Dy. Commissioner of Income Tax, Circle-2(1)(1), Surat, Surat V. Seymore Print Private Limited, Surat

ITA 612/SRT/2023

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 7060 (ITAT-SURAT)
• Duration Of Justice: 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-05-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 04-09-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SURESH K. KABRA
• Keywords: Unexplained cash credit; Corroborative evidences
• Section: 131; 68; 250; 143(2); 44AB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JIDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.612/SRT/2023 Assessment Year: (2017-18) (Physical Court Hearing) Dy. Commissioner of Income- tax, Circle-2(1)(1), Surat, Income Tax Office Majura Gate, Surat-395001 Vs. Seymore Print Pvt. Ltd., 102, Surana International, Sahara Darwaja, Ring Road, Surat-395002 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAICS 0768 E (अपीलाथŎ/Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Assessee by Shri Suresh K. Kabra, CA िनधाŊįरती की ओर से /Revenue by Shri Vinod Kumar, Sr. DR सुनवाई की तारीख /Date of Hearing 02.05.2024 घोषणा की तारीख /Date of Pronouncement 27.05.2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the Revenue emanates from the order under section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 13.07.2023 passed by the learned Commissioner of Income Tax (Appeals), [in short, ‘Ld.CIT(A)’] for assessment year 2017-18. Grounds of appeal raised by the Revenue are as under:- “1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting addition of Rs.75,57,500/- made by the Assessing Officer on account of unexplained cash credits u/s 68 of the Income-tax Act. 2 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. 2. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in delating the addition u/s 68 by not appreciating the fact that though the assessee had maintained books of account but explanation offered by the assesse for sources of cash deposits during the demonetization period was not found to be satisfactory during the assessment proceedings. 3. On the basis of the facts and circumstances of the case and in law, the Ld. CIT(A) had erred in deleting the addition of Rs.75,57,500/- made on account of cash deposits holding that the Assessing Office had accepted the cash book produced before him during the assessment proceedings however the Assessing Officer has clearly given findings with regard to non acceptance of the cash book of the assessee-company in assessment order. 4. It is therefore prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Office be restored. 5. The appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing of the appeal.” 2. Facts of the case, in brief, are that the assessee company filed its return of income for the AY 2017-18 on 02.10.2017 declaring total income of Rs.20,55,730/-. Subsequently, case was selected for scrutiny by issuing notice u/s 143(2) of the Act. During the year under consideration, the assessee-company was engaged in business of dyeing and printing of cloth on job work basis and was also engaged in manufacturing of semi-stitched kurtis. The assessee-company deposited cash of Rs.76,67,600/- during demonetization period. In this regard, assessee submitted that the source of cash deposit was cash- in-hand as on 08.11.2016 and the reason for cash-on-hand was cash withdrawals made from banks. The AO issued summons u/s 131 of the Act and recorded the statement of Shri Ashok Hariprasad Yadav, 3 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. director of the assessee-company. He stated that due to safety reasons, cash was kept at his residence. On perusal of cash book, it was found that assessee had received cash from parties and on comparison with preceding year, the quantum was on a higher side. The AO issued show-cause notice as to why the cash deposited of Rs.76,67,600/- in specified bank notes (‘SBN’ in short) during demonetization period should not be treated as unexplained cash credit. The assessee had shown cash receipts from parties in FY 2015-16 upto 08.11.2015 at Rs.40,59,849/- but cash receipts from parties upto 08.11.2016 was Rs.80,10,907/- in FY 2016-17. The assessee has shown cash receipts from customers in FY 2016-17 of Rs.80,10,907/- which is 4.7% of the turnover, whereas the cash receipt for FY 2015-16 was Rs.40,59,849/-, which was only 2.46% of the turnover. In reply, the assessee submitted that it is a general trend to maintain cash-in-hand and payment of interest on CC account cannot be questioned. In the previous year, the case of the assessee was subjected to scrutiny and no adverse inference was drawn on account of cash-in-hand by AO. The AO was not satisfied with the reply of the assessee. He observed that cash sale up to 8.11.2016 was ₹25,56,319 whereas it was only ₹12,30,165 in the earlier year. The assessee has deposited various amounts in bank account totaling to ₹76,67,600 but he accepted the first cash deposit of 4 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. ₹1,10,000 on 10.11.2016 and treated subsequent deposits of ₹75,57,000 as unexplained cash credit under section 68 of the Act. He added the same to the total income of the assessee and taxed it @ 60% under section 115BBE of the Act. 3. Aggrieved by the order of the Assessing Officer, the assessee filed appeal before the learned CIT(A). The learned CIT(A) deleted the addition made by the AO after considering the assessment order, submission of the assessee and various decisions relied upon by the appellant. The assessee had furnished date-wise cash deposits, rebuttal of all observations and findings of the AO, which are at pages 8 to 20 of the appellate order. The rebuttal/explanation of assessee was regarding the higher cash sales up to 8.11.2016; turnover of the company in financial years 2015-16 and 2016-17; cash sales to customers; payment of interest of ₹59,75,080 for use of credit from CC account and not utilising the cash in hand to reduce interest burden; cash deposit in piecemeal manner and not depositing the same at one stroke. The appellant also raised issue of double taxation on cash deposit as well as sales and receipts from customers; non rejection of books of account, cash book duly recording cash sales and receipts from debtors, audited accounts under Companies Act and Income-tax Act, availability of sufficient stock, no finding regarding other use of 5 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. cash and non-applicability of section 68 of the Act. The appellant had also relied on various decisions of the ITAT and Hon’ble Courts in support of the explanation/ rebuttal. 3.1 The learned CIT(A) has given his findings at paras 6 to 6.10 at pages 20 to 30 of his order. He observed that AO had not disputed sales, purchase, quantitative details, cash receipt against credit sales and financials of the assessee company. He observed that percentage of cash sales in assessment year 2017-18 was comparable or lower to assessment year 2015-16 and 2014-15. He also accepted contention of assessee that increase in cash sale as compared to last year was meagre if turnover of the assessee is considered. He also accepted that cash receipts from customer is less than 5% and within the tolerable limits under section 44AB for audit purpose. The learned CIT(A) also held that the AO failed to establish that cash deposited in bank was out of undisclosed sources of the assessee company. Regarding adverse comment on deposit on piecemeal basis, the learned CIT(A) observed that in absence of any such ban, the contention of AO is based only on assumptions and presumptions. The learned CIT(A) also accepted argument of the assessee that the AO failed to establish that impugned cash deposit was not offered to tax. He accepted that it would amount to double taxation if separate addition is made in this regard. He 6 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. further observed that the books of account have not been rejected and therefore, the cash deposited out of the cash in hand cannot be said to be from undisclosed sources. The learned CIT(A) further observed that in absence of any evidence that cash in hand has been utilised anywhere else, the deposit in bank cannot be adversely viewed. In view of the above facts and relying on various decisions of the tribunal and Hon’ble Courts, he deleted addition of ₹75,57,500 made by the AO under section 68 of the Act. Aggrieved by the order of the learned CIT(A), Revenue has filed present appeal before the Tribunal. 4. The learned CIT-DR has strongly relied upon the order of AO. He argued that cash receipts from parties during the year was ₹80,10,907 (4.70% of turnover) which was substantially higher than ₹14,59,000 849 (2.46% of turnover) in the preceding year. Cash sales was also higher at ₹25,56,310 as against ₹12,30,165 in the preceding year. On the other hand, cash expenses are at par. He also raised question as to why assessee deposited only ₹1,10,000 on 10.11.2016 if he had cash- in-hand of ₹76,67,600. He debunked security concerns raised by the assessee for multiple deposits. 5. On the other hand, Leonard AR had strongly supported order of learned CIT(A). He has filed a paper book containing-1 to 335 pages. He had taken us through the order of learned CIT(A) and argued that each 7 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. and every observation and finding of AO has been duly rebutted/explained with supporting evidence, books of account and appropriate case law. He also submitted that the cash deposited during the demonetization period was assessee’s own money, being cash-in-hand out of cash sales, collection from customers and cash withdrawals. The addition by AO is purely based on assumptions and presumptions. The company does not have any other source of income and cash in hand has been not utilised for any other purpose. Hence, addition of AO is not sustainable, both on facts and in law. 6. We have heard both parties and pursued the record including orders of lower authorities. We have also deliberated the case laws relied upon by the parties. In the assessment order, the AO has accepted ₹1,10,000 out of cash deposited of ₹76,67,600 in specified banking notes (SBN) during demonetization period. He accepted the first deposit of ₹1,10,000 on 10.11.2016 and added balance ₹75,57,500 deposited on subsequent dates as unexplained cash credit u/s 68 of the Act. The reasons given by AO has been discussed in the facts of the case at para-2 above. However, Ld CIT(A) deleted the addition by accepting the submission and rebuttal/explanation of the assessee on all observations and findings of the AO. The same has been discussed in this order at Parra-3.1 and hence not repeated here for brevity. The 8 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. main reasons for making the addition was that cash receipts from parties up to 8.11.2016 was very high at ₹80,10,907 which was 4.7% of the turnover of FY 2016-17. The same was only ₹40,59,849 which was 2.4% of the turnover in the earlier FY 2015-16. However, cash expenses were at par in both years. The assessee also paid interest of ₹59,00,00 to the bank for its CC account despite huge cash in hand which was not utilised to reduce the interest burden of the CC account. In view of these reasons, the assessee was actually not having the cash of ₹76,67,600 as on 08.11.2016. Therefore, the excess deposit of ₹75,57,600 barring the initial deposit of ₹1,10,000 on 10.11.2016 was added u/s 68 of the Act. 6.1 The Ld. CIT(A) has duly considered all the issues in the assessment order as well as the explanations/ rebuttal of the assessee to the observations and findings of the AO. He has accepted the explanation of the assessee on all the issues. He has also examined the other aspects such as double taxation of cash deposit as well as profit on sales/receipts recorded in the regular books and applicability of provisions of section 68 of the Act to the impugned issue. We have carefully gone through the orders of lower authorities and find that the Ld. CIT(A) has duly considered the findings of the AO and their rebuttal by the assessee and passed a reasoned and speaking order covering all 9 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. issues. He has also supported his findings with relevant decisions on the specific issue. We find that the AO has not disputed stock, cash received from customer, cash sales and cash withdrawal shown by the assessee in its regular books of account. He has also accepted other details such as purchases, sales, quantitative details and other financials of the company. It is true that the cash sales in the current year was more than that in the earlier year. But, it was lower than AY 2014-15 and comparable to AY 2015-16. In any case, cash sales were very low at 1.67% of the total turnover of ₹16,79,83,430/-. Similarly, cash received from customers at ₹80,10,907 was 4.7% of the turnover, whereas it was 2.46% of the turnover in proceeding a AY 2015-16. The assessee had argued that such figures were very low compared to total turnover. 6.2. At this stage, it may be pointed out that the observations of the learned CIT(A) regarding cash sales below tolerance limit of 5% of the turnover is not correct because 44AB(a) was inserted by the Finance Act, 2020 and is not applicable for AY 2017-18. It is also factually not correct because 5% of the turnover of ₹16,79,83,430 comes to ₹83,99,171/- whereas cash sales and cash from customers was ₹1,22,45,717/- (₹28,09,444 + ₹94,36,273), which is 7.29% of turnover. However, this by itself will not have any bearing on the findings of the 10 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. learned CIT(A) because all these transactions including cash deposits are reflected in the audited books of account which has not been rejected by the AO. The learned CIT(A) have also given a specific finding that assessee had furnished "ledgers of cash receipt parties". The learned senior DR has not brought any anything on record to controvert the findings of the learned CIT(A). We also find that the AO has not disputed the stock of the assessee. Hence, the sales including cash sales cannot be questioned. We also find that no evidence has been bought on record to prove that the cash-in-hand shown by the assessee was used for any other purpose so that sufficient cash was not available to make deposits in the bank account, as claimed by the assessee. The appellant has submitted that cash sales and realisation in cash from debtors were 1.68% and 5.37% of the turnover respectively, which is a very small portion of the turnover. Further, AO has not given any finding that assessee was having any other source of income which is not recorded in the books of account and cash generated therefrom was deposited in the bank account. 7. We also find from the record that the opening balance of cash in hand was ₹13,73,902/-. The assessee had received ₹28,09,444/-, ₹94,36,273 /- and ₹12,53,820 /- from cash sales, cash from customers and cash withdrawals respectively. Out of the above total cash of 11 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. ₹1,48,73,439/-, it has incurred various expenses in cash including salary of ₹20,07,946/ and deposited ₹98,27,600/- in cash-in-bank account. The cash deposit of ₹76,67,500/- during demonetisation period is a part of the above cash deposit in the bank account of the assessee. Thus, we find that cash realised from debtors and cash sales etc. have been duly recorded in the books of accounts. The impugned deposits have been made from cash balance available in the books of account. We also find that such books have not been rejected by the AO nor any defect has been found out by him. When cash deposits were out of the cash in the bank as per the books of account, there is no question of treating the said deposits as unexplained cash deposit u/s 68 of the Act. Hence, we do not find any infirmity in the order of learned CIT(A). The decisions relied upon by him also support his findings. Accordingly, the grounds of appeal raised by Revenue are dismissed. 8. In the result, appeal filed by the Revenue is dismissed. Order is pronounced on 27/05/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत/Surat Ǒदनांक/ Date: 27/05/2024 DKP Outsourcing Sr.P.S 12 ITA No.612/SRT/2023 AY.17-18 Seymore Print Pvt. Ltd. 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