LATE SHRI ANIL JAIN THROUGH LEGAL HEIR RATAN JAIN,INDORE V. INCOME TAX OFFICER - 2(1), INDORE, INDORE

ITA 400/IND/2024

AI Insights

The case involves the late Shri Anil Jain, a proprietor of 'M/s Anil Jewellers', who was engaged in the business of trading and repairing gold and silver jewellery. The Income Tax Officer (ITO) scrutinized the assessee's returns for the assessment year 2017-18, noting substantial cash deposits during the demonetisation period, which were significantly higher than the declared income. The ITO made additions to the income on the grounds of undisclosed business income and undisclosed money. The Commissioner of Income-tax (Appeals) upheld these additions, leading to the present appeal before the Income Tax Appellate Tribunal. The Tribunal found merit in the assessee's argument that the deposits were from business sales and directed the ITO to reassess the income accordingly.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 27209 (ITAT-INDORE)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2017-2018
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: REVENUE; SANJEEV H.BHAGAT
• Assessee Lawyers: RAJESH MEHTA; APURVA MEHTA
• Keywords: Business income
• Section: 143(3); 131; 44AD; 13; 69A

Judgement Text

" Page 1 of 18 आयकर अपीलीय अिधकरण, इंदौर Ɋायपीठ, इंदौर IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI VIJAY PAL RAO, VICE PRESIDENT AND SHRI B.M. BIYANI, ACCOUNTANT MEMBER ITA No. 400/Ind/2024 (AY: 2017-18) Late Shri Anil Jain (Through Legal Heir Shri Ratan Jain), 11-A, Nemi Nagar, Jain Colony, Indore. PAN: ACTPJ6439P बनाम/ Vs. Income-tax Officer, 2(1), Indore. (Revenue/Appellant) (Assessee/Respondent) Assessee by Shri Rajesh Mehta, CA and Shri Apurva Mehta, CA Revenue by Shri Sanjeev H. Bhagat, Sr. DR Date of Hearing 11.12.2024 Date of Pronouncement 01.01.2025 आदेश / O R D E R Per B.M. Biyani, A.M.: Feeling aggrieved by order of first-appeal dated 27.02.2024 passed by Commissioner of Income-tax (Appeal)-NFAC, Delhi [“CIT(A)”] which in turn arises out of assessment-order dated 27.12.2019 passed by ITO-2(2), Indore [“AO”] u/s 143(3) of the Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2017-18, the assessee has filed this appeal. 2. The background facts leading to this appeal are such that the assessee-individual named “Late Shri Anil Jain” was engaged in the business of trading and repairing of gold and silver jewellery in Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 2 of 18 proprietorship concern “M/s Anil Jewellers”. The assessee has already expired on 14.07.2022 and the present appeal is pursued by his son-cum- legal heir “Shri Ratan Jain”. For AY 2017-18 under consideration, the assessee filed return of income declaring a total income of Rs. 3,19,390/-. In the return so filed, the assessee declared business income u/s 44AD at Rs. 4,38,952/- @ 8.09% on sales of Rs. 54,24,396/-. The case of assessee was selected for scrutiny on the reasoning of “large value cash deposits during demonetisation period as compared to returned income” and the notices u/s 143(2)/142(1) were issued. During scrutiny, the AO found that the assessee made total deposit of Rs. 1,34,44,000/- in bank accounts during demonetisation period. The AO raised queries to assessee qua the sources of deposits. In response, assessee submitted that the sale/repair proceeds of jewellery business was deposited in bank a/cs. The assessee also filed month-wise cash-flow for entire financial year to AO to show the availability of funds for making deposits. The AO issued final show-cause notice dated 17.12.2019 to assessee. In response, the assessee submitted that the total cash of Rs. 2,01,45,219/- was deposited in bank accounts during the financial year out of (i) business sales of Rs. 94,80,810/- (excluding VAT), (ii) cash of Rs. 70,01,539/- received from different sources (details noted by AO in a Table on Page 10 of assessment-order) mainly comprising of dalali & repairing income, polish & patrika making income, advances from customers against gold card schemes, etc. and (iii) balance amount from withdrawals of bank. The AO, after considering assessee’s submissions, Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 3 of 18 observed in Para No. 6 of assessment-order that the assessee has neither offered income from dalali, repairing, polish and patrika making in return of income nor filed any supporting documents. Ultimately, the AO made following additions in two parts in assessment-order and completed scrutiny-assessment: (i) Addition of Rs. 3,24,513/-: The AO computed 8% profit u/s 44AD on difference turnover of Rs. 40,56,414/- [Rs. 94,80,810/- stated by assessee (-) Rs. 54,24,396/- disclosed in return of income] and made addition of Rs. 3,24,513/- on account of undisclosed business income. (ii) Addition of Rs. 1,00,86,463/-: The AO divided total cash deposits of Rs. 2,01,45,219/- for the year by 12 months and computed “average monthly cash deposit” at Rs. 16,78,768/-. Thereafter, the AO computed excess cash deposit during demonetisation period of 2 months at Rs. 1,00,86,463/- [Rs. 1,34,44,000/- deposited in bank a/cs during demonetisation (-) Rs. 16,78,768/- X 2 months = Rs. 33,57,537/-] and made addition of Rs. 1,00,86,463/- u/s 69A read with section 115BBE on account of undisclosed money . 3. Aggrieved, the assessee carried matter in first-appeal before CIT(A) but did not get any success. Now, the assessee has come in next appeal. Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 4 of 18 4. The grounds raised by assessee are as under: 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), National Faceless Appeal Centre (‘the Ld. CIT(A), NFAC’) has erred in confirming the addition to the extent of Rs. 3,24,513/- made by the AO which is wrong and contrary to the facts of the case and provisions of the Act. Thus, the addition of Rs. 3,24,513/- is liable to be deleted. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), National Faceless Appeal Centre (‘the Ld. CIT(A), NFAC’) has erred in confirming the addition of Rs. 1,00,86,463/- made by the Ld. AO without appreciating that the cash has been deposited from sales proceeds and entire cash deposited cannot be taxed in the hands of the assessee and only profit element could have been taxed. Thus, the addition of Rs. 1,00,86,463/- is liable to be deleted. 3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), National Faceless Appeal Centre (‘the Ld. CIT(A), NFAC’) has erred in making addition of Rs. 1,00,86,463/- without appreciating that the cash deposited in the bank account from sales proceeds has been utilized for making payment of purchases and thus, the cash deposited of Rs. 1,00,86,463/- cannot be treated as unexplained money u/s 69A r.w.s. 115BBE of the Act. Thus, the addition of Rs. 1,00,86,463/- is liable to be deleted. 4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A), National Faceless Appeal Centre (‘the Ld. CIT(A), NFAC’) and the Ld. AO have erred in not appreciating that the cash deposited in the bank account has been made out of sales proceedings in the regular course of business of proprietorship firm M/s. Anil Jewellers and thus, the transactions cannot be taxed u/s 69A r.w.s. 115BBE of the Act. Ground No. 1: 5. In this ground, the assessee has challenged the addition of Rs. 3,24,513/- made by AO and upheld by CIT(A) on account of undisclosed business income. However, during hearing, Ld. AR for assessee submitted in open court that the assessee is not pressing this ground. Ld. DR for revenue does not have any objection. Accordingly, this ground is dismissed as non- pressed. Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 5 of 18 Ground No. 2 to 4: 6. In these grounds, the assessee has challenged the addition of Rs. 1,00,86,463/- made by AO and upheld by CIT(A) on account of unexplained money u/s 69A read with section 115BBE. 7. Apropos to these grounds, Ld. AR firstly relied upon following detailed submission made by assessee to CIT(A) during first-appeal: Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 6 of 18 Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 7 of 18 Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 8 of 18 Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 9 of 18 Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 10 of 18 Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 11 of 18 Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 12 of 18 Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 13 of 18 Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 14 of 18 8. Thereafter, Ld. AR submitted that the assessee was a senior citizen engaged solely in the trading and repairing business of jewellery items having shop named as “M/s Anil Jewellers” at Bada Sarafa Bazar, Indore. He submitted that the deposits in bank a/c were only from sales receipts of business and there is no other source whatsoever with assessee. He made a straightforward submission that it is true that the assessee declared business turnover of Rs. 54,24,396/- in the return of income filed to department but the same was based on the guidance given by non- professionals otherwise the turnover of business was higher as deposited in bank a/c. He submitted that the AO has also accepted business turnover at Rs. 94,80,810/- and after deducting turnover of Rs. 54,24,396/- already disclosed in the return of assessee, applied 8% net profit under presumptive provisions of section 44AD on balance turnover of Rs. 40,56,414/- and made addition of Rs. 3,24,513/- as “undisclosed business income” which is acceptable to assessee. But at the same time, the AO has made an arithmetical estimation of “average monthly cash deposit” on self-made illogical basis of dividing the total deposits in bank a/c during financial year by 12 months and based thereon computed excess deposits at Rs. 1,00,86,463/- out of total deposits of Rs. 1,34,44,000/- in 2 months’ demonetisation period and thereby made a hefty addition of Rs. 1,00,86,463/- treating such excess as undisclosed money u/s 69A. He Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 15 of 18 submitted that the deposits of Rs. 1,34,44,000/- made in bank a/cs during demonetisation period are also part of sales of jewellery business. He pointed out that the assessee has immediately after making deposits in bank a/cs during demonetisation period, utilised the bank balance for making payment to creditors towards purchases, the details of such payments