RHYTHM INFRASTRUCTURE LTD, MUMBAI V. DCIT,CENTRAL CIRCLE 1(2), MUMBAI

ITA 3226/MUM/2022

AI Insights

Rhythm Infrastructure Ltd. appealed against the order of the Commissioner of Income-tax (Appeals)-47, Mumbai, which confirmed the addition of \\u20b983,20,000 made by the Dy. Commissioner of Income-tax under Section 68/69A of the Income-tax Act, 1961. The addition was based on cash deposits during the demonetization period, which the assessee failed to satisfactorily explain. The Tribunal considered the assessee's cash flow statement and previous disclosures during a survey, which indicated substantial cash on hand. The Tribunal found merit in re-evaluating the source of the cash deposits in light of the assessee's explanations and directed a re-assessment.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125750 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Next Hearing Date: 23-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 22-12-2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P. D CHOUGULE
• Keywords: Unexplained cash credit
• Section: 68; 143(3); 133A; 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM AND SHRI PRASHANT MAHARISHI, AM ITA No. 3226/MUM/2022 (Assessment Year 2017-18) Rh ythm Inf rast ruct ure Ltd. 201, Am ul ya Com pl ex, , Opp Ash wam e gh El egance-II, Near Am ba wad i C i r cle, Ahm edabad 380006 Vs. DCIT Central Circle-1(2) Room no. 906, 9 th Floor, Pratishtha Bhavan Old CGO Annexe, Maharshi Karve Road, Mumbai 400020 (Appellant) (Respondent) PAN No. AAECR5729E Assessee by : Shri Aditya Ramchandran, AR Revenue by : Shri P. D Chougule, DR Date of hearing: 24.05.2023 Date of pronouncement : 09.08.2023 O R D E R PER PRASHANT MAHARISHI, AM: 01. Rhythm Infrastructure Ltd. (assessee / appellant) has preferred this appeal vide ITA No.3226/Mum/2022 for A.Y. 2017-18 against the appellate order passed by Commissioner of Income-tax (Appeals)-47, Mumbai [the learned CIT (A)] dated 4 th November, 2022, wherein the appeal filed by the assessee against the assessment order passed on 30 th December, 2019, under Section 143(3) of the Income-tax Act, 1961 (the Act) by the Dy. Commissioner of Income-tax, Central Circle 1(2), Mumbai (the learned Assessing Officer), was dismissed. Page | 2 ITA No.3226/MUM/2022 Rhythm Infrastructure Ltd: A.Y.2017-18 02. Assessee is aggrieved and has preferred this appeal raising following grounds:- “1. The Ld Commissioner of Income Tax (Appeals) -47 Mumbai (CIT(A) has erred both in law and on facts in confirming the addition of Rs 83,20,000/- made by Ld AO u/s 68/69A of the Income tax Act, 1961 holding that the cash deposited in bank account was to be inferred as unexplained principals, The addition made by the Ld AO and confirmed by the ld CIT(A) is not justified and deserves to be deleted. It be deleted now. 2. the Ld CIT(A) further erred both in law and on facts in not appreciating the details submissions and the legal position emerging from the case laws cited before him and in holding that he addition of Rs 83,20,00/- was rightly made by the Ld AO. On facts and in law the decisions of both the lower authorities are not justified and impermissible. It be so held now and additions made be directed to be deleted. 3. The Ld CIT(A) ought to have accepted the submissions o the appellant and directed to delete the additions made by Ld AO considering the entirety of facts and further, when the books of account have not been rejected. 4. The order passed by Ld CIT (A) is illegal and invalid to the extent the addition made by Ld AO is confirmed by him. 5. the Appellant craves leave to add, alter, modify or delete any of the grounds at the time of hearing.” Page | 3 ITA No.3226/MUM/2022 Rhythm Infrastructure Ltd: A.Y.2017-18 03. Briefly stated fact shows that assessee is a company engaged in the business of Civil Construction and carries out contract works. Assessee filed its return of income on 23 rd September, 2017 at ₹1,91,81,940/-. Return of income was picked up for scrutiny. Assessment order under Section 143(3) of the Act was passed on 30 th December, 2019, determining the total income of the assessee at ₹2,75,01,940/-. The learned Assessing Officer has made an addition under Section 68 of the Act of ₹83,20,000/-, on account of cash deposit in excess bank account number during demonetization in SBN, which is confirmed by the learned CIT (A) and therefore, the solitary grounds before us is a challenge to the addition confirmed by the learned CIT (A). 