ASHOKKUMAR VASANTRAI PARIKH, Navsari V. WARD-1 NAVSARI, Navsari

ITA 803/SRT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 4024 (ITAT-SURAT)
• Duration Of Justice: 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: DB
• Next Hearing Date: 28-01-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 24-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 803/Srt/2023 (Assessment Year 2017-18) (Physical hearing) Ashokkumar Vasantrai Parikh, 9, Indralok Apartment, Feedar Road, Tolodh, Navsari-396380. (Gujarat) PAN No. ABJPP 2566 J Vs. Ward-1, Navsari Navsari Appellant/ Assessee Respondent/ Revenue Assessee represented by Shri Ashok Khandelwal, A.R. Department represented by Shri Vinod Kumar, Sr. DR Appeal instituted on 28/11/2023 Date of hearing 29/01/2024 Date of pronouncement 31/01/2024 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 31/10/2023 for the Assessment Year (AY) 2017-18. The assessee has raised following grounds of appeal: “1. In law, on the facts and in the circumstances of the case, the ld. CIT(A) is not justified in confirming the addition to the extent of 25% to the tune of Rs. 12,62,750/- u/s 68 of the I.T. Act, 1961. 2. The ld. CIT(A) has erred in confirming the addition of Rs. 12,62,750/- made u/s 68 of the I.T. Act, despite of fact that he himself has admitted in appellate order that the assessee has explained in details the source of cash deposit. Therefore, no reason for confirming the addition to the extent of 25% mentioned in appellate order. 3. The appellant craves to leave to add, alter, amend or withdraw any ground/s of appeal on or before hearing of the appeal.” 2. Brief facts of the case are that the assessee is an individual, engaged in the business of Tobacco and pan Masala, filed his return of income for A.Y. 2017- ITA No. 803/Srt/2023 Ashokkumar Vasantrai Parikh Vs ITO 2 18 on 03/10/2017 declaring total income of Rs. 7,18,950/-. The case of assessee was selected for limited scrutiny on the issue of “cash deposit during year”. The Assessing Officer during the assessment noted that the assessee is engaged in wholesale trading of tobacco and Pan Masala in the name of proprietory concern ‘Parikh Traders’. The assessee has shown total turnover of Rs. 6.02 crores and gross profit @ 1.44%. The Assessing Officer further noted that during demonetization period from 09/11/2016 to 30/12/2016, the assessee made cash deposit of Rs. 80,51,500/- out of which Rs. 56,01,500/- was of Specified Bank Notes (SBN). Such cash deposits were made on eight occasions up to 05/12/2016. The Assessing Officer issued show cause notice to substantiate the deposit of demonetized currency by issuing detailed show cause notice. The contents of show cause notice dated 10/12/2019 is recorded in para 4.4 of assessment order. In response to show cause notice, the assessee filed reply on 14/12/2019. The relevant part of reply is recorded in para 5 of assessment order. The assessee in his reply, submitted that he has already filed reply to various show cause notices, copy of which was allegedly attached. The assessee further explained that he purchased wholesale goods from various parties, names and addresses were furnished. The assessee also furnished 4600 sales bills and claimed that most of the bills are against the cash bills. The assessee further explained that out of total cash deposit of Rs. 80.51 lacs, Rs. 56.01 lacs is of SBN notes. All the deposits are genuine and no bogus transaction was carried out. The assessee also furnished VAT audit report on reconciliation of sale and purchase. ITA No. 803/Srt/2023 Ashokkumar Vasantrai Parikh Vs ITO 3 3. The reply of assessee was not accepted by Assessing Officer. The Assessing Officer held that bills were not having contact details of purchase party having only names. The cash generated on cash sales cannot be cross verified from any source. The Assessing Officer was of the view that the main issue involved in this case is related to cash deposit during demonetization period in SBN currency. The books of account was produced by the assessee, has no reliance as in first set of account, the assessee specified under Section 44AA of the Act maintained by his Chartered Accountant and in audited account whereas the assessee produced another set in handwritten set of account. The Assessing Officer after rejecting all contention of assessee, made addition of entire deposit of SBN of Rs. 50.51 lacs under Section 68 of the Act and taxed the same under Section 115BBE of the Act. 4. 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 detailed statement of facts and written submission. The assessee also furnished comparative chart of cash deposits in F.Y. 2015-16, month wise cash sales and deposit in F.Y. 2015-16, month wise cash sales and deposit in F.Y. 2016- 17. All such details are recorded on page No. 7 to 10 of order of ld. CIT(A). The assessee apart from furnishing such comparative detail, submitted that his customer usually paid cash and thus the assessee was having sufficient cash balance throughout the year. The nature and business of assessee is that the transactions are significantly carried out in cash. The assessee is selling goods to small trades. Cash deposit during the demonetization period was the cash in hand as per the regular books maintained by the assessee ITA No. 803/Srt/2023 Ashokkumar Vasantrai Parikh Vs ITO 4 which was deposited in bank from time to time as per convenience. Cash of sales and corresponding cash deposit having regular feature which can be seen from the details of cash sales and deposit. The assessee made a total deposit of Rs. 80.51 lacs during demonetization period itself, out of which, Rs. 56.01 lacs was only in SBN. During assessment, all entries pertaining to cash sales and corresponding cash deposit were shown as reflected in the books of account. Books of assessee was duly audited by the Independent Auditor. All sale bills, purchase register, cash book and stock register as per requirement were furnished during the assessment proceedings. The Assessing Officer objected the deposits in eight occasions and presumed that the SBN currency was not available with the assessee. The assessee submitted that the bank did not accept any high amount in cash in one time, thus, the cash was deposited in installments. No variation was found in the cash deposit and cash sales. The assessee submitted that merely entire cash holding as on 08/11/2016 was not deposited immediately, this cannot be a basis to make the addition merely on suspicion. To support his view, the assessee relied on various case laws. 5. The ld. CIT(A) after considering the submission of assessee and the contents of assessment order, noted that the assessee explained that he is in the business of Tobacco and Pan Masala and nature of business of assessee is that significant transactions are carried out in cash only. The assessee is selling goods on cash to small traders. The assessee claimed that the sale and corresponding cash deposit have been regular feature in his business from last several years which could be verified and compared with earlier ITA No. 803/Srt/2023 Ashokkumar Vasantrai Parikh Vs ITO 5 years. The assessee also furnished the details of cash deposit and cash sales alongwith month wise cash sales and cash deposit during F.Y. 2015-16 and 2016-17. On comparison of such sales and cash deposit, the ld. CIT(A) found that there is no abnormality noticed throughout the year. The cash in hand throughout the year are normal and there is no abrupt jump even during demonetization period. The assessee claimed that he filed VAT registration number and address of trader from whom the assessee purchased goods. The Assessing Officer have not examined the genuineness of purchases from suppliers. On the objection of Assessing Officer about the deposit in eight occasions, the assessee explained that due to instruction that huge cash would not be accepted at one time. So far as mistake of cash book, the assessee explained that the Chartered Accountant has given a certificate that it was written by mistake. Such certificate is filed during the course of appellate proceedings. The ld. CIT(A) on the basis of earlier history of assessee about the cash deposit and the month wise comparison of cash sales and cash deposit find that there is no abnormality. On the basis of such observation, the ld. CIT(A) deleted 75% of addition, thereby restricting the addition to the extent of 25% of total cash deposit in granting substantial relief to the assessee. Further aggrieved, the assessee has filed present appeal before this Tribunal. 6. We have heard the submissions of the learned Authorised Representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) for the revenue. The ld. AR of the assessee submits that the ld. CIT(A) despite accepting all the submissions of assessee that there was no ITA No. 803/Srt/2023 Ashokkumar Vasantrai Parikh Vs ITO 6 abnormality in cash sales and cash deposit, concluded his finding in one sentence in directing the Assessing Officer to delete 75% of total addition and to restrict the addition @ 25%. No reason or logic is given by the ld. CIT(A) in restricting the addition to that extent. The ld. AR of the assessee submits that nature of business of assessee is that significantly sales are in cash basis only. The cash deposit from April to November, 2016 in F.Y. 2015- 16 was Rs. 5.80 crores whereas in F.Y. 2016-17 it was only Rs. 5.42 crores. In financial year, total cash deposit was Rs. 8.87 crores and in F.Y. 2016-17, it was Rs. 7.61 crores. In financial year, total cash deposit from 09/11/2016 to 31/12/2016 was Rs. 92,50,000/-. However, in financial year from 09/11/2016 to 31/12/2016 is only 80,51,500/-. All such details were furnished to lower authorities. The ld. AR of the assessee submits that there is no abnormality in the cash deposit which is a regular feature. So far as the discrepancy in the books of account, the ld. AR of the assessee submits that before the ld. CIT(A), he has filed a certificate issued by the Chartered Accountant who is maintaining books of account that books of account are maintained manually. However, due to mistake it was written as maintained on computer system which is mistake of fact. The ld. AR of the assessee submits that though no addition is to be made. 7. In alternative and without prejudice submission, the ld. AR of the assessee submits that even if this Bench is of the view that any disallowance is warranted, a token amount may be disallowed to avoid the future litigation and to buy peace. ITA No. 803/Srt/2023 Ashokkumar Vasantrai Parikh Vs ITO 7 8. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR for the revenue submits that the ld. CIT(A) has already granted substantial relief to the assessee. Though, the entire cash deposit in absence of proper explanation was liable to be sustained. Hence, the ld. CIT(A) has reasonably sustained 25% of the cash deposit which was not substantiated by the assessee. The assessee does not deserve any further relief. 9. We have considered the submissions of both the parties and perused the orders of lower authorities carefully. We find that there limited dispute between the parties on the issue of cash deposits. The nature of business of assessee and sale transactions in cash is not in dispute. The Assessing Officer disallowed the entire cash deposit in the form of SBN. It is not the case of revenue/Assessing Officer that entire cash deposit was in the form of SBN. Admittedly, the assessee has deposited more than Rs. 80.00 lacs during demonetization period and out of which about Rs. 56.00 lacs was in the form of SBN. Nature of business of assessee is not in dispute. On comparison of cash deposited during the previous financial year vis a vis the current financial year is also not in dispute. Admittedly, there is more cash deposits during the earlier financial year on comparison of particular period of demonetization period i.e. 08/11/2016 to 31/12/2016 vis a vis current financial year and earlier financial year, there is more cash deposit in the corresponding period. 10. We find that the ld. CIT(A) restricted the addition to the extent of 25% of total deposits in SBNs. The ld. AR of the assessee submits that no logic or ITA No. 803/Srt/2023 Ashokkumar Vasantrai Parikh Vs ITO 8 reason was given by the ld. CIT(A) while restricting the addition to the extent of 25%. Keeping in view the facts and circumstances of the case and the deposits in eight occasions, which is the sole basis for doubting the cash deposit and keeping in view of alternative submissions of ld AR for the assessee and to avoid the future litigation, some toke amount may be disallowed, therefore, considering all the facts and circumstances of the case and gross profit declared by the assessee which is only 1.44% and on the transaction of more than Rs. 6.00 crores, the assessee has declared income of Rs. 7,18,950/- only, we are of the view that 10% of total cash deposit during demonetization period in the form of SBN would be sufficient and reasonable to avoid the possibility of revenue leakage. To be more specific, 10% of Rs. 50,51,000/- is sustained and remaining is deleted. Thus, the grounds of appeal raised by the assessee is partly allowed. 11. In the result, this appeal of assessee is partly allowed. Order announced in open court on 31 st January, 2024. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 31/01/2024 *Ranjan Copy to: 1. Assessee 2. Revenue 3. PCIT 4. DR By order 5. Guard File Sr. Private Secretary, ITAT, Surat