MRITRAYEE DAS,KOLKATA V. DCIT, CIR-27(1), HALDIA. , HALDIA

ITA 502/KOL/2023

AI Insights

The case involves an appeal by Maitrayee Das against the order of the Commissioner of Income Tax (Appeals)-NFAC, Delhi, which upheld the addition of Rs. 13,54,371 as unexplained cash credits by the Deputy Commissioner of Income Tax, Circle 27(1), Haldia. The addition was made under section 68 of the Income Tax Act, 1961, alleging that the credits were unexplained. The Tribunal examined whether the credits were related to the relevant assessment year and found that they were not, leading to the decision to allow the appeal and delete the addition.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 36267 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business expenditure; Unexplained cash credit
• Section: 143(3); 250; 139(1); 68

Judgement Text

"आयकर अपीलीय अधिकरण कोलकाता 'डी' पीठ, कोलकाता में IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA ‘D’ BENCH, KOLKATA श्री दुव्वुरु आरएल रेड्डी, उपाध्यक्ष (कोलकाता क्षेत्र) एवं श्री राक ेश धमश्रा, लेखा सदस्य क े समक्ष Before SHRI DUVVURU RL REDDY, VICE PRESIDENT (KZ) & SHRI RAKESH MISHRA, ACCOUNTANT MEMBER I.T.A. No.: 502/KOL/2023 Assessment Year: 2017-18 Maitrayee Das Vs. DCIT, Cir-27(1), Haldia (Appellant) (Respondent) PAN: AEFPD0377Q Appearances: Assessee represented by : Somnath Ghosh, Adv. Department represented by : None. Date of concluding the hearing : January 7th, 2025 Date of pronouncing the order : January 22nd, 2025 ORDER PER RAKESH MISHRA, ACCOUNTANT MEMBER: This appeal filed by the assessee is against the order of the Commissioner of Income Tax (Appeals)- NFAC, Delhi [hereinafter referred to as ld. 'CIT(A)'] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2017-18 dated 19.03.2023, which has been passed against the assessment order u/s 143(3) of the Act, dated 31.12.2019. Page | 2 I.T.A. No.: 502/KOL/2023 Assessment Year: 2017-18 Maitrayee Das. Page 2 of 8 2. The assessee is in appeal before the Tribunal raising the following grounds of appeal: “1. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-N.FA.C. acted unlawfully in upholding the purported addition in the sum of Rs. 13,54,371/- made by the Ld. Deputy Commissioner of Income Tax, Circle 27(1), Haldia alleging unexplained cash credits invoking the provisions of s. 68 of the Income Tax Act, 1961 in the facts and circumstances of the instant case and the specious finding on that issue is absolutely arbitrary, unwarranted, and perverse. 2. FOR THAT the specious approach of the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. of misreading evidence, considering improper facts, failing to consider proper position in law and thus coming to an erroneous finding in sustaining the addition in the sum of Rs. 13,54,371/- made by the Ld. Deputy Commissioner of Income Tax, Circle 27(1), Haldia on the manifestly wrong application of the provisions of s. 68 of the Income Tax Act, 1961 basing on considerations not relevant to the issue is wholly illegal, illegitimate, and infirm in law. 3. FOR THAT the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. erred in upholding the purported addition of Rs. 13,54,371/- made by the Ld. Deputy Commissioner of Income Tax, Circle 27(1), Haldia on account of alleged unexplained cash credits on extraneous considerations not germane to the issue in dispute and also totally ignoring the cogent explanation adduced on record and the impugned finding on that issue is completely unfounded, unjustified, and untenable in law. 4. FOR THAT on a true and proper interpretation of the scope of the provisions of s. 68 of the Income Tax Act, 1961, the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. was absolutely in error in upholding the specious addition of Rs. 13,54,371/- resorted to by the Ld. Deputy Commissioner of Income Tax, Circle 27(1), Haldia without considering the matter in the proper perspective and such spurious conclusion reached on extraneous considerations not germane to the issue in dispute is wholly opposed to law.” 3. Brief facts of the case, as stated by the assessee are as under: “The appellant, a lady individual, is an authorised dealer of Hindustan Petroleum Corporation Ltd. dealing in motor spirits and high-speed diesel under the name and style of “Bargabhima Fuel Centre”. The appellant had filed her return of income u/s 139(1) of the Income Tax Act, 1961 on 28-09-2017 disclosing the total income of Rs. 91,00,230/- for the assessment year under dispute. During the course of the assessment proceedings, the Ld. Deputy Commissioner of Income Page | 3 I.T.A. No.: 502/KOL/2023 Assessment Year: 2017-18 Maitrayee Das. Page 3 of 8 Tax, Circle 27(1), Haldia (hereinafter referred to as the ‘Ld. AO’) desired the appellant to produce the details of cash deposits during demonetization period which were duly complied with by the appellant. The Ld. AO found that the appellant had received alleged refunds of booking amount in the aggregate of Rs. 13,54,371/- from River Bank Developers P. Ltd., which in his opinion was not recorded in the books of accounts of the appellant. However, it was also admitted by the Ld. AO that none of such alleged credits, as assumed by him, related to the impugned previous year relevant to the assessment year under dispute. However, the Ld. Assessing Officer purportedly assumed that “…Mere making payment through bank accounts cannot be taken as these amounts were not accounted for at all as these amounts were excluded from banks neither as a part of profit nor as drawings; not even as a business expenses. Without proper entry at real time, these kinds of transactions were intentionally done for making undisclosed assets out of undeclared profit. Eventually, when the money returned on cancellation, assessee capitalized it as fresh money received without taxation. Therefore, Rs. 13,54,371/- is considered as not related to the subject period” and on such analysis, he treated such credits as relating to the impugned previous year relevant to the assessment year under dispute as unexplained cash credits within the province of section 68 of the Income Tax Act, 1961. The assessment order was thus made u/s 143(3) of the Act by determining the total income at Rs. 1,04,54,961/- for the assessment year under dispute.” 3.1 Aggrieved with the additions made, the assessee preferred an appeal before the Ld. CIT(A), who vide order dated 19.03.2023 dismissed the appeal. The relevant extract from the order of the Ld. CIT(A) is as under: “5.3.1 It is seen that the Appellant has suddenly made an addition of Rs. 13,54,371/- in this year's Capital account without any adequate explanation. The explanation advanced by the Appellant appears to be farfetched and strains the limits of credulity. In the guise of booking cancellation, the Appellant tried to justify the capital addition on the basis of some debits from bank accounts in earlier years which have been returned in this year. However, as rightly observed by the AO, the said debits from the concerned bank accounts in earlier years were not shown as drawings or expenses in those years. These debits only served to reduce the bank balances, thereby showing a reduced income and hence reduced taxation. 5.3.2 It is a fact that even as per the explanation of the Appellant, they have omitted mentioning such important data in their balance sheet for the earlier years. If at all they had accounted for all the debits from the bank accounts, the Balance sheet could not have balanced without incorporating the advance with respect to the 'said flat'. Page | 4 I.T.A. No.: 502/KOL/2023 Assessment Year: 2017-18 Maitrayee Das. Page 4 of 8 5.3.3 Thus, I am inclined to agree with the assertion made by the AO and hold that no interference is required to the addition made in the impugned assessment order. Hence this ground is Dismissed. 6.0 In the result, for statistical purposes, the appeal is Dismissed.” 4. Aggrieved with the order of the Ld. CIT(A), the assessee has filed the appeal before the Tribunal. 5. Rival contentions were heard and the submissions made have been examined. During the course of the appeal before us, the assessee has filed written submissions which are as under: The instant appeal arises out of the appellate order dated 19-03-2023 passed by the Ld. Commissioner of Income Tax (Appeals)-N.F.A.C. [hereinafter referred to as the Ld. Commissioner (Appeals) for the sake of brevity] who upheld such addition made u/s 68 of the Income Tax Act, 1961. It is an admitted fact that the Ld. Assessing Officer has resorted to an addition of Rs. 13,54,371/- by invoking the provisions of s. 68 of the Income Tax Act, 1961 which comprised of four alleged credits of Rs. 50,000/- on 31-10-2014, Rs. 4,68,698/- on 08-12-2014, Rs. 6,64,931/- on 02-03-2015 and Rs. 1,70,742/- on 02-11-2015. The provisions of s. 68 of the Income Tax Act, 1961 come into play only where the Assessing Authority finds that a cash credit is recorded in the books for any previous year and the taxpayer offers no explanation as to the nature and source thereof or the explanation offered is not satisfactory in his opinion then such credit may be deemed to be the income of the taxpayer for the corresponding assessment year. The conditions precedent for assuming jurisdiction u/s 68 of the Income Tax Act, 1961 are that (1) there shall be a credit appearing in the books of accounts of the assessee maintained for any previous year, (2) an opportunity for submitting an explanation as to the nature and source of such credit entry appearing within the books of account is to be provided to the assessee and (3) the assessee offers no explanation or such explanation offered by him is not satisfactory in the opinion of the Assessing Authority, only then the amount may be deemed to be the income of the assessee. In other words, the alleged credits shall pertain to the relevant previous year for invoking the mischief of the s. 68 of the Act. However, admittedly, the alleged credits assumed by the Ld. Assessing Officer to be unexplained cash credits u/s 68 of the Income Tax Act, 1961 did not relate to the assessment year under dispute. In fact, it was categorically admitted by the Ld. Assessing Officer that “It is noteworthy that date-wise not a single transaction was found to have been made in the subject period of assessment? Since the alleged credits found by the Ld. Assessing Officer did not relate to the previous year relevant to the assessment year under Page | 5 I.T.A. No.: 502/KOL/2023 Assessment Year: 2017-18 Maitrayee Das. Page 5 of 8 dispute, the provisions of s. 68 of the Income Tax Act, 1961 is patently ultra vires. In the present context, the Ld. Assessing Officer has transposed the alleged credits purportedly relating to the preceding assessment years to be unexplained cash credits of the assessment year under dispute. In the instant case, therefore, the Ld. Assessing Officer prima facie failed to satisfy the primary prescription contained in the provisions of s. 68 of the Act. Therefore, the allegation of the Ld. Assessing Officer that the spurious credits of Rs. 13,54,371/-as being of an income character for the assessment year under dispute will not stand the test of judicial scrutiny. Thus, the considerations of the Ld. Assessing Officer and his specious views were extraneous for the scheme of proving that such credits allegedly received in the preceding assessment years were in the form of unexplained cash credits for the relevant assessment year. In the circumstances, the conclusion reached by the Ld. Assessing Officer was based on extraneous parameters and failed to consider the relevant evidence and construed the credits in the aggregate of Rs. 13,54,371/- as unexplained cash credit within the scope of s. 68 of the Income Tax Act, 1961. The Ld. Assessing Officer has, in fact, considered the issue from the wrong perspective. The addition made by Ld. Assessing Officer is entirely based on extraneous parameters not germane for deciding the matter. The Ld. Assessing Officer had failed to consider that the impugned credits in the aggregate of Rs. 13,54,371/- does not warrant any adverse inference of unexplained cash credit within the scope of s. 68 of the Income Tax Act, 1961 in the present context. In the instant case, therefore, the impugned addition is outside the scope and ambit of the provision of s. 68 of the Income Tax Act, 1961 which was misconceived by the Ld. Assessing Officer in the facts and circumstances of the instant case and the specious findings of the Ld. Commissioner (Appeals) on this behalf in upholding such impugned addition without any valid justification is entirely out of court and do not have any legs to stand upon. 6. We have heard the rival contentions, gone through the facts of the case and perused the record and also the submissions made. The Ld. AO examined the capital of Rs. 21,65,000/- introduced, during the year and issued a show cause notice to the assessee. In the subsequent show cause notice itself, the response of the assessee in this regard has been incorporated that the entire amount of Rs. 13,54,371/- was received in four phases in three bank accounts of the assessee, Rs. 50,000/- credited on 31.10.2014, Rs. 4,68,698/- credited on 08.12.2014, Rs. 6,64,931/- credited on 02.03.2015 and finally Rs. 1,70,742/- credited Page | 6 I.T.A. No.: 502/KOL/2023 Assessment Year: 2017-18 Maitrayee Das. Page 6 of 8 on 02.11.2015. The Ld. AO stated that no such booking amount was shown on the asset side of the balance sheet as on 31.03.2014 and 31.03.2015 and mere making of payments through bank accounts cannot be accepted as these amounts were excluded from banks. Eventually when the money returned on cancellation, the assessee capitalized it as fresh money received without taxation. Therefore, Rs. 13,54,371/- was considered as not related to the subject period and he added the amount. In the same show cause notice, another sum of Rs. 10,629/- capitalized by stating “out of my past savings” was also mentioned as not acceptable as it did not bear any basis. However, only a sum of Rs. 13,54,371/- was added as unexplained cash credit and the other sum of Rs. 10,629/- was not added and the explanation in this regard was apparently accepted. 7. We have also gone through the finding of the Ld. CIT(A). There is no dispute of the facts that these four transactions were received through the bank accounts of the assessee in the earlier two years and the receipt of cancellation amount did not pertain to the year under consideration. In case the Ld. AO was not satisfied about the source of the capital contributed this year being out of the cancellation of booking and consequential refund amounts of earlier year, the cases of the earlier two years could have been reopened as the money had surfaced in these two years and the addition, if any, was liable to be made in the earlier two years. That not been done, the receipt of refund amount in the earlier year can by no stretch of imagination be considered as the unexplained cash credit in the current year and the addition made by the Ld. AO, which has been upheld by the Ld. CIT(A) is contrary to the facts of the case and law. Hence the addition of Rs. 13,54,371/- Page | 7 I.T.A. No.: 502/KOL/2023 Assessment Year: 2017-18 Maitrayee Das. Page 7 of 8 confirmed by the Ld. CIT(A) is hereby deleted and ground nos. 1 to 4 raised by the assessee are allowed. 8. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open Court on 22nd January, 2025. Sd/- Sd/- [Duvvuru RL Reddy] [Rakesh Mishra] Vice President (KZ) Accountant Member Dated: 22.01.2025 Bidhan (P.S.) Page | 8 I.T.A. No.: 502/KOL/2023 Assessment Year: 2017-18 Maitrayee Das. Page 8 of 8 Copy of the order forwarded to: 1. Maitrayee Deducted at source, C/o. S.N.Ghosh & Associates, Advocates, 2, Garstin Place, 2nd Foor, Suite No-203, Off Hare Street, Kolkata, West Bengal, 700001. 2. DCIT, Cir-27(1), Haldia. 3. CIT(A)-NFAC, Delhi. 4. CIT- 5. CIT(DR), Kolkata Benches, Kolkata. 6. Guard File. //True copy // By order Assistant Registrar ITAT, Kolkata Benches Kolkata "