Harpalsinh Fatesinh Devdhara, Kosamba V. Income Tax Officer, Ward-1, Bardoli

ITA 511/SRT/2023

AI Insights

The case involves Harpalsinh Fatehsinh Devdhara, who appealed against the order of the Commissioner of Income Tax (Appeals) confirming an addition of Rs.3,99,365 to his income for the Assessment Year 2017-18. The addition was initially made by the Assessing Officer, who considered the cash deposits in the assessee's bank accounts as unexplained. The assessee, a distributor of IDEA Cellular, argued that these deposits were business receipts. The Tribunal examined the evidence and reconciliations provided by the assessee, which clarified the nature of the deposits and corrected a typographical error in the addition amount.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301498 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-10-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 23-07-2023
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MAYUR THAKUR
• Keywords: Gift; Business income; FORM 26AS
• Section: 68; 144; 143(3); 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT (SMC) BENCH BEFORE SHRI DR. A. L. SAINI, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.511/SRT/2023 Assessment Year: (2017-18) (Physical Hearing) Harpalsinh Fatehsinh Devdhara, HG-7, Diamond Plaza Zin Road Tarsadi, Kosamba, Dist – Surat, Surat – 394120. Vs. The ITO, Ward- 1, Bardoli èथायीलेखासं./जीआइआरसं./PAN/GIR No.: BFTPD9991J (Appellant) (Respondent) Appellant by Shri Mayur Thakur, CA Respondent by Shri Vinod Kumar, Sr. DR Date of Hearing 18/10/2023 Date of Pronouncement 31/10/2023 आदेश / O R D E R PER DR. A. L. SAINI, AM: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2017-18, is directed against the order passed by the Learned Commissioner of Income Tax (Appeals), [in short “the ld. CIT(A)”], National Faceless Appeal Centre (in short ‘the NFAC’), Delhi, dated 20.05.2023, which in turn arises out of an assessment order passed by Assessing Officer u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”), dated 16.12.2019. 2. The grounds of appeal raised by the assessee are as follows: “1. The Assessing Officer and Commissioner Appeal have erred in law and in facts, in considering the cash deposit as un-explained cash credit. 2. I pray to you to allow us to add, edit or delete any of the ground of appeal during hearing.” Page | 2 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara 3. Brief facts qua the issue are that the assessee filed his return of income for assessment year (A.Y.) 2017-18 on 01.08.2017, declaring total income of Rs.3,17,960/-. The assessee`s case was selected for limited scrutiny under CASS on reason that there is large cash deposit during the year. Accordingly, notice u/s 143(2) was issued on 14.08.2018 and the same was duly served upon the assessee. Thereafter, notices u/s 142(1) of the Act was issued on 23.01.2019 calling for submission of details on or before 31.01.2019. However, the assessee failed to comply with the statutory notices, therefore, a show cause notice u/s 144 of the Act was issued to the assessee, on 17.10.2019, proposing therein to finalize proceedings u/s 144 of the Act. In response, assessee submitted that he (assessee) is distributor of IDEA Cellular and cash deposits was out of payments received on distribution of recharge balance to different sales persons. Assessee furnished computation of income, 26AS and copy of response made by him in cash transactions 2016. 4. The assessing officer noted that assessee made partial compliance vide letter dated NIL received through e-assessment portal. Accordingly, another notice u/s 142(1) of the Act was issued to the assessee on 26.11.2019 requiring the assessee to furnish details and to also furnish necessary explanation. In response, assessee vide letter dated NIL received through e-proceedings portal, submitted explanation, however, the same was not found tenable. Accordingly, show cause notice was issued to the assessee on 11.12.2019, relevant portion of which is reproduced as under: “For the A.Y. 2017-18, you had filed your return of income in ITR-4 on presumptive basis showing gross receipt amounting to Rs. 9,97,160/- with net profit of Rs. 3,25,680/-. As against the same, you have claimed commission income from IDEA Cellular and in support of the same, furnished copy of Form 26AS. Page | 3 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara You are therefore required to justify your nature of income vis-a-vis filing of ITR on presumptive basis. Failing which, the expenses claimed against commission income shall be disallowed. Further, during the assessment proceedings, you have claimed total sales of Rs.2,60,09,105/-. Accordingly, vide notice issued u/s 142(1) of the Act dated 26.11.2019. you were required to justify / furnish necessary explanation with regard to non-consideration of total turnover of Rs.2,60,09,105/- and failure to get your books audited. Vide the said notice, you were also required to furnish contra-confirmation of IDEA Cellular reflecting nature of payment made. However, on perusal of your reply, no justification with regard to consideration of total turnover of Rs.2,60,09,105/- and no justification on non-auditing books of account have been offered. In view of the above, you are required to show cause as to why your total turnover should not be considered at Rs.2,60,09,105/- and accordingly as to why net profit of 8% of total turnover should not be determined your income for the year under consideration. Further, vide submission dated 07.11.2019, you have submitted month- wise cash sale and cash deposit in a tabular chart. On perusal of the same, opening cash on hand as on 01.04.2016 was shown of Rs.4,99,520/- and closing cash on hand as on 31.03.2017 was shown of Rs.3,03,360/-. Or the contrary, closing cash balance shown by you in your return