MAGANLAL HARICHAND SONI, BARDOLI V. INCOME TAX OFFICER, WARD ONE BARODOLI

ITA 606/SRT/2023

• Counselvise Citation: [2023] 100 COUNSELVISE.COM (IT) 4589 (ITAT-SURAT)
• Duration Of Justice: 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 19-12-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 31-08-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Presumptive income; Corroborative evidences; Set aside
• Section: 68; 144; 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH (SMC), SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No. 606/Srt/2023 (Assessment Year 2017-18) (Physical hearing) Maganlal Harichand Soni, Main Bazar, Zankhwav, Surat-394440. PAN No. BKCPS 6931 D Vs. I.T.O., Ward-1, Bardoli. Appellant/ assessee Respondent/ revenue Assessee represented by Shri Krutarth Desai, A.R. with Ms. Disha Kharod, C.A. Department represented by Shri Vinod Kumar, Sr. DR Appeal instituted on 04/09/2023 Date of hearing 20/12/2023 Date of pronouncement 20/12/2023 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 National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income Tax (Appeals) [in short, the ld. CIT(A)] dated 25/07/2023 for the Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “(1) In the facts and circumstances of the case, the findings of the learned assessing officer and learned Commissioner of Income Tax (Appeals) is contrary to the settled position of law i.e. provisions of Section 68 read with section 44AD of the Income Tax Act and therefore, the addition of Rs. 12,15,000/- deserves to be quashed and set aside. (2) In the facts and circumstances of the case, the adjudicating authority has misdirected himself in treating the cash deposited in the bank account as unexplained cash under section 68 particularly when the return of income has been filed under section 44AD and treating the ITA No. 606/Srt/2023 Maganlal Harichand Soni Vs ITO 2 bank statement as “books of accounts”. Therefore, the impugned addition deserves to be quashed and set aside in the interest of justice. (3) In the facts and circumstances of the case, the learned assessing officer has erred in appreciating the material available on record and in coming to a conclusion that the sum of Rs. 1215000/- remained unexplained. (4) The appellant craves for leave to add or amend or alter any of the grounds of appeal.” 2. Rival submission of both the parties have been heard and record perused. The learned Authorised Representative (ld. AR) of the assessee submits that the assessee is proprietor of Maganlal Jewelers, engaged in the business of jewellery. The assessee while filing return of income, declared income of Rs. 4.68 lacs for A.Y. 2017-18. The assessee declared income as per provisions of Section 44AD of the Income Tax Act, 1961 (in short, the Act). The case of assessee was selected for scrutiny. The Assessing Officer during the assessment noted that during demonetization period, the assessee has made cash deposit of Rs. 12.15 lacs in his bank account with Bank of Baroda. The assessee was show caused to substantiate the source of cash deposit. The ld. AR of the assessee submits that during the assessment, he explained the fact that the assessee has declared on presumptive basis under Section 44AD of the Act. The assessee explained that deposit in the bank are the sale proceed of business activities. The Assessing officer not accepted the explanation furnished by assessee. Before the ld. CIT(A), the assessee filed written submission on 21/07/2023, however, the ld. CIT(A) confirmed the order of Assessing officer by holding that he assessee has not explained the source of cash deposit. The ld. AR of the assessee ITA No. 606/Srt/2023 Maganlal Harichand Soni Vs ITO 3 submits that the entire cash deposit is a part of sales made in cash. The deposit in bank is not inordinate or disproportionate to the income declared by the assessee. The assessee is a small scale business man and has declared presumptive income @ 8% of his total receipt. The ld. AR of the assessee submits that the lower authorities have not considered the explanation and the evidences furnished by the assessee, therefore, the matter may be restored back to the file of lower authorities. In the alternative submission, the ld. AR of the assessee submits that though the assessee has offered sufficient taxable income, still to avoid the protracted litigation, the Bench may take lenient view by making some token disallowance out of total cash deposit which is otherwise a part of business proceed. 3. On the other hand, the learned Senior Departmental Representative (ld. Sr. DR) for the revenue supported the orders of lower authorities. The ld. Sr. DR for the revenue submits that the assessee has not filed any cogent evidence to substantiate the fact about cash deposit during demonetization period and a comparative figure of cash deposit prior to demonetization period and/or in subsequent years. The assessee is simply claiming that deposit in bank is a part of sale proceed. All the submissions of assessee was considered by the lower authorities and that the assessee is not eligible for any relief. 4. I have considered the submissions of both the parties and have gone through the orders of the lower authorities carefully. I find that the ITA No. 606/Srt/2023 Maganlal Harichand Soni Vs ITO 4 during the assessment, the assessee was given various opportunities for furnishing month-wise cash sales and deposit from 01/04/2016 to 31/03/2017 in a given format. The Assessing Officer also issued final show cause notice warning the assessee to proceed under Section 144 of the Act. The Assessing Officer recorded that no submission was filed by the assessee. The Assessing Officer made addition of entire cash deposit. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed written submissions on 21/07/2023 as recorded in para 5 of impugned order. The assessee in its reply stated that he is a jeweler and cash pertains to cash receipt from sale of gold and silver which has been offered to tax under Section 44AD of the Act and that all necessary evidences were furnished during the assessment proceedings. The ld. CIT(A) on considering the submissions held that during the assessment, the assessee furnished only cash book without any details of cash sales or supporting evidence. The ld. CIT(A) by referring the relevant part of assessment order, held that the assessee has not explained the source of cash deposit and upheld the action of Assessing Officer by following the decision of Hon'ble Delhi High Court in the case of Sanjay Kapur Vs ACIT (2022) 138 taxmann.com 206 (Delhi). 5. I find that nature and business activities of assessee is not in dispute. Further the assessee has offered income on presumptive tax basis under Section 44AD of the Act. Therefore, considering the entire facts and ITA No. 606/Srt/2023 Maganlal Harichand Soni Vs ITO 5 circumstances of the case, instead of restoring the case back to the lower authorities, I find that in order to prevent the possibility of revenue leakage, a reasonable percentage of cash deposit will meet the ends of justice, therefore, the Assessing Officer is directed to tax 10% of total cash deposit of Rs. 12.15 lacs thereby the addition is restricted to Rs. 1,21,500/-. In the result, grounds of appeal raised by the assessee are allowed partly. 6. In the result, this appeal of assessee is allowed partly. Order announced in open court on 20 th December, 2023. Sd/- (PAWAN SINGH) JUDICIAL MEMBER Surat, Dated: 20/12/2023 *Ranjan Copy to: 1. Assessee 2. Revenue 3. CIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat