MOHAMMAD RAFIK JALIYAWALA,BHATAPARA V. INCOME TAX OFFICER, BHATAPARA, BHATAPARA

ITA 54/RPR/2024

AI Insights

The case involves Mohammad Rafik Jaliyawala, a trader in pulses, who appealed against the order of the Commissioner of Income Tax Appeals, which sustained additions made by the Income Tax Officer under section 68 of the Income Tax Act, 1961. The additions were based on large cash deposits in the assessee's bank accounts during the demonetization period, which were deemed unexplained. The Tribunal found that the assessee failed to provide satisfactory evidence to substantiate the source of these deposits, leading to the conclusion that they were unaccounted for. The Tribunal also dismissed the additional grounds raised by the assessee, which argued that the profit should have been estimated on a flat rate after rejecting the books of account, as the books were not relied upon for making the additions.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 106826 (ITAT-RAIPUR)
• Duration Of Justice: 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Next Hearing Date: 25-09-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 20-02-2024
• Other Referred Cases: KY Pilliah & Sons (1967) (SC), ISMT Ltd (2022) (Pune-Trib), Malpani House of Stones (2017) (Raj), Gian Chand Labour Contractors (2008) (P&H), Indwell Constructions (1998) (AP), CIT VS. Bahubali Neminath Muttin (2016) 73 taxmann.com 100 (Kar. HC), CIT vs. Dularam Labour contractor (2014) 42 taxmann.com 349 (P & H HC), Amitabh Construction vs. ACIT (2012) 20 taxmann.com 385 (Jharkhand HC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: SUNIL KUMAR AGRAWAL
• Keywords: Unexplained cash credit; Bogus
• Section: 144; 143(3); 142(1); 143(2); 250; 68; 73; 145(3); 20

Judgement Text

"आयकर अपीलीय अिधकरण, रायपुर Ɋायपीठ, रायपुर IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH, RAIPUR ŵी रिवश सूद, Ɋाियक सद˟ एवं ŵी अŜण खोड़िपया, लेखा सद˟ क े समƗ । BEFORE SHRI RAVISH SOOD, JM & SHRI ARUN KHODPIA, AM आयकर अपील सं. / ITA No: 54/RPR/2024 (िनधा[रण वष[ Assessment Year: 2017-18) Mohammad Rafik Jaliyawala, Paigam Mobile Centre, Hatri Bazar, Bhatapara, C.G. 493118 V s Income Tax Officer, Irrigation Colony, Khaparadih, Baloda Bazar, Bhatapara, C.G. - 493118 PAN: AFFPJ4941K (अपीलाथŎ/Appellant) . . (ŮȑथŎ / Respondent) िनधाŊįरती की ओर से /Assessee by : Shri Sunil Kumar Agrawal, CA राजˢ की ओर से /Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई की तारीख / Date of Hearing : 25.09.2024 घोषणा की तारीख/Date of Pronouncement : 21.11.2024 आदेश / O R D E R Per Arun Khodpia, AM: The Captioned appeal is filed by the assessee against the order of Commissioner of Income Tax Appeal, National Faceless Appeal Centre (NFAC), Delhi (for short, “Ld. CIT(A)”), u/s 250 of the Income Tax Act, 1961 (for short, “The Act”), for the Assessment Year (AY) 2017-18, dated 07.12.2023. Resulted, from the order passed by the Income Tax Officer, Bhatapara (for short, “The Ld. AO”), U/s 143(3) dated 28.12.2019. 2 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara 2. The grounds of appeal, in present appeal raised by the assessee reads as under: 1. \"On the facts and circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs. 85,78,000 on the count of unexplained cash credit into bank account u/s 68, is unjustified and is liable to be deleted.\" 2. \"On the facts and circumstances of the case and in law, Id CIT(A) has erred in sustaining addition of Rs. 2,00,000 on the count of unexplained cash credit into bank account u/s 68, is unjustified and is liable to be deleted.\" 3. \"On the facts and circumstances of the case and in law, the Id CIT(A) has erred in sustaining the application of sec 115BBE.\" 4. \"The appellant craves leave, to add, urge, alter, modify or withdraw any grounds before or at the time of hearing.\" Additional Grounds of appeal (dated 12.07.2024, submitted on 19.07.2024) Additional Gr. No. 1: “On the facts and circumstances of the case and in law, addition made by AO of Rs. 85,78,000 as unexplained cash credits u/s 68 is invalid; books of account rejected by applying sec145(3); after rejecting the books, profit ought to have been estimated by applying flat rate of profit on turnover of Rs. 93,17,434; AO cannot rely on rejected books for making addition on cash deposits into bank which is sourced out of cash sales of Rs. 93, 17,434; addition is liable to be deleted; relied on KY Pilliah & Sons (1967) (SC); ISMT Ltd (2022) (Pune-Trib); Malpani House of Stones (2017) (Raj); Gian Chand Labour Contractors (2008) (P&H); Indwell Constructions (1998) (AP).” 3 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara Additional Gr. No. 2: \"On the facts and circumstances of the case and in law, assessment made u/s 143(3) is invalid; after specifying various defects in the books of account examined by the AO, books of account has been rejected by applying sec 145(3); only course was available with the AO to make assessment u/s 144 i.e., best judgment assessment, which has not been made by the revenue; assessment made u/s 143(3) is liable to be quashed; relied on Forum Sales (P) Ltd (2024) (Del HC); Marg Ltd (2017) (Mad HC); Anil Kumar & Co (2016) (Kar HC) Subhendu Kumar Subudhi (2022) (Ori HC).” 3. Concisely stated, the facts of the case are that the assessee is an individual, engaged in the business of trading of pulses and runs his business under the name of M/s Mohd. Rafiq Traders. Had filed his return of income for AY 2017-18 on 31.03.2018 declaring total income of Rs. 9,63,070/-. The case thereafter was selected for scrutiny. Statutory notices under section 143(2) & 142(1) were issued. In response to the said notices, replies were furnished by the assessee through online module. During the course of assessment proceedings, it was noticed by the Ld. AO that the assessee has deposited huge cash of Rs. 75,69,500/- in demonetized currency during the demonetization period in his bank account number 935620110000107 maintained with Bank of India, Bhatapara. 4. To examine the aforesaid facts, Ld. AO enquired about the source of such huge cash deposits for which the assessee responded that, he was having 4 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara sufficient cash balance to deposit in bank. Ld. AO proceeded to verify the documentary evidence furnished by the assessee, on perusal of such documents, it is revealed that the assessee was not having any opening balance of stock in his P&L A/c, however as stated by the assessee, during the year under consideration the assessee has recorded certain purchase and sale transactions in his books of accounts and the amount generated from such transactions was the source of cash deposit in the bank account. It is noted by the learned AO that one of the parties from whom such purchases were made is a sister concern of the assessee, the purchases were made in credit whereas the same have been sold in cash. It is also revealed that the entire alleged business was carried out by the assessee only during the demonetization period, without creating a single debtor. On further enquiry it is found out that all the sale transactions are done with the persons not having PAN, even the complete postal/ contact details of such persons were not made available by the assessee. Therefore, the AO arrived at the conclusion that the sale and purchase transactions of the assessee are doubtful. Learned AO further observed certain deformities in the cash balance shown by the assessee in his books of account as against in ITR filed for the assessment year 2016-17. Assessee’s balance in the books of M/s Arshi Dal Mill, Bhatapara was found to be at Rs. 25,35,720/-, whereas the books of assessee had shown total debtors at Rs. 75,500/-, in explanation assessee admitted such anomaly, but have 5 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara resorted to the excuse by stating that it was only a clerical mistake. Having privy to such defects and doubts, Ld. AO rejected the books of the assessee u/s 145(3) of the Act and treated the entire sale / purchase transactions as ingenuine and have concluded that the entire cash deposited by the assessee for Rs. 85,78,000/- in his bank account is nothing but unexplained cash credit of the assessee and added back the same to assessee’s income u/s 68 of Act. 5. Further the cash of Rs. 2,00,000/- deposited by the assessee in his personal bank account was also treated as unexplained cash credit u/s 68 of the Act, which is explained to be personal savings of the assessee, but in absence of any documentary support to such contention the same are treated as unexplained cash credit. 6. With the aforesaid 2 additions the total income of the assessee has been determined at Rs. 97,41,070/-. 7. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), however with no success the appeal of the assessee was dismissed, with following observations: 6.2.3 It is noticed from the assessment order that the assessee has made total cash deposits of Rs. 87,78,000/- in his bank account maintained with Bank of India, Bhatapara during the period of demonetization. During the course of assessment proceedings, the 6 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara assessee was asked to furnish the details of all bank accounts either individually or jointly, copy of bank statement along with narration of entries of deposits and withdrawals, source of cash deposit in the bank with other details, copy of cash book, month wise details of purchases & sales and details of persons from whom the cash in demonetization currency has been received etc. 6.2.4 In this regard, the appellant has stated that the cash deposited of Rs.85,78,000/-, which were sourced from the cash sales made during the year. Further, the appellant has stated that he had provided all purchase bills, sales bills, details of creditors, debtors and details of payments made to creditors through bank (NEFT/RTGS) during the assessment proceedings justifying that all the purchases and sales made are genuine. Also, the books of account for the year under assessment were duly audited yet the AO treating the entire transaction of purchase and sale as bogus and treating the cash deposits of Rs. 85,78,000/- in the entire year as introduction of unaccounted money in the guise of purchase and sales of pulses considered it as unexplained cash credit u/s 68. Further, the appellant had deposited cash of Rs. 2,00,000/- in the demonetization period in his personal bank account. Such cash deposit was made in his personal saving account out of past years savings. But such amount was treated as unexplained cash credit u/s 68 by the AO and added to the income of the appellant. 6.2.5 I have carefully considered the AO's viewpoint contained in the Assessment Order and the submission made by the appellant including relevant judicial decisions in the matter. It is seen from the appellant's own submissions that the total annual turnover of the appellant is Rs. 93,17,434/- and sales of Rs 75,69,500/- have been made b/w 13/1 1/2016 to 16/12/2016 alone. This clearly raises doubts about a regular business of purchase and sale. The AO has also noted this fact on page 6 of the assessment order — \"It is also surprising to note that the assessee has done the entire alleged business only during demonetization period without creating a single debtor. \" 6.2.6 The AO had specifically asked for details of month wise stocks, sales and purchases along with details of cast) deposited, vide notice u/s 142(1) dated 04/09/2019, The details furnished by the appellant have been analysed in detail by the AO in the assessment order from Page 3 to 10. The discrepancies noted and the fact that the business was almost exclusively with sister concerns and that the Income Tax Inspector was not able to locate the parties even after physical address verification all point to the entire purchase and sales being a bundle of fictitious transactions. In view of the above, I uphold the assessment of the entire cash deposits of Rs 85,78,000/- u/s 68 r.w.s 115BBE and this ground of appeal is dismissed. 7 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara 6.2.7 Regarding the cash deposit of Rs 2,00,000/- in bank account 935610310000016 with Bank of India, Bhatapara, since the appellant has not been able to explain the source of the same, the addition of this amount u/s 68 r.w.s. 115BBE is also upheld and this ground of appeal is also dismissed. 8. At the threshold, Shri Sunil Agrawal, Authorized Representative of the assessee (in short “Ld. AR”), submitted that the present appeal is delayed by 15 days. While explaining in delay in filing of the appeal, an application for condonation of delay along with affidavit of the assessee was filed. It is apprised that the assessee, at the time of issuance of appellate order by the Ld. CIT(A) on 07.04.2023 was unable to access on the portal as well as on his email, thereafter the assessee went for religious journey to Makka Madina from 28.12.2023 till 23.01.2024, therefore, the delay of 15 days occasioned due to unintentional / bonafide reasons beyond the control of assessee. We have considered the plea by the Ld. AR and found it appropriate to condone the delay of 15 days on account of justifiable reasons and also as the delay involved is not exorbitant. The registry is therefore directed to condone the delay and fix the case for regular hearing under information to both the parties. 9. At the outset, Ld. AR assailed the additional ground no.1, stating that the books of account of the assessee were rejected under the provisions of section 145(3) of the Act, therefore, the profit ought to have been estimated by applying a flat rate of 8 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara profit on the turnover of the assessee of Rs. 93,17,434/-. It is argued that the AO cannot rely on the information transpiring from the rejected books for making addition on cash deposits into bank account which is sourced out of cash sales of the assessee. It was the submission that for this reason itself the addition is liable to be deleted. Ld. AR placed his reliance on the following judgments:  CIT VS. Bahubali Neminath Muttin, (2016) 73 taxmann.com 100 (Kar. HC)  CIT vs. Dularam Labour contractor, (2014) 42 taxmann.com 349 (P & H HC)  Amitabh Construction vs. ACIT, (2012) 20 taxmann.com 385 (Jharkhand HC) 10. Backed by aforesaid submissions, it is contented that while the books of accounts of the assessee are rejected, it was not open upon the Ld. AO to rely upon the information emanating from the books of accounts to make the additions. 11. Ld. Sr. DR, Dr. Priyanka Patel, representing the revenue, on the other hand had reiterated the observations of Ld. AO, decision of the Ld. CIT(A) and vehemently supported their orders. 12. We have considered the rival submissions, perused the material available on record and case laws relied upon by the Ld. AR. On perusal of the judgment in the 9 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara case of CIT vs. Bahubali Neminath Muttin (supra), it is revealed that in the said case the books were rejected u/s 145(3) by the Ld. AO and at the same time the addition on account of trade creditors, also for the purpose of arriving at a closing stock, books of accounts of the assessee were relied, whereas in present case, Ld. AO have not resorted to the estimation of profit of the assessee, also the books of account of the assessee are rejected, but the quantification of additions qua the cash deposits during the demonetization period was as per undisputed information available from the bank statement of the assessee. It can be safely concluded that the rejected books of accounts have never been relied upon by the Ld. AO. Similar findings were accorded by the Hon’ble High Court of P & H in the case of CIT vs Dullaram, Labour contractor, Kotkapura (supra), and Amitabh Constructions Pvt. Ltd. (supra), therefore, these case laws are distinguishable on facts as against the facts of the present case, so are of no help to the assessee. The plea of assessee having been filed the annual VAT returns without filing the quarterly returns after one year cannot support, it was just to recharacterize the sham transaction into a genuine deal. Even the ITR for preceding year AY 2016-17 was filed by the assessee on 15.03.2017, much after the demonetization period, shows such steps are taken to cover bogus transactions. Further, nothing has been brought on record to show that the assessee is functioning with the similar magnitude in the business of trading of pulses in the preceding and succeeding year, thus, the finding of the Ld. AO on the basis of large transactions with the buyers without PAN / unidentifiable and were not 10 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara produced before the Ld. AO, during the year of demonization and huge cash deposits. Ld. CIT(A) had rightly appreciated the facts that the total turnover of assessee of Rs. 93.17 lac includes cash deposit of Rs. 75.69 lacs i.e., almost 81%, during the period 13.11.2016 to 16.12.2016, further the month wise stocks, sales and purchase along with details of cash deposits were not furnished by the assessee. Another aspect observed by the revenue authorities was that the most of transactions were exclusively executed with the sister concern of the assessee, which could not be located by the Income Tax Inspector during the physical verification. In absence of plausible explanations qua the addition’s u/s 68 for Rs. 85,78,000/- on account of fictitious purchase and sale transaction and personal cash deposit of Rs. 2,00,000/- the additions were confirmed by the Ld. CIT(A). Under such facts and circumstances, we concur with the findings of Ld. CIT(A) and are unable to subscribe to the contentions raised by the Ld. AR, accordingly, Ground No. 1 & 2 and additional ground No. 1 & 2 of the present appeal of assessee stands dismissed. 13. Ground No. 3, regarding applicability of provisions of section 115BBE is consequential in nature, since we have upheld the addition under section 68 of the applicability of section 115BBE shall apply as per law, thus Ground no 3 of appeal is disposed off accordingly. 11 ITA No. 54/RPR/2024 Mohammad Rafik Jaliyawala Vs. ITO, Bhatapara 14. Ground No 4. : It is a general ground, without any further contention or argument, therefore, does not require any adjudication, thus, stands dismissed. 15. In result, appeal of the assessee has been dismissed in terms of our aforesaid observations. Order pronounced in the open court on 21/11/2024. Sd/- (RAVISH SOOD) Sd/- (ARUN KHODPIA) Ɋाियक सद˟ / JUDICIAL MEMBER लेखा सद˟ / ACCOUNTANT MEMBER रायपुर/Raipur; िदनांक Dated 21/11/2024 Vaibhav Shrivastav आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : आदेशानुसार/ BY ORDER, (Senior Private Secretary) आयकर अपीलीय अिधकरण, रायपुर/ITAT, Raipur 1. अपीलाथŎ / The Appellant- 2. ŮȑथŎ / The Respondent- 3. आयकर आयुƅ(अपील) / The CIT(A), 4. The Pr. CIT, Raipur (C.G.) 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 6. गाडŊ फाईल / Guard file. // स×याǒपत Ĥित True copy // "