of income for A.Y. 2016-17 is found to be of Rs. 1,02,400/- and for A.Y. 2017-18, you have shown closing balance of Rs. 4,23,120/-. By considering opening cash on hand as on 01.04.2016 and relying upon figures shown by you as cash sales, cash deposits and cash expenses, your cash balance goes negative in the month of Nov. 2016, and therefore remained negative cash balance of Rs. 3,39,365/- as on 31.12.2019. In view of the above, you are required to show cause, as to why negative cash amounting to Rs.3,39,365/- should not be treated as unexplained and added to your total income for the year under consideration. Further, on perusal of debtor ledger submitted by you, narration of certain entries appearing with narration "Dummy Bank_Cont" and "Pre- paid Debtor". On perusal of your bank statement no such debit entries were found appearing. You are therefore required to justify the nature and mode of all such payments to the company alongwith with necessary evidentiary proof- Please note that in case of failure, adverse inference shall be drawn.” 5. In response to the above show cause notice, the assessee has submitted its response. Having gone through the reply of the assessee, the assessing officer, noted that during demonetization period, the Page | 4 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara assessee had made substantial cash deposit in his bank accounts. Accordingly, account statement of the said bank accounts were called for from the concerned bank. On receipt of bank information, the following cash deposits were observed in the same banks accounts: A/c No. Name of Bank Total cash and Credit deposit during the year period. 32051882836 SBI Rs. 2.45,21,535/- 912020054205561 Axis Bank Rs. 10,12,250/- 30951129871 SBI Rs. 1,40,500/- Total Rs. 2,56,74,285/- During the assessment proceedings, assessee submitted before the assessing officer that he is a registered distributor of IDEA Cellular. Assessee further submitted that cash deposits in bank accounts were out of payments received on distribution of recharge balance to different sales persons. The Assessee also submitted certificate from Vodafone-IDEA Cellular certifying therewith that the assessee is its registered distributor of prepaid recharge in Kosamba of Surat Zone. Further, on verification of bank statements of the assessee, it has been observed that after making cash deposits; assessee has immediately transferred the fund almost every time to IDEA Cellular Ltd. The above facts clearly indicate that the assessee was involved in business of recharge of telecom services. Further, after making cash deposits, almost all the money was transferred to Idea Cellular Ltd. Therefore, assessing officer held that above cash deposit in the various banks were out of his business receipts. 6. However, the assessing officer observed that assessee had carried out business of sale of recharge balance of IDEA Cellular Ltd. However, vide submission dated 07.11.2019, assessee had submitted month-wise cash sale and cash deposit in a tabular chart. On perusal of the same, opening cash on hand as on 01.04.2016 was shown of Page | 5 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara Rs.4,99,520/- and closing cash on hand as on 31.03.2017, was shown of Rs.3,03,360/-. On the contrary, closing cash balance shown by the assessee in his return of income for A.Y. 2016-17 is found to be of Rs.1,02,400/- and for A.Y. 2017-18, assessee has shown closing balance of Rs.4,23,120/-. Hence, by considering opening cash on hand as on 01.04.2016 and relying upon figures shown by the assessee as cash sales, cash deposits and cash expenses, assessee's cash balance goes negative in the month of Nov, 2016, and therefore remained negative cash balance of Rs.3,99,365/- as on 31.12.2019. 7. In respect of above negative cash balance, the assessee had submitted that he had received cash gift of Rs.2,77,120/- from his wife, however, no supporting evidentiary proof has been furnished by the assessee. Hence, the claim of the assessee remained unjustifiable. Therefore, the differential amount of Rs.3,99,365/- was treated as unexplained u/s 68 of the Act and accordingly added to the total income of the assessee for the year under consideration. 8. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has adjudicated the assessee’s appeal on merit considering the statement of facts and assessment order. Before ld. CIT(A), the assessee did not appear, during the appellate proceedings, despite of issuance of notice of hearing four times, therefore ld. CIT(A) has adjudicated the issue considering the statement of facts and assessment order, dated 16.09.2018 and confirmed that addition made by the assessing officer to the tune of Rs. 3,99,365/-. Aggrieved by the order of ld. CIT(A), the assessee is in further appeal before this Tribunal. Page | 6 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara 9. I have heard the rival arguments made by both the sides and perused the material available on record. Admittedly, the Assessing Officer during the assessment proceedings stated that assessee had carried out business of sale of recharge balance of IDEA Cellular Ltd therefore cash deposits in the bank accounts were considered genuine. However, the assessing officer made addition to the tune of Rs.3,99,365/-. The Ld. Counsel for the assessee submitted before me that assessee has not submitted any other documents and evidences before the Bench except the evidences and documents which were submitted before the Assessing Officer. The Ld. Counsel submitted that during the assessment proceedings, sufficient compliance was made and each and every documents were submitted, as required by the assessing officer, however the Assessing Officer has made the addition to the tune of Rs.3,99,365/-. The Ld. Counsel for the assessee also pointed out that there is a typographical error in the figure of addition made by the Assessing Officer. The Assessing Officer in para no.6.4 stated that negative cash balance is to the tune of Rs.3,39,365/- and the same should be treated, if any, as unexplained under section 68 of the Act, by the assessing officer. However, finally the Assessing Officer made the addition to the tune of Rs.3,99,365/-, hence there is typographical error to the extent Rs.60,000/- (Rs.3,99,365/- – Rs.3,39,365/-). 