04. Brief fact shows that a survey under Section 133A of the Act was carried out on 17 th June, 2015. During the course of survey assessee admitted unaccounted income of the group companies of ₹8.70 crores. Subsequently, the assessee retracted the same. Pursuant to the survey, during the assessment proceedings, the learned Assessing Officer noted that assessee has deposited cash of ₹83,20,000/- in Axis Bank account number-7508 in two tranches i.e. ₹50 lacs were deposited on 14 th December, 2016 and ₹33,20,000/- was deposited on 23 rd November, 2016 during 9 th November, 2016 to 30 th December, 2016 [post Demonetization] and therefore, assessee was specifically asked about the source of large value of cash deposited during demonetization period. The assessee was also asked to show the bank statement and cash book for Page | 4 ITA No.3226/MUM/2022 Rhythm Infrastructure Ltd: A.Y.2017-18 the financial year 2016-17. The assessee stated that ₹24,35,919/- is opening cash balance and further assessee has sold scrap in cash. The assessee further stated that during the course of survey cash receipt to the tune of ₹1,85,92,000/- was disclosed and offered for taxation for A.Y. 2012-13 to A.Y. 2016-17 and therefore, ₹76 lacs out of 83,20,000/- is declared cash. Assessee also submitted bank statement and cash book. The learned Assessing Officer noted that survey took place on 17 th June, 2015 and assessee did not include the above cash in its books of account for A.Y. 2016-17. The learned Assessing Officer held that the return was pending for A.Y. 2016-17 till that time so assessee had an option to include in books and return for AY 2016-17. The learned Assessing Officer further held that the statement of the assessee recorded during the survey was retracted and therefore, assessee is making false statement. Assessee was granted further opportunity by the learned Assessing Officer by issuing specific show cause notice dated 20 th December, 2019. The assessee submitted a reply on 23 rd December, 2019. The learned Assessing Officer noted that the claim of the assessee is that cash of ₹76 lacs is the same cash which was declared during the assessment proceedings of earlier years which is pending in appeal and therefore, has not reached the finality. The learned Assessing Officer was also of the view that cash generated out of sale of scrap is unusual and it is also not clear that such scrap sale is also recorded in earlier years or not. The learned Assessing Officer also rejected the claim of the assessee that it Page | 5 ITA No.3226/MUM/2022 Rhythm Infrastructure Ltd: A.Y.2017-18 amounts to double taxation where the cash is deposited out of withdrawals. Accordingly, as the assessee has not been able to explain the source of money deposited in the books of account to the satisfaction of the learned assessing officer, cash deposited of ₹83,20,000/- was treated as unexplained cash credit under Section 68 of the Act. The learned Assessing Officer also made a parallel addition under Section 69A of the Act. The same was taxed under Section 115BBE (2) of the Act. Assessment order under Section 143(3) of the Act was passed on 30 th December, 2019. 05. The assessee challenged the same before the learned CIT (A). The learned CIT (A) vide ground no.6 categorically held that cash deposited in the bank account of the assessee during the demonetization period has nothing to do with the cash offered as income at the time of survey action, for the simple reason that assessee has not incurred any cash expenditure after the date of survey on 17 th June, 2016 till the date of demonetization i.e. 8 th November, 2016, which is very unusual and cannot be correct. He further referred to the conduct of the assessee and the statement recorded by the survey team holding that such statement is absurd. He held that assessee has not explained or furnished the details of sale of scrap in earlier years. Further, if the scrap is sold, there is no evidence of tax collection source and it is not accounting in