3 of assessment order. In the reply, the assessee stated that the assessee is engaged in business of jewellery designing and charging the labour cost. The assessee also furnished the details of address of his shop/business premises. The Assessing Officer recorded that reply of assessee is not acceptable. The assessee has shown income from various persons on account of job work/labour income. The assessee has not given complete addresses of such persons. In absence of required details, the cash receipt income shown by assessee in her cash book is not verifiable. The assessee has reduced expenses in cash and increased cash receipt during this financial year comparative to previous financial year which not practically possible in the jewellery designing labour work and that the cash deposit in the bank account is abnormally high to previous year. The Assessing Officer treated the cash deposit of Rs. 15,38,500/- as deemed income of Assessee under Section 69A of the Income Tax Act, 1961 (in short, the Act) while passing the assessment order dated 29/12/2019. 4. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). The appeal of the assessee was migrated before the NFAC. Before the ld. CIT(A)/NFAC, the assessee filed detailed written submission. The submission of assessee is recorded in para 8 of order of ld. CIT(A)/NFAC. In the submission, the assessee ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 4 stated that she has derived income from jewellery making/designing from gold received by her customers on labour basis. The assessee furnished details of cash deposited during demonetization year and non- demonetization year in both the bank accounts in the following manner: Name of Bank Cash deposit during the demonetization on period Cash deposit during the non- demonetization on period Total Rs. Axis bank 915020009055079 9,68,000/- 1,05,500/- 10,73,500/- Axis bank 913010054129047 2,50,000/- 2,15,000/- 4,65,000/- Total 15,38,500/- 5. The assessee also submitted that as per closing balance, the assessee was having cash balance as on 08/11/2016 of Rs. 12,31,067/-. The cash in hand as on 31/3/2016 was Rs. 2,56,472/-. To substantiate such submission, the assessee furnished copy of ITR for preceeding assessment year. The assessee furnished complete details of labour receipt from April, 2016 till March, 2017 as recorded by the ld. NFAC in the following manner: Month Amount in (Rs.) April, 2016 82,550 May, 2016 1,81,810 June, 2016 1,83,515 July, 2016 2,10,100 Aug. 2016 1,63,950 Sept. 2016 1,62,300 Oct 2016 1,44,820 Nov. 2016 14,100 De. 2016 29,350 Jan 2017 14,685 Feb. 2017 36,703 ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 5 March 2017 2,16,032 Labour Income in cash 14,39,915 Labour income other than cash 2,53,020 Total Labour Income 16,92,935 6. On the basis of her submission, the assessee contended that there was no variation/jump in labour income offered by assessee during pre- demonetization year and post-demonetization year and furnished the following details: Particular Labour Income (In Rs.) Pre-demonetization year i.e. 01/04/2015 to 31/03/2016 13,43,585 Demonetization year i.e. 01/04/2016 to 31/03/2017 16,92,935 Post-demonetization year i.e. 01/04/2017 to 31/03/2018 18,62,837 On the basis of aforesaid submission, the assessee prayed to delete the entire addition. 7. The ld. NFAC after considering the contents of the assessment order and the submission of assessee, confirmed the action of Assessing Officer by taking a view that during the appellate proceedings, the assessee did not bring any material on record to establish genuineness of cash deposit. Further aggrieved, the assessee has filed the present appeal before this Tribunal. 8. We have heard the submission of learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (Sr. DR) for the Revenue. The ld. AR of the assessee submits that during the year, the assessee has declared profit @ ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 6 25.78% on total labour receipt of Rs. 16,92,935/-, though the deemed profit under Section 44AD could be only Rs. 1,35,435/-. The assessee has made cash deposit as per instruction of Reserve Bank of India (RBI) during the impugned period. The cash deposited by assessee during pre-demonetization year as per post-demonetization year was not abnormal. The assessee has deposited cash out of business/labour receipt received, during the relevant period as well as cash in hand available during pre-demonetization year, the assessee has made cash deposit of Rs. 13,43,585/- during demonetization year, the assessee made cash deposit of Rs. 16,92,395/- and in post-demonetization period i.e. in subsequent financial year. The assessee has earned income from labour receipt of Rs. 18,62,837/-. The Assessing Officer as well as the ld. CIT(A) failed to appreciate the facts and the evidences furnished by assessee. The assessee has explained that she is engaged in the business of jewellery designing making and shown income from labour charges. The lower authorities have treated the cash deposit as unexplained investment. There is no investment rather it was a cash deposit in the bank out of labour receipt. The cash deposited in the bank account were made in accordance with the Government of India and RBI guidelines. To support his submission, the ld. AR of the assessee relied on the decision of Delhi Tribunal in the case of Mr. Arish Singla Vs ITO in ITA No. 1185/Del/2021 dated 06/04/2022. ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 7 9. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR submits that the evidences furnished by the assessee is not sacrosanct. 10. We have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. There is no dispute that assessee made certain cash deposit in her two bank accounts during demonetization year and subsequent period thereto. Before the Assessing Officer, the assessee, in reply to show cause specifically contended that she is engaged in the jewellery designing, has shown labour receipt. We find that the assessee has not shown the income from labour receipt for the first time, similar business receipt/labour receipt was also shown in preceeding year which was accepted by the lower authorities. Before the ld. CIT(A), the assessee filed detailed written submissions. The ld. NFAC instead of giving any finding on the various submission as well as on the evidences furnished by assessee concluded that the assessee had not brought any material on record to establish the genuineness of cash receipts. We find that the lower authorities have not considered ratio of similar cash deposit in previous and subsequent financial year. We find that in previous financial year i.e. pre-demonetization year i.e. 01/4/2015 to 31/3/2016, the assessee has shown income from labour charges of Rs. 13,43,585/-. For the year under dispute, the assessee has shown labour ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 8 receipt/income of Rs. 16,92,935/-. In subsequent financial year i.e. post-demonetization year starting from 01/04/2017 to 31/03/2018, the assessee has shown labour receipt of Rs. 18,62,837/-. Comparing of such labour receipt shows, there is gradual increase in the labour receipt. 11. We further find that before the ld. CIT(A), the assessee has given complete details/month wise labour receipt and highest labour receipt were shown in the month of August and September, 2016. In the month of November (demonetization declared month), the assessee has shown merely receipt of Rs. 14,100/- and similarly in December, 2016 Rs. 29,350/- and in January, 2017 Rs. 14,685/- only. Such receipts are not disputed. The deposits in bank account also shown that the assessee was regularly making deposit in the bank account. We find that on such labour receipt, the assessee has shown substantial gross profit i.e. @ 25.78%. The assessee has also categorically contended before the ld. CIT(A) that closing the cash in hand as on 31/3/2016 with assessee was Rs. 2,56,472/- and cash in hand as on the date of declaration of prohibition of specified bank note of Rs. 500 and Rs. 1000 as on 08/11/2016, the assessee was having cash in hand of Rs. 12,31,067/-. Such details were not disputed by the ld. NFAC. The ld. NFAC simply held that the assessee has not brought any evidence on record to establish the genuineness of cash receipt. Before us, the ld. ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 9 AR of assessee vehemently submitted that in response to show cause notice regarding the cash deposit in bank in F.Y. 2015-16 and 2016-17, the assessee furnished complete details showing cash deposit as well as month-wise cash sales and cash deposit, complete details of which is furnished as per page No. 23 to 26 of the paper book (reply filed before the Assessing officer). We find that the Assessing Officer has not given any adverse finding on such details and simply extracted para 1 of reply of assessee in his order. On perusal of such details, we find that overall deposits in bank accounts in preceding financial year and subsequent financial year do not show abnormal differences. 12. We find that the Coordinate Bench (SMC Bench) of Delhi Tribunal in Mr. Atish Singla Vs ITO (supra) had dealing with the similar issue on account of cash deposit in bank account during demonetization year wherein the addition was made under Section 68 of the Act, passed the following order: “7. I have considered the rival arguments made by both the sides, perused the orders of the A.O. and the Ld. CIT(A), NFAC and the paper book filed on behalf of the assessee. I have also considered the various decisions cited before me. I find the A.O. in the instant case made addition of Rs.39,60,000/- to the total income of the assessee on the ground that assessee could not explain the source of cash deposit made in the bank account during the demonetization period. I find the Ld. CIT(A), NFAC upheld the action of the A.O, the reasons of which have already been reproduced in