are mentioned in the Written-Submission filed to CIT(A) reproduced above. Therefore, the deposits were made from sale of goods and immediately utilised for purchase of goods. He submitted that the gold card schemes run by assessee were also part of assessee’s business to enable customers to purchase gold and silver jewellery from assessee and accordingly the receipts therefrom were part of business turnover. He submitted that the nature and source of impugned deposits of Rs. 1,34,44,000/- is no different than the deposits of Rs. 94,80,810/- considered by AO for assessing additional business income at Rs. 3,24,513/- u/s 44AD. He submitted that for the relevant AY 2017-18, the presumptive section 44AD was applicable upto a turnover of Rs. 2 crore. Ld. AR submitted that the assessee has already expired and the present appeal is being pursued by legal heir who does not have any further material except to submit the truth. Therefore, Ld. AR prays that to close the litigation, the legal heir of assessee gives acceptance if a direction is given to the AO to assess income at Rs. 8,06,917/- @ 8% on Rs. 1,00,86,463/- u/s 44AD. Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 16 of 18 9. Ld. DR for revenue supported the orders of lower-authorities. He submitted that the assessee was also running gold card schemes and the AO called certain customers of gold card schemes u/s 131 but as per statements, those persons were not having receipt or document to justify that they had given cash towards gold card schemes. He submitted that the AO has analysed the trend of assessee’s deposits and found that a higher amount of deposit was made during demonetisation period than the normal/average trend of assessee. He submitted that the AO has made best exercise and assessed income properly and the CIT(A) has also upheld AO’s order. He requested that the orders of lower-authorities must be upheld. 10. We have considered rival contentions of both sides and perused the orders of lower-authorities as well as the material held on record to which our attention has been drawn. On perusal and after careful consideration, we find that the assessee was a senior person engaged in jewellery business in proprietorship concern named “M/s Anil Jewellers” having shop in Sarafa Bazar, Indore. The case of assessee has been subjected to scrutiny assessment to examine cash deposits in bank a/cs during demonetisation period. Before lower authorities, the assessee has made a consistent explanation that the deposits in bank a/cs were made from sale of jewellery business, repair jobs of jewellery business, gold card schemes which are also a part of jewellery business and balance from withdrawals from bank Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 17 of 18 a/c. In the return of income, the assessee declared business turnover of Rs. 54,24,396/- and declared income at Rs. 4,38,952/- @ 8.05% u/s 44AD. However, before AO, the assessee admitted higher turnover/receipts from business and gold card schemes. The AO has accepted business turnover at Rs. 94,80,810/- and after deducting turnover of Rs. 54,24,396/- already disclosed in the return of assessee, applied 8% net profit under presumptive provisions of section 44AD on difference turnover of Rs. 40,56,414/- and made a separate addition of Rs. 3,24,513/- as “undisclosed business income” which is acceptable to assessee. Additionally, the AO has made an arithmetical estimation of “average monthly cash deposit” by dividing the total amount of deposits in bank a/c during financial year by 12 months and based thereon computed excess deposits at Rs. 1,00,86,463/- out of total deposits of Rs. 1,34,44,000/- in 2 months’ demonetisation period and thereby made a separate addition of entire difference of Rs. 1,00,86,463/- as undisclosed money u/s 69A read with section 115BBE which is being contended before us. The assessee has already expired and legal heir is pursuing present appeal. The assessee was engaged solely in jewellery business and there is no other source of income or revenue brought on record by department. Considering the entire conspectus of case and to close the litigation, we agree that the same logic as applied by AO to accept the turnover of Rs. 94,80,810/- as business sales and thereby assess Late Shri Anil Jain through Legal Heir Shri Ratan Jain, Indore. I.T.A. No. 400/Ind/2024 – A.Y .2017-18 Page 18 of 18 additional business @ 8% u/s 44AD, can be applied to the excess deposits of Rs. 1,00,86,463/- alleged by AO. Accordingly, we direct the AO to assess income of assessee @ 8% of Rs. 1,00,86,463/- as additional business income which would be Rs. 8,06,917/- and delete excess addition. The assessee gets part relief in this way. The grounds raised by assessee are allowed partly. 11. Resultantly, this appeal is allowed partly. Order pronounced by putting upon notice board in terms of Rule 34 of ITAT Rules, 1963 on 01/01/2025 Sd- Sd/- (VIJAY PAL RAO) (B.M. BIYANI) VICE PRESIDENT ACCOUNTANT MEMBER Indore िदनांक / Dated : 01/01/25 CPU/Sr. PS Copies to: (1) The appellant (2) The respondent (3) CIT (4) CIT(A) (5) Departmental Representative (6) Guard File By order UE COPYAssistant Registrar Income Tax Appellate Tribunal Indore Bench, Indore "