the books of accounts and deposited with the government. Accordingly, he confirmed the addition of ₹83,20,000/- under Section 69A of the Act. Page | 6 ITA No.3226/MUM/2022 Rhythm Infrastructure Ltd: A.Y.2017-18 06. On appeal before us, assessee submitted a paper book containing 149 pages. The assessee submitted the assessment order from A.Y. 2013-14 to A.Y. 2016-17 and the statement submits that assessee has disclosed during the course of survey a sum of ₹8,74,85,000/- in the hands of group companies and out of that ₹7,34,85,000/- was pertaining to the assessee. He further submitted that out of above sum of ₹1.35 crores has been accepted by the assessee. Assessee further referred to the cash flow statement from 1 st March, 2007 to 7 th September, 2015. He submitted that as per the above cash flow statement the closing balance as on 7 th September, 2015 available with the assessee is ₹1,36,79,500/-. Therefore, assessee should be granted credit for above cash in hand available with the assessee. With respect to the sale of scrap, he submitted that assessee has collected tax at source on sale of scrap which has been recorded by the learned CIT (A) in his order. Accordingly, the cash deposit of ₹83,20,000/- is fully explained. 07. The learned Departmental Representative vehemently submitted that the order of the lower authorities have correctly held that cash deposited by the assessee of ₹83,20,000/- is unaccounted cash of the assessee. He further submitted that the cash flow statement submitted by the assessee has already been proved as incorrect by the learned CIT (A) as there is no cash expenditure by the assessee after the date of survey till the date of demonetization, which cannot be correct. Accordingly, he Page | 7 ITA No.3226/MUM/2022 Rhythm Infrastructure Ltd: A.Y.2017-18 submitted that the orders of the lower authorities deserve to be upheld. 08. We have carefully considered the rival contentions and perused the orders of the lower authorities. The fact shows that survey took place at the business premises of the assessee on 7 th September, 2015. Assessee disclosed unaccounted income of ₹7.35 crores. It is also a fact that assessee did not offer disclosure so made by it. However, it is also fact that though assessee has not owned complete disclosure of ₹7.35 crores, the cash flow statement submitted before us categorically shows that as on 7/9/2015 the assessee has cash on hand of Rs 1,35,79,500/-. In the same cash flow statement assessee has also shown several admitted cash receipts, some of the cash receipts have also been owned by the assessee to avoid unnecessary litigation. Further in assessment year 2013 – 14 to 2016 – 17 there are several additions made in the hence of the assessee on account of cash receipts. Regarding sale of scrap paragraph number 6.14 of the learned CIT – A shows that that there are certain works contract tax shown as payable by the assessee on sale of scrap. The learned assessing officer is confirmed the addition also 41 of the reason that the assessment order for assessment year 2013 – 14 till 2016 – 17 has not attained finality. In view of this we set-aside the whole issue back to the file of the learned assessing officer to consider the amount of disclosure made by the assessee and owned by the assessee. If the learned assessing officer finds that that the amount of cash deposited by the Page | 8 ITA No.3226/MUM/2022 Rhythm Infrastructure Ltd: A.Y.2017-18 assessee is covered by the cash flow statement and available cash on hand, the impugned addition of ₹ 83,00,200/– may be deleted. Accordingly we set-aside the solitary ground of appeal to the file of the learned assessing officer for verification of the submission made by the assessee on all the above two counts. Needless to say, the assessee may be afforded an opportunity of hearing before deciding the issue. Accordingly ground number 1 and 2 of the appeal of the assessee are allowed with above directions. 09. In the result, appeal filed by the assessee is allowed for statistical purposes. Order pronounced in the open court on 09.08.2023. Sd/- Sd/- (ABY T. VARKEY) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 09.08.2023 Sudip Sarkar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai