Indermeet Singh, Ludhiana V. ITO, Ward - 1(5), Ludhiana

ITA 7/CHANDI/2022

AI Insights

The case involves an appeal by the assessee, Indermeet Singh, against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (CIT(A), NFAC), which confirmed the addition of Rs. 2,68,72,000 as unexplained cash credit under Section 68 of the Income Tax Act, 1961. The addition was initially made by the AO during the assessment year 2017-18, following the demonetization period, based on the substantial increase in cash deposits. The assessee argued that the cash was from legitimate business operations and provided various documents to substantiate this claim, which were not accepted by the AO. The CIT(A) upheld the AO's decision, leading to the current appeal before the Income Tax Appellate Tribunal, Chandigarh.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 127577 (ITAT-CHANDIGARH)
• Duration Of Justice: 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 29-11-2022
• Assessment Year: 2017-2018
• Appeal Filed On: 12-01-2022
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Matter Remanded
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Set aside
• Section: 68; 142(1); 250; 143(2)

Judgement Text

आयकर अपील य अ धकरण,च डीगढ़ यायपीठ “ए” , च डीगढ़ IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH “A ”, CHANDIGARH ीमती दवा संह, या"यक सद#य एवं ी $व%म संह यादव, लेखा सद#य BEFORE: SMT. DIVA SINGH, JM & SHRI. VIKRAM SINGH YADAV, AM ITA NO. 7/Chd/2022 Assessment Year : 2017-18 Indermeet Singh D-6, Phase-II, Focal Point, Ludhiana Ludhiana-141010- Punjab The ITO, Ward-1(5), Rishi Nagar, Ludhiana- Punjab PAN NO: AYVPS1664F Appellant Respondent ! " Assessee by : Shri S.K. Mukhi, Advocate # ! " Revenue by : Smt. Amanpreet Kaur, Sr. DR $ % ! & Date of Hearing : 30/11/2022 '()* ! & Date of Pronouncement : 02/01/2023 आदेश/Order PER VIKRAM SINGH YADAV, A.M: This is an appeal filed by the Assessee against the order of the Ld. Commissioner of Income Tax, (Appeals), National Faceless Appeal Centre [hereinafter referred to as ‘CIT(A), NFAC’] passed under section 250 of the Income Tax Act, 1961 (in short ‘the Act’) dt. 05/11/2021 pertaining to A.Y. 2017- 18 wherein the assessee has taken the following grounds of appeal: 1. “That the order of the learned CIT (Appeals), is illegal, wrong, arbitrary and against law and the facts of the case. 2. That the learned CIT(Appeals) is not justified in concurring with the Ld. AO and thereby confirming the addition of Rs. 2,68,72,000/- towards unexplained cash credit u/s 68 of the Income Tax Act 1961 which was nothing but deposit of cash out of the regular books of account and such action / order of the CIT(A) is perverse and needs interference by this Hon’ble Tribunal for which the appellant respectfully prayeth vide this present appeal. 2 3. That the Appellant craves for leave to add, modify amend or delete any of the grounds of appeals at the time of hearing and all the above grounds are without prejudice to each other.” 2. Briefly the facts of the case are that the assessee filed his return of income declaring total income of Rs. 19,55,180/- which was selected for complete scrutiny under CASS for examining cash deposited during the demonetization period. Thereafter, notices under section 143(2) and 142(1) were issued alongwith detailed questionnaire, and after taking into consideration the submissions filed by the assessee but not finding the same acceptable, an addition of Rs. 2,68,72,000/- was made towards cash deposited during the demonetization period under Section 68 read with Section 115BBE of the Act. 3. Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A),NFAC and the order of the AO and additions made therein were confirmed by the Ld. Commissioner of Appeal, NFAC. 4. Against the said findings and the order of the Ld. CIT(A) NFAC, the assessee is in appeal before us. 5. During the course of hearing, the Ld. AR taken us through the notice issued under section 142(1) alongwith detailed questionnaire and the responses filed by the assessee from time to time and it was submitted that all requisite information as called for by the AO were submitted during the course of assessment proceedings in support of cash deposited during the demonetization period including cash book, bank statements giving complete details of all the deposits, month wise details of sales made and comparative sales figures for the previous financial year, however the AO without appreciating the same has gone ahead and made the addition. 5.1 Further our reference was drawn to the findings of the AO wherein he has held that the cash imprest amounts were nothing but bogus entries in order to not reflect huge cash in book of the assessee firm and cash imprest was never 3 used for any purpose and was merely a book entry in order to show reduced cash in the cash book of the firm. In this regard, our reference was drawn to the submissions made before the AO dt. 17/12/2019 wherein it was submitted that imprest account was always part of the books of account and transferring of cash balance from cash book to imprest account or vice a versa did not change the nature of the cash. It was submitted that the amount was lying in the imprest account as the assessee was in the process of negotiation for buying certain industrial piece of land which did not materialize and in the meantime, demonetization happened and the assessee thereafter deposited all the cash lying in the imprest account into the bank. It was submitted that the explanation so submitted by the assessee was not appreciated by the AO. 5.2 Further referring to the findings of the AO that introduction of cash sales in the cash book is an afterthought to bring unaccounted cash lying with the assessee in the book of account of the firm so as to enable him to deposit the same during the demonetization period, in this regard, it was submitted that during the course of assessment proceedings, the assessee has submitted that there are regular cash sales made by the assessee and vide its submission dt. 11/12/2019 month wise cash sales details for the F.Y. 2014-15, 2015-16 were submitted and which adequately demonstrated that the assessee was making regular cash sales even during the previous financial year and therefore the said findings of the AO wherein he has held that the cash sales were introduced in the books of account is again factually incorrect. 