SHRI LAL NIHALCHAND THAKUR ,MUMBAI V. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE -4, THANE

ITA 3338/MUM/2024

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The case involves Shri Lal Nihalchand Thakur, a proprietor of M/s. Anita Gas Services, who appealed against the order of the CIT(A) confirming additions made by the assessing officer regarding unexplained cash deposits during the demonetization period in India. The assessee, engaged in the distribution of LPG cylinders, collected a significant portion of sales in cash, which was deposited in banks. The assessing officer treated a substantial part of these deposits as unexplained cash credits under section 68 of the Income Tax Act, imposing tax under section 115BBE. The CIT(A) partially relieved the assessee by correcting some errors in the additions, but upheld a significant portion. The Tribunal, after considering the nature of the assessee's business and the regulations during the demonetization period, found merit in the assessee's arguments and reduced the additions further.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 398085 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: K
• Assessment Year: 2017-2018
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJEYA KUMAR OJHA
• Assessee Lawyers: SAMEER G. DALAL
• Keywords: Business income; Unexplained cash credit
• Section: 68

Judgement Text

"IN THE INCOME TAX APPELLATE TRIBUNAL “K(SMC)” BENCH, MUMBAI BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER &GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 3338/MUM/2024 (AY : 2017-18) (Physical hearing) Lal Nihalchand Thakur 1510, Samarth Aangan, 2B, Oshiwara, Andheri (W), Mumbai-400053. [PAN No. ACSPT8705B] Vs ACIT, Circle-4, Thane Appellant / Assessee Respondent / Revenue Assessee by Shri Sameer G. Dalal, Advocate Revenue by Shri Ajeya Kumar Ojha, Sr. DR Date of institution of appeal 27.06.2024 Date of hearing 01.05.2025 Date of pronouncement 02.06.2025 Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER; 1. This appeal by assessee is directed against the order of NFAC/ ld. CIT(A) dated 04.06.2024 for A.Y. 2017-18.The assessee has raised the following grounds of appeal: “1. learned CIT(A) has erred in confirming the addition of Cash Deposit: a) Rs.1,00,000/- in Kotak Mahindra Bank and b) Rs.6,76,500/- in Vasai VikasSahakari Bank, stating that no substantial documentary evidence was produced. It is respectfully submitted that appellant has correctly explained the cash deposit as appellant is having Gas Agency and was collecting cash against the delivery of Cylinder. Cash on hand was deposited in bank as when agent collect cash deposit to office. Appellant was entitled to collect demonetization notes of Rs. 1,000/- upto 30.11.2016 and Rs.500/- notes upto 15.12.20216. Appellant on receipt of cash from customers received by agent deposit in bank. The learned CIT(A) has stated that no bank statement was provided which was irrelevant as cash was collected on sale of Cylinder. Appellant has submitted that Cash book which was duly audited by Chartered Accountants as appellant accounts were under tax audit. Appellant has submitted cash ITA No. 3338/Mum/2024 Shri Lal Nihalchand Thakur 2 book from 01.11.2016 to 15.12.2016 showing cash on hand which shows cash collected and deposited in Bank. 2. The appellant craves leave to refer to and rely upon all or any of the above grounds of appeal and add to, delete, modify and/or alter the grounds of appeal on or before the date of hearing.” 2. Brief facts of the case are that assessee is an individual and proprietary of M/s. Anita Gas Services. The assessee is distributor of LPG cylinder in Virar area being authorised dealer/ distributor of Bharat Petroleum Corporation Ltd. The assessee filed his return of income for A.Y. 2017-18 on 31.10.2017 declaring income of Rs. 31,54,770/-. Case was selected for scrutiny and cash deposit was one of the criteria for selection of case for scrutiny. During assessment proceeding, the assessing officer noted that during demonetization period, the assessee made cash deposit of Rs. 6,76,500/- in Vasai Vikas Sahakari Bank Ltd. and Rs. 8,10,500/- in Kotak Mahindra Bank in the form of old currency notes/ specified bank notes (SBN). The assessee was asked to explain the source of such cash deposit. The assessee in response to such show cause notice filed his reply and submitted that he is a distributor of LPG cylinder for Bharat Petroleum Corporation Ltd. in Virar and nearby area. He is distributing the LPG cylinder to various house-holds and collected 90 to 95% of sales in cash. Therefore, cash amount is collected and deposited on various dates. All old notes were received before the mid night of 15th December, 2016. Majority of amount was deposited before 15.12.2016. In some cases wherein delivery men were absent and cash was collected by them from remote area and villages the same was subsequently deposited but before 30.12.2016 as per scheme of Government and Reserve ITA No. 3338/Mum/2024 Shri Lal Nihalchand Thakur 3 bank of India (RBI) regulations. The reply of assessee was not accepted by assessing officer. The assessing officer noted that Government of India has directed to stop over counter exchange of old notes after 25.11.2016 but Government of India has permitted certain transaction in specified bank note till mid night of 15.12.2016. On perusal of detail furnished by assessee, the assessing officer found that assessee has deposited Rs. 3,99,500/- in old currency notes of Rs. 500/- &Rs. 1,000/- till 15.12.2016 which can be considered as business receipt and remaining of amount of Rs. 14,89,000/- is treated as unexplained cash credit under section 68 and tax under section 115BBE in the assessment order dated 22.12.2019. 3. Aggrieved by the additions in the assessmentorder, the assessee filed appeal before ld. CIT(A). Before ld. CIT(A), the ld. CIT(A), the assessee filed his submission dated 01.03.2021. Submission of assessee are duly recorded in para 5 & 5.1 of order of ld. CIT(A). In the written submission, the assessee reiterated his submission as made before assessing officer. The assessee vide submission dated 02.03.2021, further stated that in Kotak Mahindra Bank the cash in SBN in Kotak Mahindra Bank was made on 01.12.2016, 02.12.2016 and 06.12.2016. The assessing officer wrongly mentioned cash deposit at serial no. 3 of Rs. 3,46,000/-. 4. The ld. CIT(A) on considering the submission of assessee allowed part relief to the assessee in respect of the case deposit in SBN prior to 15.122016 and also corrected the error making excess addition thereby deleted Rs. 5,83,000/- and restricted the addition to the extent of Rs. 1,00,000/- in Kotak bank and of Rs. 6.76 lacs deposited in Vasai Vikas Sahakari Bank Ltd. By passing following order: ITA No. 3338/Mum/2024 Shri Lal Nihalchand Thakur 4 Sl. No Date of deposit Denomination x No of piece of notes Amount (in Rs.) 1 01.12.2026 1000x2,500x280 1,42,000/- 2 02.12.2016 1000x13,500x263 3,24,500 3 06.12.2016 1000x85,500x263 2,16,500 Total 6,83,000/- The cash deposited on 06.12.2016 is wrongly calculated above as it should be Rs. 2,16,500/- instead of Rs. 3,46,000/-. The total cash deposit in Kotak Mahindra Bank from 01.12.2016 to 06.12.2016 works out to Rs. 6,83,000/-. The error resulted in excess addition of 1,29,500/-. The same is therefore deleted. Out of Rs. 6,83,000/-cash deposit in Rs. 500 (old notes) is to the tune of Rs. 5,83,000/-. Therefore, relief of Rs. 5,83,000/- is granted to the appellant. The addition of Rs. 8,12,500/- on account of cash deposit in Kotak Mahindra Bank is restricted to Rs. 1,00,000/-. (Appellant gets relief of Rs. 1,29,500/- + Rs. 5,83,000/- 7,12,500/-) 7.2 Further, the appellant had deposited cash to the tune of Rs. 6,76,500/- in the bank account held with Vasai VikasSahakari Bank Ltd. after 15.12.2016 which the appellant had claimed to have been deposited from cash in hand as on 15.12.2016. The appellant has not provided copy of bank statement and merely submitted a statement showing cash in hand from on 01.11.2016 to 15.12.2016 which is self made and has no validity. In absence of any documentary evidences to substantiate the cash balance the stand taken by the appellant has not merits. Further, it is also not explained that if the appellant had already deposited the old 500 Rs. notes why the rest notes could not be deposited and the same were retained and deposited subsequently. Hence this stand of the appellant is rejected. Ground no.2 of appeal is partly allowed. 