10. The Ld. Counsel for the assessee submitted that although during the assessment proceedings, to explain the difference of Rs.3,39,365/-, the assessee made a plea that he has received a gift to the tune of Rs.2,77,120/- from his wife. However, no supporting documents have been furnished by the assessee therefore Assessing Officer made addition. The Ld. Counsel submitted that assessee has Page | 7 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara not submitted additional evidences, however with the help of the evidences, which were already submitted before the Assessing Officer, the addition so made by the assessing officer is not justified. The Ld. Counsel pointed out that there is mistake in the cash deposited amount in the bank account. The Ld. Counsel for the assessee took me through the paper book page no.16 to 18, wherein the month-wise cash sale and cash deposits from period 01.04.2016 to 31.03.2017 were submitted before the Assessing Officer, in such month-wise cash sale, there was mistake apparent from record. The Ld. Counsel submitted a reconciliation of the difference and explained the impugned addition made by the Assessing Officer to the tune of Rs.3,39,365/- with help of the bank account and reconciliation which is reproduced below: Page | 8 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara Page | 9 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara 11. Therefore, with help of the above reconciliation statement, Ld. Counsel contended that after considering the rectified figures in the cash deposit amount to the bank, there would not be any difference at all; therefore addition made by the Assessing Officer should be deleted. 12. On the other hand, Learned Senior Departmental Representative (ld. Sr. DR) for the Revenue submitted that first of all the assessee did not appear before the appellate proceedings, however the ld. CIT(A) has adjudicated the issue on merit by taking into account the statement of facts and assessment order, even then, the matter may be restored back to the file of Assessing Officer with the direction to the assessing officer to examine the explanations provided by the assessee with help of reconciliation of the bank account and the cash book. 13. In rebuttal, the Ld. Counsel submitted that the bank account and the cash book were already submitted before the Assessing Officer; therefore, there is no logic to remit the issue back to the file of Assessing Officer for re-examination of the same issue. 14. I have considered the arguments of both the parties. I note that to explain the difference to the tune of Rs.3,99,365/-, the assessee submitted the following documents and evidences, viz: (1) Annexure 1 Certificate of Vodafone Idea Distributorship (vide Pb.7), (2) Annexure 2 Income tax Return Acknowledgement (vide Pb.8), (3) Annexure 3 copy of order in Assessment (original) (vide Pb.9-15), (4) Annexure 4 month-wise cash receipts and cash deposits submitted by the assessee to the AO during assessment proceedings (vide Pb.16), (5) Annexure 5 month-wise cash receipts and cash deposits Redrafted by the learned AO (vide Pb.17), (6) Annexure 6- Month-wise cash Page | 10 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara receipts and cash deposits Redrafted by the Assessee (vide Pb.18 to 21), (7) Annexure 7 copy of relevant date’s Bank statement (vide Pb.22 to 25), (8) Annexure 8- copy of relevant Bank statement (vide Pb.26), (9) Annexure 9 -copy of Cheque of IT Refund (vide Pb.27). 15. I have gone through the above factual evidences, and I find that the assessee furnished the bank statement and the cash details before the Assessing Officer. I find that certain cheques were dishonoured and there are some contra-entries in the bank statement, which were not considered by the Assessing Officer, for example in the bank statement of State Bank of India, there is a cash deposits to the tune of Rs.1,01,500/- on 08.04.2016, such cash deposit has been reversed by the bank on 11.04.2016. Such contra-entries getting reflected in the bank statement of State Bank of India. Similarly other cheques deposited to the tune of Rs.1,01,090/- has not been examined by the Assessing Officer, which is getting reflected on the bank statement. Besides, there is typographical error to the extent Rs.60,000/-. Considering the above reconciliation, I find that assessee has explained the difference of Rs.3,99,365/-, and just because the assessee made a wrong statement during the assessment proceedings, stating that the difference belongs to the gift received from his wife, does not mean that the assessee should be punished, particularly when the assessee has direct evidences to explain the difference. Based on the facts and evidences submitted by the assessee, the addition of Rs.3,99,365/-, should not have been made in the hands of the assessee. Hence, I am not inclined to accept the contention of the Assessing Officer in any manner and hence the addition so made is deleted. Hence this ground of the assessee is allowed. Page | 11 ITA.511/SRT/2023/AY.2017-18 Harpalsinh Fatehsinh Devdhara 16. In the result, appeal filed by the assessee is allowed. Order is pronounced on 31/10/2023 in the open court. Sd/- (Dr. A.L. SAINI) ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 31/10/2023 SAMANTA Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // TRUE COPY // Assistant Registrar/Sr. PS/PS ITAT, Surat