Soniya Fab Pvt. Ltd., Surat V. The Income tax Officer, Ward-2(1)(3), Surat

ITA 452/AHD/2017

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 1967 (ITAT-SURAT)
• Duration Of Justice: 5 year(s) 4 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-06-2022
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-05-2022
• Assessment Year: 2012-2013
• Appeal Filed On: 21-02-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Business income; Set aside
• Section: 68; 22

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. 156/Ahd/2017 (AY: 2012-13) (Hearing in Physical Court) I.T.O. Ward-2(1)(3), Room No. 220, Aayakar Bhavan, Majura Gate, Surat- 395001. Vs. M/s Soniya Fab Pvt. Ltd., B-5, D.K. Industrial Estate, B/H Gurudwara, Near Udhna Bus Depot, Udhna Main Road, Surat-394210 PAN : AAICS 0907 R APPELLANT RESPONDEDNT ITA No. 452/Ahd/2017 (AY: 2012-13) M/s Soniya Fab Pvt. Ltd., B-5, D.K. Industrial Estate, B/H Gurudwara, Near Udhna Bus Depot, Udhna Main Road, Surat-394210 PAN : AAICS 0907 R Vs. I.T.O. Ward-2(1)(3), Room No. 220, Aayakar Bhavan, Majura Gate, Surat-395001. APPELLANT RESPONDEDNT C.O. No. 31/Ahd/2017 (Arising out of ITA No. 156/Ahd/2017)(AY: 2012-13) M/s Soniya Fab Pvt. Ltd., B-5, D.K. Industrial Estate, B/H Gurudwara, Near Udhna Bus Depot, Udhna Main Road, Surat-394210 PAN : AAICS 0907 R Vs. I.T.O. Ward-2(1)(3), Room No. 220, Aayakar Bhavan, Majura Gate, Surat-395001. APPELLANT RESPONDEDNT Department by Shri H.P. Meena, CIT-DR Assessee by None. Date of hearing 19/05/2022 Date of pronouncement 27/06/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: ITA No. 156 & 452/Ahd/2017 & CO 31/Adh/2017 ITO Vs M/s Soniya Fab P Ltd. 2 1. These sets of three appeals, out of which cross appeals by both the parties and one cross objection by the assessee in revenue’s appeal are directed against the order of learned Commissioner of Income tax (Appeals)-2, Surat [‘ld. CIT(A)’ for short] dated 19/10/2016 for the Assessment Year (AY) 2012-13. The Revenue in its appeal has raised the following grounds of appeal:- “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs. 2,99,66,500/- on account of unexplained cash credits u/s 68 of the Act. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has not appreciated the fact that the assessee has failed to explain the source of total cash deposits made in the banks. 3. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in accepting the contention of the assessee that cash-deposits in Bank were out of cash sales, without examining the cash-book. The total cash sales was Rs. 2,11,49,763/- whereas total deposit in bank account was Rs. 2,99,66,500/- which falsifies the claim of the assessee. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) ought to have upheld the order of the A.O. It is, therefore, prayed that the order of the ld. CIT(A), Surat may be set aside and that of the A.O’s order may be restored.” 2. The assessee in its cross appeal has raised following grounds of appeal: “1. On the facts and circumstances of the case as well as law on the subject, the learned CITY (Appeal)-II, Surat has erred in partly dismissing the appeal made by the appellant. 2. It is prayed that the appellant shall be permitted to represent his view and do the needful in favour of the appellant. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” ITA No. 156 & 452/Ahd/2017 & CO 31/Adh/2017 ITO Vs M/s Soniya Fab P Ltd. 3 3. Further on receipt of notice of revenue’s appeal, the assessee filed its Cross Objection raising following grounds of appeal: “1. On the facts & circumstances of the case as well as law on the subject, the learned CIT (Appeal)-II, Surat is justified in deleting the addition made by ld. A.O. w.r.t. cash deposit to bank accounts. Hence, the appeal filled by the ld. A.O. to be dismissed. 2. It is prayed that the submission made by respondent before ld. CIT(A) to be considered enough to determine the genuineness of the cash deposit to bank accounts and do the needful in favour of the respondent. 3. On the facts & circumstances of the case as well as law on the subject, the ground no. 3 raised by the ld. A.O. that the cash book was not examined by the ld. CIT(A) is totally wrong. The respondent had duly produced the cash book before id. CIT(A) explaining the source of cash deposit to various bank (i.e. out of cash sale & earlier withdrawals from bank accounts). Thus, the deposit to bank account is majorly out of cash sale but not limited to the same. The reconciliation for the same is already produced before ld. CIT(A). Further, the ld. A.O. has wrongly stated in grounds raised that the cash sale were amounting to Rs. 2,11,49,763/- instead of fact that the actual cash sale were Rs. 3,21,49,763/-. Hence, the ground raised by ld. A.O. that there is lower cash sale compared to cash deposit is totally invalid. 