the preceding paragraph. It is the submission of the Learned Counsel for the Assessee that cash deposited in the bank account represents partly the sale proceeds in cash and partly realization from debtors, for which, ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 10 complete details were filed before the A.O. as well as the Ld. CIT(A), NFAC and without giving any justifiable reasons, the A.O. has made the addition which has been sustained by the Ld. CIT(A), NFAC and, therefore, the same is not in accordance with law. It is also his submission that when the assessee has opted for presumptive tax under section 44AD and the total sales as declared by the assessee at Rs.90,66,440/- is much more than the cash deposits made in the bank account and when the assessee has realised an amount of Rs.38,32,509/- from the debtors standing recovered as on 01.04.2016, such addition made by the A.O. which has been sustained by the Ld. CIT(A), NFAC is not justified. 7.1. I find some force in the above arguments advanced by the Learned Counsel for the Assessee. Admittedly, the assessee has filed its return of income by opting for presumptive tax under section 44AD of the I.T. Act, 1961. Further the gross sales made during the year at Rs.90,66,440/- is not in dispute. The assessee has closed down its business during the subsequent year and assessee has filed the chart showing name and address and PAN of sundry debtors from whom cash payments were received during the A.Y. 2017-18, copies of which are placed at pages 49-50 of the PB which are not disputed by the lower authorities. Therefore, I am of the considered opinion that the A.O. should not have brushed aside the submission of the Counsel for the Assessee without bringing any other material to rebut the same. I find the assessee has filed copies of ledger account and confirmations received from various debtors and also the chart showing the purchases made during the year along with copies of ledgers of creditors. Therefore, I find merit in the arguments of the Learned Counsel for the Assessee that without bringing any material to rebut the various details furnished by the assessee and considering the fact that assessee has opted for presumptive tax under the provisions of Section 44AD, the A.O. should not have made the addition. 7.2. I find the Coordinate Bench of the Tribunal in the case of Kishore Jeram Bhai Khaniya vs., ITO (supra) while deleting the addition under section 68 of the I.T. Act, 1961 made by the A.O. on account of cash deposit has observed as under: “There is another dimension to this issue. The Assessing Officer made addition of Rs. 22.06 lacs u/s 68 of the Act, which contemplates the ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 11 making of addition where any sum found credited in the books of the assessee is not proved to the satisfaction of the A.O. It is only when such a sum is not proved that the Assessing Officer proceeds to make addition u/s 68 of the Act. We are dealing with a situation in which the assessee has himself offered the amount of cash sales as his income by duly including it in his total sales. Once a particular amount is already offered for taxation, the same cannot be again considered u/s 68 of the Act. In fact, such addition has resulted into double addition.” 7.3. Similarly, I find the Indore Bench of the Tribunal in the case of ACIT vs., Dewas Soya Ltd., (supra) has observed as under : “The claim of the appellant that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit & loss account) and on the other hand amounts received from above parties has also been added u/s. 68 of the Act. This view has been held by the Hon'ble Supreme Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 that "It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed. The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again.” 7.4. I find the Coordinate Bench of the Tribunal in the case of M/s. Singhal Exim P. Ltd., vs., ITO (supra) while deleting the addition made under section 68 of the I.T. Act, 1961 made on account of cash deposit has observed as under: “9. Further, we find the stand of the Assessing Officer to be contradictory. On one hand, he mentioned the high sea sales to be not genuine and on the other, he has accepted the business income disclosed by the assessee. Admittedly, the business income disclosed by the assessee has been worked out after considering the purchases and sales of mobile phones. The sales included the high sea sales also. Once the Assessing Officer has accepted the trading results, he has accepted the sales including high sea sales. Therefore, his stand while making the addition under Section 68 or 69C is contradictory to his stand taken while accepting the business income which is not permissible in law. 15. In view of the above, we hold that the Assessing Officer was not right in concluding that the high sea sales are not genuine. Moreover, Section 68 would also not be applicable in respect of recovery of sales consideration. Once the assessee sold the goods, the buyer of the goods becomes the debtor of the assessee and any receipt of money from him is the realisation of such debt and therefore, we are of the opinion that in respect of ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 12 recovery of sale consideration, Section 68cannot be applied. In view of the above, we find no justification for upholding the addition of Rs.59,51,29,517/-. The same is deleted.” 7.5. I find the Ahmedabad Bench of the Tribunal in the case of Shree Sanand Textile Industries Ltd., vs., DCIT (supra) while deleting the addition made by the A.O. under section 68 of the I.T. Act, 1961 on account of cash deposit has observed as under: “9.3. Admittedly, the amount of sale as claimed by the assessee was offered to tax by reflecting the same in the trading and profit and loss account. This fact has not been doubted by the authorities below. However, the existence of the parties was not proved by the assessee based on the documentary evidence during the proceedings. Accordingly, the learned CIT (A) treated the amount received from such parties as unexplained cash credit under section 68 of the Act. In this connection we note that the impugned amount has been taxed twice firstly the same was treated as sales and secondly the same was treated as unexplained cash credit under section 68 of the Act. Even if we assume that the action of the learned CIT (A) is correct i.e. the impugned amount is representing the cash credit as provided under section 68 of the Act. Then, the learned CIT (A) was duty- bound to reduce the same from the amount of sales as the same does not represent the sale but unexplained cash credit. As such, the same amount cannot be held taxable twice as per the wish of the learned CIT (A). In our considered view the action of the learned CIT (A) is erroneous to the extent of treating the same as sale proceeds and the unexplained cash credit simultaneously. 9.4. However, we are also conscious to the fact that there is no allegation from the authorities below that the impugned amount represents the unexplained cash credit over and above the sale proceeds. We also find important to refer the provisions of section 68 of the Act which reads as under : 9.5 From the above, we note that the provisions of section 68 of the Act can be attracted where there is a credit found in the books of accounts and the assessee failed to offer any explanation or the offer made by the assessee is not satisfactory in the opinion of the assessing officer. The assessee has explained to the authorities below that the impugned amount represents the sale which has not been doubted by the authorities below. Thus in our considered view, the impugned amount cannot be treated as unexplained cash credit under section 68 of the Act merely on the ground that the assessee failed to furnish the details of the existence of the parties. ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 13 9.6. We also note that the provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only. 9.7. We are also aware of the fact that there is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding. In view of the above we are not convinced with the finding of the learned CIT(A) and accordingly we set aside the same with the direction to the AO to delete the addition made by him”. 7.6. The various other decisions relied on by the Learned Counsel for the Assessee in the case law compilation and synopsis also support the case of the assessee to the proposition that when the nature and source of old currency notes is fully supported and substantiated, no addition under section 68 of the I.T. Act, 1961 can be made. In this view of the matter, I am of the considered opinion that the Ld. CIT(A), NFAC was not justified in sustaining the addition of Rs.39,60,000/- made by the A.O. on account of cash deposit in the bank account. I, therefore, set aside the order of the Ld. CIT(A), NFAC and direct the A.O. to delete the addition. Grounds raised by the assessee are accordingly allowed. 8. In the result, appeal of the Assessee is allowed.” 13. Considering the aforesaid factual and legal discussion and specifically keeping in view that despite furnishing complete details for previous and subsequent period of demonetization year, the assessee has discharged his onus by showing the magnitude of cash deposit, during demonetisation period was not at much variance, comparative to previous and subsequent period, therefore, the addition made by Assessing Officer does not stand in judicial scrutiny and we direct to delete the addition made. ITA No.216/Srt/2021 Neena Praful Sawlani Vs ITO 14 14. In the result, this appeal of assessee is allowed. Order pronounced in the open court on 17 th October, 2022 and the result was also placed on the Notice Board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 17/10/2022 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order Sr.Private Secretary, ITAT, Surat