MOHAMMAD JABIR ALI, RAJDHANI TYRES, BILASPUR,BILASPUR V. INCOME TAX OFFICER, WARD 1(2), BILASPUR, BILASPUR

ITA 481/RPR/2024

AI Insights

The case involves Mohammad Jabir Ali, the proprietor of Rajdhani Tyres, who appealed against the order of the CIT(Appeals) sustaining the addition of Rs.3,18,500 as unexplained cash credit under Section 68 of the Income-tax Act, 1961. The addition was initially made by the Assessing Officer following scrutiny of the assessee's bank deposits during the demonetization period. The Tribunal examined whether the cash deposits made in the assessee's bank accounts, which were part of his audited books, could be considered unexplained when the books themselves were not rejected by the Assessing Officer. The Tribunal referenced a similar case to conclude that the addition was unjustified.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 46706 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-12-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: Rahul Cold Storage Vs. ITO, Ward- Dhamtari, ITA No.123/RPR/2022
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: S G.L DUBEY; SAMIR MISHRA; ADVOCATES; HIM; THEREFORE; THERE CAN BE NO JUSTIFICATION
• Keywords: Business income; Unexplained cash credit
• Section: 143(3); 143(1); 68; 22; 13; 20

Judgement Text

"आयकर अपीलीय अधिकरण न्यायपीठ “एक-सदस्य” मामला रायपुर में IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR श्री रवीश सूद, न्याययक सदस्य क े समक्ष BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER आयकर अपील सं. / ITA No. 481/RPR/2024 यििाारण वर्ा / Assessment Year : 2017-18 Mohammad Jabir Ali, Rajdhani Tyres, Raipur Road, Near Maharana Pratap Chowk, Bilaspur (C.G.)-495 001 (C.G.) PAN: AGLPA6789R .......अपीलार्थी / Appellant बिाम / V/s. The Income Tax Officer, Ward-1(2), Bilaspur (C.G.) ……प्रत्यर्थी / Respondent Assessee by : S/shri G.L Dubey, & Samir Mishra, Advocates, Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई की तारीख / Date of Hearing : 23.12.2024 घोषणा की तारीख / Date of Pronouncement : 24.12.2024 2 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the assessee is directed against the order passed by the ADDL/JCIT(A)-11, Mumbai dated 06.09.2024, which in turn arises from the order passed by the A.O under Sec.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 22.12.2019 for the assessment year 2017-18. The assessee has assailed the impugned order on the following grounds of appeal: “1. That the appellate order is not justified. 2. That on the fact and in the circumstances of the case, CIT(A) has erred in confirming addition of Rs3,18,500/- made by assessing officer by invoking provision of section 68 of alleged unaccounted sum by ignoring that provision of section 68 is applicable to the sum credited in the books of account. The Assessee prays that the addition of Rs.3,18,500/- made u/s 68 be deleted. 3. That on the fact and in the circumstances of the case, CIT(A) has erred in confirming addition of Rs.3,18,500/- made by assessing officer under section 68 by treating cash (SBN) deposited during demonetization period as unexplained cash credit esp ecially when the assessee audited books of account have not been rejected by Assessing officer When A.O itself accepted that assessee has cash generating sales/Income after knowing this fact A.O. added the SBN Notes in income in u/s 68 of IT Act. 4. That on the fact and in the circumstances of the case, CIT(A) has erred in rejecting Board Notification, this notification is only for the monetary limit of deposited of cash. That above threshold limit Rs.12,50,000/- is only for current account of bank. 5. That assessee reserve the right to add or alter /withdraw any ground/grounds of appeal at time of hearing.” 3 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 2. Succinctly stated, the assesse who is engaged in the business of trading of tyres on wholesale/retail basis had e-filed his return of income for A.Y.2017-18 on 21.12.2017 declaring an income of Rs.4,24,070/-. The return of income filed by the assesse was initially processed as such u/s. 143(1) of the Act. Subsequently, the case of the assesse was selected for scrutiny assessment. 3. During the course of assessment proceedings, it was observed by the A.O that the assesse had during the demonetization period made cash deposits aggregating to Rs.13,39,500/- in his bank accounts viz. (i) CC account No.01912850000010 with Canara Bank, Branch: Bilaspur : Rs.11.59 lacs; and (ii) Savings Bank account No.0191101014208 with Canara Bank, Branch : Bilaspur : Rs.1,80,000/-. On being queried, it was the assessee’s claim that the subject cash deposits were sourced out of his duly accounted business receipts. Although the A.O accepted the assessee’s claim that the cash deposits made in his bank accounts on 16.11.2016 aggregating to Rs.10.19 lacs, viz. (i) CC account No.01912850000010 with Canara Bank, Branch: Bilaspur : Rs.8.39 lacs; and (ii) Savings Bank account No.0191101014208 with Canara Bank, Branch : Bilaspur : Rs.1.80 lacs were sourced out of demonetized currency that was available with him at the beginning of the demonetization period but declined to accept the same regarding the balance cash deposits that 4 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 were made in three tranches over the period 19.11.2016 to 20.12.2016 aggregating to Rs.3,20,500/-, as under: S. N Date Cash deposits in Canara bank A/c. No. 01912850000010 Cash deposits in Canara bank A/c. No. 0191101014208 1. 16/11/2016 Rs.8,39,000/- Rs.1,80,000/- 2. 19/11/2016 Rs.3,06,000/- 3. 06/12/2026 Rs.9,500/- 4. 20/12/2016 Rs.5,000/- Total Rs.11,59,500/- Rs.1,80,000/- (emphasis supplied) Accordingly, the A.O vide his order passed u/s.143 (3) of the Act, dated 22.12.2019 held the cash deposits of Rs.3,20,500/- as unexplained cash credits u/s. 68 of the Act. 4. Aggrieved, the assesse carried the matter in appeal before the CIT(Appeals) who taking cognizance of the fact that out of the amount of Rs.3,20,500/-, an amount of Rs.2000/- was deposited in currency notes of denomination of Rs.20/-which were not SBNs, thus, granted relief to the said extent but sustained the balance addition of Rs.3,18,500/-. For the sake of clarity, the observations of the CIT(Appeals) are culled out as under: 5 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 “5. Observation :- 5.1. Submission of the appellant and the order passed by the Ld. AO u/s. 143(3) have been carefully considered. Extract of relevant part of order u/s. 143(3) is reproduced for ready reference as under:- The AO has arrived at the point that \"the assessee had cash generating income and it is a clear fact that the assessee must have old currency (specified bank notes) in his possession as cash in hand at the beginning of demonization period, which were to be deposited in his bank account. However, in normal circumstances it/s not presumed that 6 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 cash in old currency (specified bank notes) will be deposited in someone's bank accounts rep eatedly and up to the end of demonetization period.\" 5.2 The appellant has also referred to NOTIFICATION NO. GSR 1068(E) [No.104/2016 (F.No.370142/32/2016-TPL)], DATED 15-11-2016 which is reproduced as under:- 5.3 The submission of the appellant and the conclusion arrived at by the assessing Officer have b een carefully gone through. From the order of the assessing officer its transpires that he has arrived at the conclusion that after making deposit on 16/11/2016 of the sp ecified notes the appellant was not left with any further amount of specified notes which could be deposited later. The assessing officer has not 7 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 brought on record anything to suggest that the appellant was not having specified notes even after making the deposits in his two accounts No. 01912850000010 & 0191101014208 on 19/11/2016, 06/12/2016 & 20/12/2016. Secondly the assessing officer has also not examined the fact that the appellant was trading in the specified notes even after 08/11/2016 which could have generated such notes despite the appellant depositing the cash in his two Canara Bank accounts No. 01912850000010 & 0191101014208. The appellant has relied upon notification of the board reproduced above regarding the monetary limit of deposit of cash. On the other hand, in its reply the appellant has not brought anything on record to substantiate that after he had deposited the specified notes in his two Canara Bank accounts, he was further left with specified notes as deposited on 19/11/2016, 06/12/2016 & 20/12/2016. The appellant in his reply dated 04/09/2024 has accepted that the cash receipts are only from his business therefore considering the submission made by appellant the conclusion drawn by the assessing officer has force that there is no reason to deposit specified denomination cash on 19/11/2016, 06/12/2016 & 20/12/2016 if he was not making cash sales in the amount of sp ecified notes of 1000/500. The appellant cannot seek the shelter of the above notification for making sales transaction in the demonetized currency. In view of the above facts the addition made by the Ld. AO is confirmed subject to the below paragraph. From the perusal of the submission made by the appellant it is seen that he has deposited Rs.2,000/- in the denomination of Rupee 20 notes which is not the specified currency therefore he is granted relief of Rs.2,000/- sustaining the addition of Rs.3,18,500/- 5.4 Considering the facts discussed above in para 5.1 to 5.3 the addition made by the Ld.AO is sustained to the extent of Rs.3,18,500/-.” 5. The assesse being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before the Tribunal. 8 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 6. I have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 7. Shri G.L Dubey, Ld. Authorized Representative (for short ‘AR’) for the assessee at the threshold, submitted that both the lower authorities had on the basis of perverse observations made/sustained the addition in the hands of the assesse. Elaborating on his contention, the Ld. AR submitted that the CC account No.01912850000010 with Canara Bank, Branch : Bilaspur held by M/s. Rajdhani Tyres Works, i.e. proprietary concern of the assesse was the bank account through which the assesse had routed his business transaction of trading of tyres etc. and the same was disclosed in his duly audited books of accounts. Carrying his contention further, the Ld. AR submitted that now when not only the A.O had not rejected the books of account of the assesse, but had in fact, by adopting the income disclosed based on the audited books of accounts as the base figure for computing his total income, had accepted the said books account, therefore, there was no justification for him to have held the cash deposits made in the aforesaid bank account (which formed part of his audited books of accounts) as having been sourced out of unexplained sources. The Ld. AR to buttress his aforesaid claim had taken me through the CC account No.01912850000010 with Canara Bank, Branch: 9 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 Bilaspur a/w. the balance sheet of the assesse as on 31.03.2017 wherein the said bank account was duly disclosed. The Ld. AR to fortify his claim that the subject cash deposits in the assesse’s bank account were routed through “cash book” of M/s. Rajdhani Tyres works i.e. the assessee’s proprietary concern, had taken me through the extract of the same for the period 01.11.2016 to 31.12.2016. 8. Per contra, the Ld. Sr. Departmental Representative (for short ‘DR’) relied on the orders of the lower authorities. 9. Controversy involved in the present appeal boils down to the solitary issue, i.e. as to whether or not the A.O is justified in treating the cash deposits of Rs.3,20,500/- made in CC account No.01912850000010 with Canara Bank, Branch : Bilaspur as unexplained cash credit u/s. 68 of the Act? 10. I am unable to comprehend and find no logic in the view taken by the A.O, wherein he had accepted the claim of the assesee that the cash deposits of Rs.8.39 lacs made in the same bank account on 16.11.2016 were sourced out of the demonetized currency (SBNs) that was available with him at the beginning of the demonetization period but had declined to accept the said explanation regarding the cash deposits aggregating to Rs.3,20,500/- that were made by him in three tranches in the same bank account during the subject year i.e. on 19.11.2016, 10 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 06.12.2016 and 20.12.2016. Although the A.O had observed that it could be someone else money deposited in the bank account of the assesse, but in absence of any supporting material, I am unable to concur with him. 11. Be that as it may, I am of a firm conviction that as the CC A/c. No. 01912850000010 with Canara Bank, Branch: Bilaspur forms part of the duly audited books of account of the assesse which had not been rejected by the A.O, therefore, it is incomprehensible as to how he could have held the cash deposits made in the said account as unexplained cash credit within the meaning of Section 68 of the Act. In fact, I find substance in the Ld. AR’s contention that as the A.O had taken the “net profit” as was disclosed in the audited financial statements of the assesee as the base figure for determining his income, therefore, he had rather accepted the books of accounts of the assesse. Having done so, the A.O could not have thereafter, in absence of any material proving to the contrary held the cash deposits made in the CC A/c. No.01912850000010 with Canara Bank, Branch: Bilaspur of M/s Rajdhani Tyres Works (supra) as having been sourced out of his unexplained sources. My aforesaid view is fortified by the order of the ITAT, Raipur in the case of Rahul Cold Storage Vs. ITO, Ward- Dhamtari, ITA No.123/RPR/2022, dated 29.11.2022, the Tribunal after deliberating on the identical facts involved in the said case had observed as under: 11 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 “12. Having given a thoughtful consideration to the issue in hand, I find certain peculiar facts attending to the case of the present assessee before me. As observed hereinabove, it was the claim of the assessee that the cash deposits of Rs.46.55 lacs (supra) made in its bank accounts during the demonetization period were sourced out of its business receipts, i.e., cold storage rentals that were duly recorded in its books of account. On the contrary, the A.O for the aforesaid reasons had rejected the claim of the assesee and had held the entire amount of Rs.46.55 lacs (supra) as an unexplained cash credit u/s.68 of the Act. Ostensibly, the A.O had though rejected the assessee’s claim that the cash deposit of Rs.46.55 lacs (supra) was sourced out of its business receipts, but on the other hand he had accepted its returned income, and thus without rejecting the books of account of the assessee had framed the assessment vide his order passed u/s.143(3), dated 16.12.2019. In sum and substance, the A.O though had rejected the assessee’s claim that the cash deposits of Rs.46.55 lacs (supra) were sourced out of the cold storage rental receipts for the year under consideration, but acting contrary to his aforesaid observation had at the same time accepted its book results, which, in fact, supports the assessee’s claim. On the basis of the aforesaid facts, I am unable to comprehend that now when the assessee’s explanation that the cash deposits of Rs.46.55 lac (supra) were sourced out of its duly accounted cold storage rent receipts was not accepted by the A.O, then, on what basis he had accepted its book results and framed the assessment. In case, the view taken by the A.O is approved, then the same would lead to an incongruous situation, wherein the A.O while framing assessment had rejected the assessee’s claim that the cash deposits of Rs.46.55 lacs (supra) in its duly accounted bank accounts was made out of the cash in hand as was available with it out of the cold storage rent receipts, but to the contrary, while framing the assessment had simultaneously subscribed to its claim by accepting the disclosed cold storage rent receipts out of which the cash deposits in question were claimed by the assesee to have b een sourced. The A.O could not b e allowed to blow hot and cold at the same time. If the assessee’s claim that the cash deposits in question were made out of its duly disclosed cold storage rent receipts was not to be accepted, then, the A.O was obligated to have rejected the books of account of the assessee, for the reason, that by not doing so he had on the one hand held the cash deposits to have been sourced out of an unexplained source, while for at the same time by 12 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 accepting its books of account had accepted its claim that the cash deposits in duly accounted bank accounts were sourced out of the duly disclosed source of the assessee firm. At this stage, it may be observed that the fact that the bank accounts in question in which the cash deposits were made by the assessee during the demonetization period formed part of its books of account can safely be gathered from a perusal of the assessee’s balance sheet, Page 20 to 22 of APB. Considering the aforesaid facts, I am of a strong conviction that now when the bank accounts in question, viz.(i) A/c. No.910020017065122 with Axis Bank Ltd.; and (ii) A/c. No.13460200011173 with the Bank of Baroda had both duly been accounted for by the assessee in its books of account for the year under consideration, therefore, the A.O by not rejecting the said books of account had clearly accepted that the cash deposited by the assessee firm during the year under consideration in the said bank accounts was out of its disclosed sources. 13. Considering the aforesaid facts, I am of the view that as the treating of the cash deposit of Rs.46.55 lac (supra) as an unexplained cash credit u/s.68 of the Act by the A.O in itself militates against the acceptance of the book results of the assessee by him, therefore, there can be no justification in upholding the addition so made by him. I, thus, on the basis of my aforesaid observations vacate the addition of Rs.46.55 lac (supra) made by the A.O u/s.68 of the Act. Thus, the Ground of appeal No. 1 raised by the assessee is allowed in terms of the aforesaid observations.” 12. As the facts and issue involved in the present appeal remains the same as were therefore before me in the case of Rahul Cold Storage Vs. ITO, Ward- Dhamtari (supra), therefore, I follow the same. Accordingly, I set-aside the order of the CIT(Appeals) and vacate the addition of Rs.3,18,500/- that was sustained by him. Thus, the Grounds of appeal No.1 to 4 raised by the assesse are allowed in terms of the aforesaid observations. 13 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 13. Ground of appeal No.4 being general in nature is dismissed as not pressed. 14. In the result, appeal of the assesse is allowed in terms of the aforesaid observations. Order pronounced in open court on 24th day of December, 2024. Sd/- (रवीश सूद /RAVISH SOOD) न्याययक सदस्य/JUDICIAL MEMBER रायपुर/ RAIPUR ; ददनाांक / Dated : 24th December, 2024. ***SB, Sr. PS आदेश की प्रयिललपप अग्रेपर्ि / Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant. 2. प्रत्यर्थी / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ववभागीय प्रयतयनधि, आयकर अपीलीय अधिकरण,रायपुर बेंच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गार्ड फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अधिकरण, रायपुर / ITAT, Raipur. 14 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 Date 1 Draft dictated on Sr.PS/PS 2 Draft placed before author Sr.PS/PS 3 Draft proposed and placed before the second Member JM/AM 4 Draft discussed/approved by second Member AM/JM 5 Approved draft comes to the Sr. PS/PS Sr.PS/PS 6 Kept for pronouncement on Sr.PS/PS 7 Date of uploading of order Sr.PS/PS 8 File sent to Bench Clerk Sr.PS/PS 9 Date on which the file goes to the Head Clerk 10 Date on which file goes to the A.R 11 Date of dispatch of order 15 Mohammad Jabir Ali, Rajdhani Tyres Vs. ITO, Ward-1(2), Bilaspur ITA No.481/RPR/2024 "