4. Further, the respondent is disagree with the order of CIT(A) dismissing the other grounds raised before it. In this regard, the respondent has also filed an appeal before ITAT on 22 nd February, 2017 vide appeal no. 452/Ahd-2017. For your kind consideration, I am providing herewith a copy of form 36 filled. Thus, I kindly request you to also take this matter into consideration.” 4. Brief facts of the case are that the assessee is a company engaged in the business of trading and import export of dyed Polyester cloth. The assessee filed its return of income for the year under consideration on 01/10/2012. The assessee has shown its turnover of Rs. 21,79,51,543/- and gross profit of Rs. 69,51,379/-. The assessee offered taxable income of Rs. 3,86,850/-. The case was selected for scrutiny. During the assessment, the Assessing Officer besides making addition of unexplained cash deposits in bank accounts of Rs. 2,99,66,500/-, also made ITA No. 156 & 452/Ahd/2017 & CO 31/Adh/2017 ITO Vs M/s Soniya Fab P Ltd. 4 addition on account of share premium/share application, addition on account of unaccounted expenses and addition of unsecured loan. Before us, the grounds of appeal relates to unexplained cash deposits in banks accounts only. The facts leading to making addition of unexplained cash deposit are that during the assessment, the Assessing Officer on verification of bank accounts of assessee, noted that the assessee has made cash deposits in various bank accounts maintained with Bank of Baroda and City Union Bank. The Assessing Officer issued show cause notice to the assessee that the cash deposit does not match with the books of account, which on looking at the nature of business of manufacturing, trading and export of dyed silk cloths, huge amount of cash deposit are not possible. The assessee was asked to explain such cash deposits. The assessee filed its reply on 30/03/2015. The assessee explained/replied that they are in export and trading of cloths. Many times, the buyers come to assessee and purchased as per their requirement by paying in cash. The assessee deposited this cash in their bank accounts either on same day or on the next day in their bank accounts. Hence, the major cash deposits in the accounts is from receipt of cash. So cash deposits found can be verified from the cash book. The cash deposits are part of business receipt. The assessee furnished copy of cash book. The reply of assessee was not accepted by the Assessing Officer by taking a view that the assesse failed to furnish source of cash deposits during the year and was treated as unexplained cash credit and made addition under Section 68 thereon. ITA No. 156 & 452/Ahd/2017 & CO 31/Adh/2017 ITO Vs M/s Soniya Fab P Ltd. 5 5. Aggrieved by the addition in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submission. On the addition under consideration, the assessee besides making similar submission as made before the Assessing Officer and also submitted that the Assessing Officer held that the assessee could not furnish satisfactory explanation regarding cash deposits. The assessee is in the business of export and local trading and cash sales are made in the business during the year. The ld. CIT(A) on considering the submission and the finding of Assessing Officer, held that the Assessing Officer made addition without discussing any fact about the cash deposit and the cash deposits have been made in the regular disclosed bank accounts of the assessee. Bank accounts are disclosed in the return of income. The ld. CIT(A) required the turnover of three years including the breakup of sales in cash in total turnover. The assessee furnished the breakup of total turnover including the cash sales for A.Y. 2012-13 to 2014-15. The ld. CIT(A) compiled the details in the following manner: Particulars AY 2012-13 AY 2013-14 AY 2014-15 (a) Gross Sales 19,48,06,563 13,51,38,776 31,31,67,584 (b) Cash Sales 2,11,49,763 3,04,31,950 2,39,12,147 6. On considering the aforesaid detail, the ld. CIT(A) was of the view that the assessee was making substantial amount of cash sales in his business which has been deposited in their regular bank accounts disclosed in the return of income. Cash deposits are part of total sales as per return of income. The Assessing officer has not made any finding as to why the cash deposits are undisclosed or ITA No. 156 & 452/Ahd/2017 & CO 31/Adh/2017 ITO Vs M/s Soniya Fab P Ltd. 6 unexplained. It is not the case that the cash deposits made in the savings bank account or accounts which are not disclosed in the return of income and deleted the entire addition. The ld CIT(A) deleted the entire addition. Aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before this Tribunal. 7. The assessee has also filed its cross appeal and the Cross Objection in the appeal of revenue, before the Tribunal. 8. None appeared on behalf of assessee despite service of notice of hearing of appeal through registered A.D. as well as through Departmental representative. Perusal of record reveals that none has appeared on behalf of assessee right from the beginning, despite service of notice of hearing, therefore, we left no option except to hear the submission of ld. CIT-DR for the Revenue and to decide the appeal on the basis of material available on record. The ld. CIT-DR for the revenue submits that the ld. CIT(A) granted relief to the assessee by accepting its explanation and deleted the entire addition. Before the Assessing Officer, the assessee failed to explain the source of cash deposit in its bank account. The Ld. CIT-DR for the revenue prayed for reversal of order of Ld. CIT(A) and to restore the order of assessing officer. 9. We have considered the submission of ld. CIT-DR for the Revenue and have also perused the orders of the lower authorities carefully. We find that before the Assessing officer, the assessee in response to show cause notice by the Assessing Officer stated that the cash deposit in the bank account represent the sales made in cash. The cash was deposited either on the same day or on very next day. The ITA No. 156 & 452/Ahd/2017 & CO 31/Adh/2017 ITO Vs M/s Soniya Fab P Ltd. 7 assessee also contended that the deposits can be verified from their cash book. The Assessing Officer recorded “the assessee failed to furnish source of cash deposit.” We find that the Assessing Officer has not examined the contention of assessee. No adverse material was brought on record. The Assessing Officer made addition of entire cash deposit in bank accounts. The Assessing Officer has not disputed the claim of assessee of cash sales was made during the course of business. As recorded above before the ld. CIT(A), the assessee urged that the major cash deposit in the bank is from receipt of sales in cash. The bank accounts are disclosed in the return of income. Cash deposit is not found in bank account which was not disclosed in the Income Tax Return. The assessee also submitted that their turnover is about Rs. 22 crores (21.795 crores). The ld. CIT(A) examined the breakup of cash sales and sales made through banking transaction. On perusal of such details, the ld. CIT(A) took his view that the details show that the assessee is making substantial amount of cash sales in his business which were deposited in regular bank accounts which has been disclosed in the return of income. The cash sales are part of total sales as per return of income. The ld. CIT(A) also recorded that the Assessing Officer has not given his finding as to how such cash deposits are undisclosed or unexplained. The ld. CIT(A) concluded that it is not a case of cash deposit made in seven accounts which are not disclosed in the return of income. 10. We find that the assessee right from the beginning is claiming that cash amount deposited in the banks is a part of business transaction made in cash. We also ITA No. 156 & 452/Ahd/2017 & CO 31/Adh/2017 ITO Vs M/s Soniya Fab P Ltd. 8 noted that the assessee’s total turnover is of Rs. 21.795 crores out of which Rs. 19.48 crores is other than cash transaction and more than Rs. 2.11 crore is shown in cash sales. We further noted that the Assessing officer made addition without giving any finding that the cash deposit in the bank account is other than the disclosed source. We further noted that the Assessing Officer added the entire credit shown in three bank accounts without referring the withdrawal for the purpose of business. Thus, we find that the Assessing Officer was not justified in making addition of entire cash credit for whole of the year, particular when the bank accounts were maintained for the purpose of business. We find that the ld. CIT(A) has given categorical finding that the cash deposits were made in the regular bank accounts disclosed to the department in its return of income. Thus, in view of the aforesaid discussion, we do not find any merit in the grounds of appeal raised by the revenue and we affirm the order of ld. CIT(A). 11. In the result, this appeal of the revenue is dismissed. 12. With regard to cross appeal filed by the assessee, we find that the assessee has raised general grounds of appeal and not challenged the validity of confirming any particular addition/disallowance by the ld. CIT(A). In absence of any specific submission/written submission or any document on record. We do not find any merit in the grounds of appeal. In the result, the cross appeal filed by the assessee is dismissed. ITA No. 156 & 452/Ahd/2017 & CO 31/Adh/2017 ITO Vs M/s Soniya Fab P Ltd. 9 13. With regard to cross objection filed by the assessee, we find that the grounds of Cross Objection are in support of ld. CIT(A), which we have already affirmed, therefore, the cross objection filed by the assessee is also dismissed. 14. Finally, the appeal of the revenue and cross appeal of the assessee are dismissed and the cross objection filed by the assessee is also dismissed. Order pronounced on 27/06/2022 in open court and result was placed on notice board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 27/06/2022 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By Order Sr. Private Secretary, ITAT Surat