RASHMI MOHAN KIRPALANI,MUMBAI V. ITO 33(1)(6), KAUTILYA BHAVAN

ITA 5364/MUM/2024

AI Insights

The case involves Rashmi Mohan Kirpalani, an individual engaged in the business of selling school uniforms, who appealed against the order of the National Faceless Appeal Centre (NFAC), Delhi. The NFAC had confirmed the addition of Rs.62,68,716 to her income for the Assessment Year 2017-18, treating it as unexplained cash credit under sections 68 and 69A of the Income Tax Act. The primary contention was the source of deposits made during the demonetization period, which were scrutinized by the Assessing Officer (AO) but were not adequately considered in terms of the assessee's explanations and supporting documents. The Tribunal noted that the AO and CIT(A) failed to verify the detailed records provided by the assessee, which substantiated the legitimacy of the deposits as business income.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473397 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.R. MAKWANA
• Assessee Lawyers: VIMAL PUNMIYA
• Keywords: Business income; Additional evidence; Unexplained cash credit
• Section: 101

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No.5364/Mum/2024 (Assessment Year :2017-18) Rashmi Mohan Kirpalani Tower A, 5A Viceroy Park Thakur Village Kandivli (E) Mumbai – 400 101 Vs. Commissioner of Income Tax Appeal (NFAC),Ward 42(1)(4), Mumbai PAN/GIR No.AGCPK0757C (Appellant) .. (Respondent) Assessee by Shri Vimal Punmiya Revenue by Shri R.R. Makwana, Addl. CIT Date of Hearing 30/01/2025 Date of Pronouncement 25/02/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 26/09/2024 passed by NFAC, Delhi for the quantum of assessment passed u/s.144 for the A.Y.2017-18. 2. In various grounds of appeal assessee has challenged the addition of Rs.62,68,716/- by treating the credits in the bank account as unexplained cash credit u/s.68 / 69A. ITA No.5364/Mum/2024 Rashmi Mohan Kirpalani 2 3. The brief facts are that assessee is an individual and engaged in the business of selling school uniforms and uniform fabrics which is supplied to various schools and students. In the course of assessment proceedings various notices were issued and it has been stated that in response to such notices assessee has filed her reply through online e-proceedings portal as well as alongwith the details passed by the ld. AO. 4. Ld. AO sought information u/s.133(6) from bank wherein assessee is having an account i.e. Canara Bank, Kandivili (E), Mumbai wherein it was found that there were total credits in the bank account for the F.Y.2016-17 of Rs.62,68,716/- out of which there was a deposit during demonetization period of Rs.16,45,500/-. The details of deposits are as under:- S. No. Name of Bank Account No. Deposit during demonetization period Total deposit in F.Y.2016- 17 1. CANARA BANK 2663214000001 16,45,500 49,33,895 CANARA BANK 2663201000352 ------------ 13,34,821 TOTAL RS.= 16,45,500 62,68,716 5. Ld. AO without considering the assessee’s reply and explanations that assessee had failed to comply with the notices ITA No.5364/Mum/2024 Rashmi Mohan Kirpalani 3 had added the entire amount of Rs.62,68,718/- as unexplained money u/s.69A. 6. Before the ld. CIT(A) assessee has filed various documents and evidences and also filed petition for admission on additional evidences u/s.46A of the IT Rules. However, the ld. CIT(A) has refused to admit the additional evidences and confirmed the addition made by the ld. AO. 7. Before us, ld. Counsel submitted the following nature of receipts deposited in the bank account:- Particulars Amount (Rs.) Reference Comments Opening Balance 411,615 Opening balances Internal Bank Transfer 1,299,431 Transfer of funds from A/c. No. 001 to A/c. No. 352 Cash 1,858,430 Cash Deposited during the year Fabric Sales 2,597,832 Sales during the period Bank Transaction Charges 60 Bank Transaction Charges Reversed Office Expenses 182 Office Expenses paid online refunded Travelling Expenses 16,360 Travelling Expenses paid online refunded ITA No.5364/Mum/2024 Rashmi Mohan Kirpalani 4 Total 6,183,910 7.1 He pointed that the aggregate deposits are Rs.61,83,910/- and not 62,68,716/- as noted by the ld.AO. He submitted that the deposit in the bank statement consists of internal bank transfers, opening balance, cash deposited out of cash in hand as well as expenses which have been refunded back into the account. All these facts were duly brought before the authorities below. It was only during the demonetization period assessee has deposited cash of Rs.16,45,000/- between 09/11/2016 to 30/12/2016 in her two bank accounts. These deposits are out of sales of