Jiteshbhai Jashmatbhai Goti, Surat V. Income Tax Officer, Ward - 2(2)(2), Surat

ITA 771/SRT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3316 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Next Hearing Date: 14-03-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 08-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Opportunity of being heard; Set aside
• Section: 68; 69; 144; 44AD; 143(3); 142(1); 143(2); 69A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.771/SRT/2023 Assessment Year: (2017-18) (Physical Hearing) Jiteshbhai Jasmatbhai Goti, 127, Gadhpur Township, Near Khadsad Patiya, Gadhpur Road, Pasodra, Surat – 395206. Vs. The ITO, Ward – 2(2)(2)(2), Surat èथायीलेखासं./जीआइआरसं./PAN/GIR No: AJOPG4767B (Appellant) (Respondent) Appellant by Shri P. M. Jagasheth, CA Respondent by Shri Vinod Kumar, Sr. DR Date of Hearing 15/03/2024 Date of Pronouncement 22/03/2024 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)”], Surat, National Faceless Appeal Centre (in short ‘the NFAC’), dated 20.09.2023, 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 26.12.2019. 2. The grounds of appeal raised by the assessee are as follows: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals)'s order seems to be based on different facts and subject matter, Hence, the order is deemed to be dismissed and hence this Appeal. 2. On the facts and in the circumstances of the case as well as the law on the subject, the Assessing Officer has erred in making addition of Rs. 16,82,500/- 2 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti on account of total cash deposits in bank accounts during the year and demonetization period treated as undisclosed income u/s.69A of the Income Tax Act without considering the material available on record. 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Assessing Officer has erred in making addition of Rs.8,15,000/- on account of credit entries in bank accounts treated as alleged undisclosed income u/s.68 of the Act without considering material available on record. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has not offered adequate opportunities to hear the case and passed the order on different facts and subject, matter, hence the case may please be set aside and restored back to the CIT(A) or AO. 5. It is therefore prayed that the above addition may please be deleted as learned members of the tribunal may deem it proper. 6. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. Ground Nos.1 and 2 raised by the assessee relate to addition of Rs.16,82,500/- on account of total cash deposits in the year, which includes cash deposited during demonetization period. 4. The relevant material facts as culled out from the material on record, are as follows. The assessee before us in an Individual and filed his return of income for the assessment year 2017-18 on 26.02.2019 declaring total income of Rs.3,61,180/- and agricultural income of Rs.1,36,029/-. The case of the assessee was selected for scrutiny though CASS under the flag of complete Scrutiny for identification and examination of issue related to “Cash deposit during demonetization period”. Accordingly, notice under section 143(2) of the Act, bearing Notice No. ITBA/AST/S/143(2)72018-19/1012525340(1) was issued on 24.09.2018 and duly served upon the assessee. During the year under consideration, the assessee was working as a contractor and declared income of Rs.3,65,186/- u/s 44 AD of the I.T. Act on total receipt of 3 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti Rs.9,49,250/-. As per the details filed in the return of income, the assessee has shown income from other sources also. As per various order sheet entries of the assessing officer, recorded on ITBA portal, the assessee has furnished the details and documents called for before the assessing officer, during the assessment proceedings. With regard to the cash deposit made during the demonetization period, the Assessing Officer noted that the assessee has put forth that he has deposited cash of Rs.7,39,100/- from the cash withdrawal. Further, while going through the bank account of assessee held with Sarvodaya Co-operative bank following cash transaction found: Withdrawal Deposits 12.08.2016 Rs. 10,00,000/- 14.09.2016 Rs. 10,00,000/- 16.09.2019 Rs. 9,20,000/- 10.11.2019 Rs. 5,00,000/- Cash deposits other Rs. 30,500 Than monetization in BOI Cash deposits during demonetization in BOI Gadhada Rs.45000/- Cash deposits during demonetization in BOB, Saiyed pura Rs.1,07,000/- Total Rs.10,00,000/- Rs.26,82,500/- In view of the above, the Assessing Officer noted that assessee has withdrawal of total cash of Rs.10,00,000/-, however, during the year assessee has deposited cash of Rs.26,82,500/- (including Cash deposits during demonetization period at Rs.7,39,100/-). In view of the above as per assessing officer, the cash deposited Rs.16,82,500/- (26,82,500 – 10,00,000) remain unexplained in the hand of assessee. 4 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti 5. Therefore, considering the above facts, a show cause notice was issued to the assessee on 22.11.2019, which is reproduced below: “1. As you are aware that assessment proceedings are going on in your case for the assessment year 2017-18 with reason to verify the cash deposits during demonetization by you. A Notice U/s. 142(1) of the I. T. Act issued to you dated 24.04.2019, 03.06.2019, 06.09.2019 and 08.11.2019.You have not submitted the details called for vide Notice U/s. 142(1) of the I. T. Act issued to you. 2. Further on verification bank statements, it is found that you have deposited cash on following dates Bank A/c. No Cash deposited during Demonetization Rs. Period The Sarvoday Sahkari Bank Ltd A/c. No. 1001021011364/- Rs. 5,02,1 00/- Demonetization Bank Of Baroda A/c. No. 06370100017434 Rs. 1,07,000/- Demonetization Bank Of India A/c. No. 270010110004282 Rs. 80,000/- Demonetization Bank Of India A/c. No. 321810110001596 Rs.50,000/- Demonetization TOTAL Rs. 7,39, 100/- 3. You are totally failed to comply and submitted the source of cash deposits made during period of demonetization. In view of the above source of cash deposited Rs.7,39,100/- during period of demonetization and in earlier date remain un explained in your hands. In view of the above you are requested to submit details called for vide above mentioned notices along with documentary evidence through assessment portal. 4. It is also mentioned here that if you failed to submit the satisfactory evidence to prove source of cash deposits. You are requested to show case as to why Rs.7,39,100/- added in your total income for the year under consideration u/s. 69 A of the I. T. Act. 6. On verification of bank account held with The Sarvoday co-operative bank Ltd it is found that, there are huge credit entries i.e. Rs.46,18,300/- in your bank. However you have shown contract income of Rs.9,49,250/-. In absence details / nature of credit entries, you are therefore requested to show cause as to why the credit entries in your bank should not be treated as unexplained cash credit and added in your income for the year under consideration. 5. Hereby, you are being given the final opportunity of being heard. You are requested to furnish the detail alongwith all documents and evidences for the purpose of verification and assessment. 5 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti 6. Your failure to comply with terms of this letter will force the O/o the undersigned to make the assessment of the total income or loss by making addition as discussed above and determine the sum payable as per Act by you on the basis of such assessment. 7. Therefore you are given final opportunity to furnish fully and completely the information called for in earlier this Notices on or before time given. In the event of failure on your part to comply with this letter, it will be taken that you have nothing to submit and the assessment shall be made on the merits of the case u/s. 144 of the I. T. Act.” 6. In response to the above show cause notice, the assessee furnished reply before Assessing Officer. However, the Assessing Officer rejected the contention of the assessee and held that since the assessee failed to give reliable and justifiable explanation about the source of deposits, therefore the total cash deposits during entire year including demonetization period of Rs.16,82,500/- was treated as unexplained money u/s 69A of the Income Tax Act, 1961 and added to the Total Income of the assessee. The assessing officer also held that total income assessed should be taxed u/s 115 BBE of the Act at the rate of 60%. 7. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A), who has partly allowed the appeal of the assessee, observing as follows: “7.2 On Merits: In statement of facts, the appellant has stated that he was engaged in business of selling milk. It was stated that details were filed before earlier AO i.e. ITO Ward 3(5), Jamnagar but could not file the same before the new AO i.e. ITO Ward 2(7) Jamnagar. The AO failed to gather and take note of replies filed before ITO Ward 3(5), Jamnagar. The appellant had produced books of accounts for FY 2014-15, 2015-16 and 2016-17. Also filed cash ledger wherein sufficient cash was available. The appellant has filed letter dated 08/11/2022 of Manager, The Commercial Co-Operative Bank Ltd, Jamnagar wherein it has been stated that during the year 2016-17 total cash deposit is Rs.7,50,000/- which is between 14/11/2016 to 21/11/2016. Copy of the letter was filed which was also filed with ITO Ward 3(5), Jamnagar. Therefore, the cash deposit during the year is taken Rs.10,48,000/- (7,50,000 + 2,98,000) only. The appellant has not given any proof of doing business of sale of milk. Thus, the contention that the cash deposits are out of sale proceeds remain unsubstantiated. However, various courts have given allowance for past savings and cash in hand. In view of the 6 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti facts of the case it will be reasonable to give allowance for past savings of Rs.3,00,000/-. Therefore, the addition is restricted to Rs.7,48,000/-. 8. In the result, the appeal of the appellant for the AY.2017-18 is ‘Partly Allowed’. 8. Aggrieved by the order of ld. CIT(A), the assessee is in appeal before us. 9. Shri P. M. Jagasheth, Learned Counsel for the assessee, argued that at the initial stage the assessing officer proposed to make addition to the tune of Rs.26,82,500/-, however, the assessee filed the explanation stating that he has withdrawal of total cash of Rs.10,00,000/-, therefore, assessing officer reduced the addition at Rs. Rs.16,82,500/- (26,82,500 – 10,00,000). On appeal by the assessee, before ld CIT(A), the ld CIT(A) further reduced the addition to Rs. 7,48,000/-. The ld Counsel stated that balance addition sustained by ld CIT(A) at Rs. 7,48,000/- is the amount deposited by the assessee in the bank account out of the sales realization from debtors. Though this amount was deposited in the demonetization period, however, it does not mean that it is unaccounted money of the assessee. This money belongs to the assessee`s business and the assessee has paid the taxes thereon, as the said amount is duly reflected in the total sales of the assessee. Hence, addition sustained by ld CIT(A) may be deleted. 10. On the other hand, learned Senior Departmental Representative (ld. Sr. DR) for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 11. We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the 7 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. CIT(A) and other material brought on record. Before us, the assessee has furnished the summary of total cash deposit in the bank account in entire year including amount deposited during the demonetization period of Rs.7,34,100/-. The ld CIT(A) sustained the addition at Rs. 7,48,000/-, instead of Rs.7,34,100/-. The said summary of cash deposited during the year is reproduced below: From the above chart, it is vivid that assessee had deposited cash during the demonetization period at Rs. 7,34,100/- out of routine business income. We are of the view that cash deposit in the bank account during 8 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti the demonetization period should not be treated as profit of the assessee, especially when the other cash deposited in the bank account, out of business income, was deleted by the assessing officer himself. It is an admitted fact that assessee is a small businessman and filed his return of income u/s 44AD of the Act, and in assessee`s business cash transactions are involved. The section 44AD of the Act, relates to presumptive income scheme, wherein in case of an eligible assessee engaged in an eligible business, a sum equal to 8% of the total turnover or gross receipts of the assessee, in the previous year on account of such business, shall be deemed to be the profits and gains of such business chargeable to tax. Therefore, to meet the end of justice, we are of the view that cash deposited by the assessee during the demonetization period at Rs. 7,34,100/-, should suffer tax @ 8% under the head business income, which comes to Rs.58,728/-. Therefore, we direct the assessing officer to make addition at Rs.58,728/- in the hands of the assessee. 12. Since, we held that cash deposited by the assessee at Rs.7,34,100/- in the bank account is out of assessee`s business income, hence it should not be taxed u/s 115 BBE of the Act at the rate of 60%. Therefore, we direct the assessing officer to tax the profit element of Rs.58,728/- by applying the normal rate of tax. 13. In the result, ground Nos.1 and 2 raised by the assessee, are partly allowed in above terms. 14. Coming to ground No.2 raised by the assessee which relates to addition of Rs.8,15,000/- on account of credit entries in bank accounts treated as alleged undisclosed income under section 68 of the Act. 9 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti 15. At the outset, ld Counsel stated that assessing officer made addition of Rs.8,15,000/- on account of credit entries in bank accounts. The credit entries in bank accounts, which are duly supported by the cheque entries should not be treated as unexplained income of the assessee. The said amount was deposited by the assessee out of the amount received from sundry debtors during the course of business by way of cheque, hence it should be treated as an explained item and no addition should be made. 16. However, ld DR for the Revenue, relied on the findings of the assessing officer. 17. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. We note that during the course of assessment proceedings, it was noticed by Assessing Officer that assessee has credited following amount other than cash in his bank account: Bank A/c. No Credit entries in bank deposited during year Rs. Period The Sarvoday Sahkari Bank Ltd A/c.No.1001021011364/- Rs. 26,98,300/- Bank Of India A/c.No. 270010110004282 Rs. 16,66,000/- TOTAL Rs.43,64,300/- Assessee has deposited Rs.43,64,300/- through cheque or other way of credit. The Assessing Officer issued show cause notice to the assessee and assessee was asked as to why the credit entries should not be treated 10 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti as unexplained credit during year. In response to same assessee has submitted that he has received unsecured loan of Rs.10,00,000/- and secured loan of Rs.16,00,000/-. However, by accepting the reply of the assessee partly, the assessing officer noted that assessee has failed to submit the details of remaining credit made in his bank account Rs.17,64,300/- (4364300 – 1000000 – 1600000). 18. For remaining credit made in his bank account of Rs.17,64,300/-, the assessee submitted further reply to the assessing officer stating that assessee has received contract income of Rs.9,49,200/-. The assessing officer accepted the submission of the assessee and note that considering the receipt deposited in bank, credit entries of Rs.8,15,000/- (Rs.17,64,300 – Rs.9,49,200) remain unexplained in the hands of assessee. Thus, Assessing Officer finally made addition of credit entries of Rs.8,15,000/-. We find merit in the submission of ld Counsel that balance amount of Rs.8,15,000/- was also deposited in bank account by way of cheque, which was received by the assessee from its customers, hence we are of the view that such explained amount should not be added in the hands of the assessee, particularly, when the assessee had explained the entire credit entries, as noted above, before the Assessing officer and Assessing Officer has himself deleted the same. Considering these facts and circumstances, we delete the addition of Rs. Rs.8,15,000/-. 19. Since, we have deleted the entire addition of Rs.8,15,000/-, which are business receipts, question to tax the assessee`s income u/s 115 BBE of the Act at the rate of 60% does not arise. 20. In the result, ground No.3 raised by the assessee is allowed. 11 ITA.771/SRT/2023/AY.2017-18 Jiteshbhai Jasmatbhai Goti 21. Ground No.4 raised by the assessee, was not argued/not pressed by Ld. Counsel for the assessee, hence we dismiss ground No. 4 of assessee, as not pressed. 22. In the result, appeal filed by the assessee is partly allowed in above terms. Order is pronounced on 22/03/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat Ǒदनांक/ Date: 22/03/2024 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