SRI RAJANI GOLD,VIJAYAWADA V. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-1(1), VIJAYAWADA

ITA 162/VIZ/2023

AI Insights

The case revolves around the appeal by Sri Rajani Gold against the order of the Commissioner of Income Tax (Appeals), which upheld the AO's decision treating Rs.31,41,71,000 as unexplained cash deposits during the demonetization period. The AO had rejected the books of accounts under section 145(3) and estimated the income at 1% of turnover, considering the deposits as unexplained under section 68 read with section 115BBE of the Income Tax Act. The Tribunal, after examining the submissions and evidence, including VAT returns and statements recorded during the survey, found that the assessee had legitimate transactions and the SBNs were not illegal tender during the relevant period.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 46636 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Next Hearing Date: 11-09-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 22-05-2023
• Other Referred Cases: ITO v. Sri Tatiparti Satyanaraya, CIT v. Bhaichand H. Gandhi, Smt. Charu Aggarwal v. DCIT, Rajmeet Singh v. ITO, Arunkumar J. Muchhala v. CIT, Jagdish Prasad Sharma v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Condonation of delay; Rejection of books of accounts; Bogus
• Section: 143(3); 142(1); 143(2); 68; 131; 133(6); 69A; 133A; 145(3)

Judgement Text

"आयकर अपीलीय अधिकरण, धिशाखापटणम पीठ, धिशाखापटणम IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM श्री दुव्वूरु आरएल रेड्डी, न्याधयक सदस्य एिं श्री एस बालाक ृष्णन, लेखा सदस्य क े समक्ष BEFORE SHRI DUVVURU RL REDDY, HON’BLE JUDICIAL MEMBER & SHRI S BALAKRISHNAN, HON’BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.162/VIZ/2023 (निर्धारण वर्ा/ Assessment Year: 2017-18) Sri Rajani Gold D.No. 11-49-336B Sivalayam Street, I Town Vijayawada – 520001 Andhra Pradesh [PAN: AACFS6675E] v. Asst. CIT – Circle – 1(1) Central Revenue Building MG Road – 520001 Vijayawada, Andhra Pradesh (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व / Assessee Represented by : Shri GVN Hari, AR राजस्व का प्रतततितित्व/ Department Represented by : Dr. Satyasai Rath, CIT(DR) सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 11.09.2024 घोर्णधकीतधरीख/Date of Pronouncement : 11.10.2024 आदेश /O R D E R PER SHRI S BALAKRISHNAN, ACCOUNTANT MEMBER: 1. This appeal is filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter in short “Ld.CIT(A)”] vide DIN & Order No. I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 2 ITBA/NFAC/S/250/2022-23/1048899643(1) dated 18.01.2023 arising out of order passed under section 143(3) of the Income Tax Act, 1961 (in short ‘Act’) dated 31.12.2019. 2. At the outset, it is noticed from the appeal record that there is a delay of 64 days in filing the appeal before the Tribunal. Explaining the reasons for belated filing of the appeal, the Ld. AR drew our attention to the affidavit filed by the assessee along with a petition seeking for condonation of delay and read out the contents of the petition which is as under: “2. The computer operator, unfortunately missed to pick up the e- mailed order of the CIT(A), NFAC, dt. 18-01-2023 and we could know about the aforesaid order, only when the Ld. A.O., viz., ITO, ward-1(1), VZA passed the consequential order dated 21-02-2023, giving effect to the aforesaid Order of the CIT(A) and when such consequential order was got served on us on 21-02-2023. Then our brother, Sri Y.Uday Kumar, one of the partner of the firm, M/s. Rajani Gold, approached Sri D.L.NarasimhaRao, Advocate, Vijayawada who dealt with the appeal work earlier, belonging to our father, Sri .ChandraRao, before the Hon'ble ITAT, VSP and requested him to take up the appeal work in the instant case before the Hon'ble ITAT, VSP as he held acquaintance with the appeal/asst. proceedings in our case. However, he declined initially to take up the work IMMEDIATELY, on the ground that he met with surgical treatment for left leg and with the associated ailments with which he is confronted at the age of 80 years. Then, we made efforts to procure the services of a few tax consultants at Vijayawada, which resulted in vain for different reasons. 3. Then we approached again the above Advocate, who agreed to render assistance to us on humanitarian grounds, a fortnight back. He sought for some material, connected with SBNs, details of cash transactions and other associated documents so as to prepare the appeal petition/ and in this process there was consumption of some more time in ensuring filing of the appeal papers before the Hon'ble ITAT, VSP. Thus there is a delay of above 65-days in filing the appeal. I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 3 4. In the aforesaid factual background, we humbly request that the above delay of about 65 days which took place (by 22-05-2023) may kindly be CONDONED and the appeal petition in Form No.36 may kindly be entertained and the grounds urged in may be taken up for adjudication on MERITS of the case. 5. I further affirm and state that this Declaration is given on my own volition, without the undue influence of any person and thereby this holds binding effect on us.” 3. On perusal of the contents of the affidavit filed by the assessee as well as the submission of the Ld. AR, we find that the assessee is prevented by a reasonable and sufficient cause in filing the appeal beyond the prescribed time limit with a delay of 65 days. Therefore, we hereby condone the delay of 65 days in filing the appeal before the Tribunal and proceed to adjudicate the appeal on merits in the following paragraphs. 4. Brief facts of the case are that, assessee-firm is carrying on business of bullion trading in gold and silver and trading in gold ornaments and silver articles and filed its return of income on 17.02.2018 for the A. Y. 2017-18 admitting a total income of Rs.43,31,080/-. The case was selected for complete scrutiny and statutory notices under section 143(2) and 142(1) of the Act were issued and served on the assessee from time to time calling for information relevant for computation of total income. Subsequently, survey operation was conducted on 22.11.2016 and statement was recorded from the Managing Partner, Sri. Yenugula Vinod Kumar on 22.11.2016 under section 133A of the Act. Statements are also recorded on 23.11.2016 and 29.12.2016. I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 4 5. The Ld.AO noticed from the statements recorded that the assessee accepted demonetized currency from the public by making sale of gold bullion. The assessee submitted that the amounts deposited in banks are out of advances received for sale of bullion before the demonetization period. The Ld.AO considering the statements recorded by the Managing Partner of the firm Sri. Yenugula Vinod Kumar under section 131 of the Act and the information obtained from the banks under section 133(6) of the Act noticed that assessee has deposited Specified Bank Notes (SBN) in the bank accounts during the demonetization period as follows: - Rajani Gold SBNs Deposits during Demonetisation Period Denominations S.No. Bank Branch A/c No. 500s 1000s SBNs Amount 1. Andhra Bank Satyanarayanapuram 50411100001200 37058 33789 52318000 2. Indian Overseas Bank Park Road 10102000004333 82500 58850 100100000 3. Lakshmi Vilas Bank Governorpet 2893600000000091 22388 47176 58370000 4. SBI Gandhi Nagar 33897205082 63558 71604 103383000 314171000 6. The Assessee finally submitted explaining the sources for cash deposits made during the demonetization period in Specified Bank Notes amounting to Rs.31,14,71,000/- are arising out of the cash sales and advances received towards sale of bullion before and after demonetization period. The Ld.AO noticed that the books of accounts of the assessee have been manipulated in such a manner and therefore not relying on the books of accounts rejected the same by invoking provisions of section 145(3) of the Act. The Ld.AO based on I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 5 the return of income filed by the assessee for the A.Ys. 2015-16, 2016-17 & 2017-18, noticed that the assessee has admitted Net Profit as under: - A.Y. Turnover Net Profit Net Profit rate 2015-16 153,53,46,029 4,50,271 0.03% 2016-17 150,89,00,721 1,30,404 0.01% 2017-18 79,92,05,016 43,31,082 0.54% 7. Considering the business and turnover of the assessee, Ld.AO estimated the income of the assessee at 1% of the turnover of Rs. 79,92,05,016/- amounting to Rs. 79,92,050/-. 8. The Ld.AO rejected the explanation of the assessee that the sources for cash deposits are receipt of cash sales and cash advances received against sales made by it. The Ld.AO noticed that assessee has accepted Specified Bank Notes (SBNs) which are not a legal tender and cannot be treated as Cash or Money for the purpose of any transaction except for depositing in bank stating that Government of India notified Rs.1000 and Rs.500 will not be a legal tender w.e.f. 09.11.2016. Considering the above facts, Ld.AO found that the assessee was owner of the cash deposited into bank account, but has not offered any acceptable and cogent explanation regarding the source of Cash Credit, treated I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 6 an amount of Rs.31,41,71,000/- as unexplained under section 68 r.w.s. 115BBE of the Act. 9. On being aggrieved by the order of the Ld.AO, assessee filed an appeal before Ld. CIT(A). Before Ld. CIT(A) assessee made similar representations / submissions regarding the Specified Bank Notes. Ld.AR also submitted that the assessee made purchases through banking channels which was not disputed by the Revenue Authorities. The Ld.AR, before Ld. CIT(A) also submitted that the amount of Rs. 31,41,71,000/-was treated as turnover and estimate of 1% on the turnover was made by the Ld.AO in addition to the treatment of the same amount as unexplained under section 68 of the Act. Considering the above submissions, Ld. CIT(A) reduced the turnover from Rs.79.92 crores to Rs.48.17 crores while estimating the same 1% on the turnover and confirming the addition of Rs.31,74,33,706/- as unexplained while dismissing the appeal of the assessee. 10. Aggrieved by the order of the Ld. CIT(A), assessee is in appeal before us by raising the following revised grounds of appeal: - 1. The order of the learned Commissioner of Income Tax (Appeals) is contrary to the facts and also the law applicable to the facts of the case. 2. The learned Commissioner of Income Tax (Appeals) is not justified in upholding the rejection of books of account. 