5. Further, aggrieved the assessee has filed present appeal before Tribunal. 6. We have heard the submission of ld. Authorised Representative (AR) of the assessee and the learned senior departmental representative (ld. Sr. DR) for the Revenue. The ld. AR of the assessee submits that assessee in the business of distribution of LPG cylinder through his proprietorship concern Anita Gas Services. Majority of gas supply and sales is in cash during the year under consideration total cash sales of assessee was Rs. 22.56 crore. Being LPG distributor as essential commodity, the assessee was allowed to receive ITA No. 3338/Mum/2024 Shri Lal Nihalchand Thakur 5 payment through old currency note of Rs. 500/- and Rs. 1,000/- upto 15.12.2016. The assessee has deposited certain currency notes after 16.12.2016 as mentioned in the assessment order. Such bank notes were accepted prior to 15.12.2016 and deposited prior to 31.12.2016. Delay in deposit of demonetization currency was due to peculiar nature of assessee’s business wherein delivery men collets cash from various consumers from remote areas and handed over/deposits such cash by a marginal delay ranging from 1 to 10 days. The delay in deposit was due to leave or absenteeism of delivery men or due to shortage of staff in collecting cost of cylinder from consumers. The assessing officer presumed that assessee collected SBN currency after specified dates i.e. 16.12.2016, merely it was deposited in bank accounts after 16.12.2016. Merely cash was deposited after 16.12.2016, it does not mean that such cash was collected after 16.12.2016. The cash deposited after 16.12.2016 is cash in hand available with the assessee as a part of normal course of business activity. The ld. AR prayed for deleting the entire addition. 7. On the other hand, ld. Sr. DR for the Revenue submits that lower authorities have given clear finding that assessee has deposited cash amount in the form of SBN’s during demonetisation after 16.12.2016. The order passed by ld CIT(A) is quite reasonable. 8. We have considered the rival submissions of both the parties and have gone through the orders of lower authorities carefully. We find that assessee is engaged in the business of distribution of LPG cylinder. It is a matter of common knowledge that in F.Y. 2016-17, majority of gas distribution was in cash. The assessee has shown cash sales in more than Rs. 22.00 crore. The ITA No. 3338/Mum/2024 Shri Lal Nihalchand Thakur 6 cash sales are not disputed. The assessing officer doubted the cash deposit in the form of SBN as the same were deposited only after 16.12.2016. However, the Government of India has allowed to cash to deposit cash in the form of SBN upto 30.12.2016. The assessing officer has not investigated the matter nor examined total cash sales upto 15.12.2016. The Assessing officer doubted the cash deposits as it was deposited in the bank after 15.12.2016. Facts remained the same that Government of India allowed such cash deposits in SBN up to 31.12.2016. Therefore, considering the peculiar business activities of the assessee, wherein majority of sales were in cash, therefore, there was no justification of making addition of such cash deposit. In the result, the grounds of appeal raised by the assessee are partly allowed. 9. In the result, the appeal of assesseeis allowed. Order pronounced in the open Court on 02/06/2025. SS Sd/-S/- GIRISH AGRAWAL ACCOUNTANT MEMBER - S/- Sd/- PAWAN SINGH JUDICIAL MEMBER MUMBAI, Dated: 02/06/2025 Biswajit Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The PCIT / CIT (Judicial); (4) The DR, ITAT, Mumbai; and (5) Guard file. By Order Assistant Registrar ITAT, Mumbai "