fabrics and school uniforms to the school students. The assessee’s sales consist of both cash sales and credit sales and the cash deposits in the bank account are out of cash sales during the period. The assessee has produced the cash book which was also appearing from pages 142-146 of the paper book. This cash book and explanation was specifically provided to the ld. AO physically on 14/11/2019 and the reference was duly mentioned in the submissions made on 18/11/2019 before him. The submission of the acknowledgment has also been mentioned by the ld. CIT (A) at page 6 of his order. Thus, there was no additional document with regard to his explanation which was not produced before the ld. AO. Thus, he submitted that once all the purchases have been accepted and without purchases there cannot be any sale and without disturbing the sales, deposits cannot be added. All the cash sales and credit sales have been entered in the books which are in the form of computerized ITA No.5364/Mum/2024 Rashmi Mohan Kirpalani 5 nature cash book, bank book, sales register and purchase register. She has also filed copy of monthly purchase and sales chart for the existing and previous deposits have been made in the bank account. Thus, no addition could have been made in the hands of the assessee. 8. On the other hand, ld. DR strongly relied upon the order of the ld. AO and ld. CIT(A) submitted that none of these explanations have been given before the ld. AO and ld. CIT(A) and assessee could not establish the nature and source of deposits and the same were rightly been added by the ld. AO. 9. After hearing both the parties and on perusal of the facts and material placed on record and finding given in the impugned order it is seen that ld. AO has added the entire deposits / credits appearing in the bank account without verifying that there were certain internal bank transfers, opening balance, deposits out of sales made which are duly shown in the books of accounts etc. It is also not been disputed that assessee is engaged in selling of school uniforms and fabrics to school students and these sales are mostly in cash. The entire cash deposits in the bank accounts have been stated to be out of cash sales during the year which is also reflected in the cash book placed in the paper book. This specific document was filed before the ld. AO physically before the ld. AO on 14/11/2019 and also on 18/11/2019. The screen shot of e-proceeding response wherein, assessee has filed these documents are incorporated in the appellate order. Assessee before the ld. CIT(A) had filed copy ITA No.5364/Mum/2024 Rashmi Mohan Kirpalani 6 of agreements with the two schools in respect of sale of school uniform to demonstrate that assessee has made sales regarding school uniforms which ld. CIT(A) has held that it is an additional evidence therefore, cannot be admitted. Even if these evidences are not to be admitted but the fact of the matter is that none of the authorities have even verified ledger account, cash book, bank book, sales register and purchase register and that none of the purchases have been doubted. Once the purchases have been recorded in the books, then corresponding sales cannot be disputed. The assessee has also filed copy of cash statement, cash statement of monthly purchases and sales chart for existing and previous year. It is seen that in the earlier assessment year i.e. A.Y.2015-16, the total sales were Rs.81,96,746/- out of which cash sales was Rs.55,43,545/- and during the relevant assessment year i.e. A.Y.2017-18 total sales is Rs. 51,52,475/- and cash sales for A.Y.2017-18 was Rs.23,45,500/-. Thus, the percentage of cash sales during the year has reduced from 67.63% to 45.52%. Once the purchases and sales have not been doubted then deposit made out of sale in the bank account cannot be held to be from unexplained sources and especially when sales have recorded and corresponding deposits are shown in cash book and bank book maintained by the assessee as noted above. The ld. AO has treated the entire credit appearing during the year as unexplained without even considering that they were contra entry, internal bank transfers etc., In view of these documents we do not find any reason as to why the deposits made in the bank account should be treated as ITA No.5364/Mum/2024 Rashmi Mohan Kirpalani 7 unexplained. In the result, addition made by the ld. AO is deleted. 10. In the result, appeal of the assessee is allowed. Order pronounced on 25th February, 2025. Sd/- (GIRISH AGRAWAL) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 25/02/2025 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// "