5.3 It was submitted that the AO has only looked at the cash deposited in the books of account however has not appreciated that the assessee has disclosed total turnover of Rs. 60,72,43,334/- during the financial year relevant to the impugned assessment year and there were adequate opening stock as well as purchases and other expenses incurred by the assessee during the year which have not been disputed by the AO. 4 5.4 It was submitted that it is a one sided arbitrary findings recorded by the AO without taking into consideration the sales and the profits shown by the assessee. It was submitted that where the sales have been accepted and the books of accounts have not been rejected then the corresponding cash generated out of the said sales are duly explained and cannot be disputed by the AO. 5.5 It was further submitted that even the Ld. CIT(A) NFAC has not appreciated the assessee’s position and even during the appellate proceedings, the assessee has submitted copies of the VAT returns and month wise sale data for both cash and credit sales, further weekly cash flow statement for the previous financial year as well as financial year relevant to the impugned assessment year have been submitted which shows the regular cash inflow and cash outflow relating to the assessee’s business activity. 5.6 It was submitted that all these facts and documentation duly submitted during the course of assessment and appellate proceedings have been summarily rejected without giving any specific findings and merely basis the fact that the certain amount was deposited during the demonetization period, the addition have been made by the AO it was accordingly submitted that the order so passed by the AO and confirmed by the Ld. CIT(A), NFAC be set aside. 6. Per contra, the Ld. DR has relied on the order of the lower authorities and it was submitted that the cash in hand as on 01/04/2016 was only Rs. 10,10,563/- which increased to Rs. 2,68,17,796/- as on 08/11/2016 and thereafter the assessee deposited cash of Rs. 2,68,72,000/- during the demonetization period. 6.1 Further referring to the findings of the AO where the AO has stated that during the pre demonetization period, the assessee has shown cash sales of Rs. 2,06,54,724/- and immediately after the demonetization period, the assessee has only shown cash sales of Rs. 4,99,811/-. It was submitted that the said factual 5 position adequately demonstrates that the assessee has introduced cash sales in the book of accounts to accommodate unaccounted cash lying with him. 6.2 Further referring to the findings of the AO, it was submitted that the assessee was enjoying substantial credit facility from the bank and there was no business rationale for keeping huge cash in hand which corroborate the fact that the cash was actually not available in the books of the assessee firm and the same was introduced in the cash book so as to enable the assessee to accommodate unaccounted cash lying with him and deposited the same in the bank. It was submitted that the story of the imprest account and withdrawal from the cash book and subsequent deposit is clearly an afterthought which has been rightly rejected by the AO and upheld by the Ld. CIT(A), NFAC. It was accordingly submitted that there is no infirmity in the findings of the order of the Ld. CIT(A) NFAC who has rightly confirmed the addition made by the AO. 7. After hearing both the parties and going through the material available on record and taking into consideration the contentions of the ld AR that submissions and documentation submitted during the course of assessment and appellate proceedings have been summarily rejected without giving any specific findings and merely basis the fact that the certain amount was deposited during the demonetization period, it was observed by us during the course of hearing that the matter require fresh examination and verification of assessee’s books of accounts and to take into consideration the assessee’s submissions and explanation regarding the source of cash deposit during the demonetization period as well as to record specific findings accepting or rejecting the assessee’s explanation. The examination and verification should take into consideration the availability of cash at the beginning of the financial year, the transactions effected during the pre-demonetization period both in terms of cash deposits and withdrawals in the bank accounts and their source/utilization along with supportive documentation, manufacturing and 6 sales data and supporting documentation, and past history of the assessee. As informed by the ld DR during the course of hearing, the examination and verification should also take into consideration and follow the detailed standard operating procedure as issued by the CBDT for carrying out such verification. Both the parties agreed to the aforesaid proposition and accordingly, we set- aside the matter to the file of the AO to examine the matter afresh as per aforesaid discussions and decide as per law after providing reasonable opportunity to the assessee. Needless to say, the assessee shall be at liberty to file additional information/documentation as so advised and shall participate and cooperate in the timely completion of the proceedings and submit necessary information/documentation as available and called for by the AO. 8. In the result, the appeal is allowed for statistical purposes. Order pronounced on 02/01/2023. Sd/- Sd/- दवा संह $व%म संह यादव (DIVA SINGH) (VIKRAM SINGH YADAV) या"यक सद#य / JUDICIAL MEMBER लेखा सद#य/ ACCOUNTANT MEMBER AG Date:02/01/2023 ( + ! , - . - Copy of the order forwarded to : 1. The Appellant 2. The Respondent 3. $ / CIT 4. $ / 0 1 The CIT(A) 5. - 2 ग 4 5 & 4 5 678 ग9 DR, ITAT, CHANDIGARH 6. ग 8 : % Guard File ( + $ By order, ; # Assistant Registrar