3. Without prejudice to the above, the learned Commissioner of Income Tax (Appeals) ought to have held that the net profit estimated @ 1% is on a higher side. I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 7 4. The learned Commissioner of Income Tax (Appeals) is not justified in sustaining the addition of Rs.31,41,71,000 made by the Ld.AO u/s 68 of the Act towards unexplained cash deposits during demonetisation period. 5. The learned Commissioner of Income Tax (Appeals) ought to have held that the provisions of S.68 are not applicable to entries in the bank account in as much the pass book issued by the bank is not a book of account maintained by the appellant. 6. Any other ground that may be urged at the time of appeal hearing. 11. The only contention of the assessee is with respect to the addition made by the Revenue Authorities under section 68 of the Act aggregating to Rs.31,41,71,000/-, considering it that the assessee accepted cash in demonetised currency. On this issue Ld. Authorised Representative [hereinafter “Ld.AR”] submitted that assessee has purchased gold bullion by making payments to the sellers through RTGS / NEFT which was not disputed by the Ld.AO. Ld.AR vehemently argued that the only objection of the Ld.AO is acceptance of Specified Bank Notes after announcement of demonetization stating that it is not a legal tender consequent to announcement of the demonetization. The Ld.AO has also not disputed the turnover of the assessee, Ld.AR argued. Further, Ld.AR also stated that the VAT returns showing the purchase and sales of bullion were also submitted before the Revenue Authorities for verification. 12. The Ld.AR placing reliance in the case of ITO v. Sri Tatiparti Satyanaraya in ITA No. 76/VIZ/2021 dated 16.03.2022 wherein the Specified Bank Notes (Cessation of Liabilities) Act, 2017 permitted Specified Bank Notes to be legal tender till 31.12.2016. Ld.AR also relied on the case of I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 8 CIT v. Bhaichand H. Gandhi [(1983) 141 ITR 0067] and the decision of the Co-ordinate Bench of Chandigarh in the case of Smt. Charu Aggarwal v. DCIT [2022] 140 taxmann.com 588 (Chandigarh – Trib). He therefore pleaded that the addition made by the Revenue Authorities be deleted. 13. Per contra, Ld. Departmental Representative [hereinafter in short “Ld.DR”] submitted that the purchase and sale are disproportionate in November, 2016 till the date of Survey. He therefore pleaded that the assessee has manipulated the books of accounts subsequent to demonetization. Ld. DR placed reliance on the following case laws: - a. Decision of Hon’ble High Court of Jharkhand in the case of Rajmeet Singh v. ITO [2024] 160 taxmann.com 83 (Jharkhand). b. Decision of the Hon’ble Bombay High Court in the case of Arunkumar J. Muchhala v. CIT [2017] 85 taxmann.com 306 (Bom). c. Decision of the Co-ordinate Bench of Delhi in the case of Jagdish Prasad Sharma v. ITO [2020] 115 taxmann.com 162 (Delhi – Trib.). 14. Ld. DR, therefore pleaded that the order of the Ld. CIT(A) be upheld. 15. We have heard rival contentions and perused the material available on record including the cases cited by both the parties. It is an undisputed fact that the assessee has purchased gold bullion and by making payment towards the same in the form of RTGS/NEFT. The only contention of the Ld.AO is that the assessee has accepted the Specified Bank Notes towards the sale of gold bullion in spite of the Specified Bank Notes being declared as an illegal tender w.e.f. I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 9 09.11.2016. It is also seen from the statement recorded on 28.12.2019 that the assessee has admitted that turnover for the AY 2017-18 in earlier assessment years and subsequent assessment years as follows: Sl.No. Period (Assessment Year) Turnover (Rs. In Cr’s.) 1. A.Y. 2015-16 153.33 2. A.Y. 2016-17 150.89 3. A.Y. 2017-18 79.92 4. A.Y. 2018-19 105.68 5. A.Y. 2019-20 102.44 16. Further, from the documents submitted before the Revenue Authorities and also before us, we find that the assessee has declared the turnover and also purchases in the VAT Returns on a monthly basis which was also not disputed by the Revenue Authorities. The only issue agitated by the Ld.AO is with respect to the validity of the acceptance of sale consideration in High Value Denomination Notes subsequent to demonetisation. In this connection this bench in the case of ITO v. Sri Tatiparti Satyanaraya(supra) has held as follows:- “9. …….. The Specified Bank Notes (Cessation of Liabilities) Act, 2017, defines “appointed day” vide Section 2(1)(a). As per Section 2(1)(a), “appointed day” means the 31st Day of December 2016. Section 5 of the Specified Bank Notes (Cessation of Liabilities) Act, 2017 also deals with prohibition on holding, transferring or receiving specified bank notes. Section 5 states that “On and from the appointed day, no person shall knowingly or voluntarily, hold, transfer or receive any specified bank note”. We therefore, find that the specified bank notes can be measured in monetary terms since the guarantee of the Central Government and the liability of Reserve Bank of India does not cease to exist till 31.12.2016. In view of the above, the contention of the Ld.DR, treating the receipt of I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 10 SBNs from cash sales as illegal and therebyinvoking the provisions of section 69A is not valid in law. ..” 17. In our considered view, the provisions of section 68 of the Act cannot be invoked by the Revenue Authorities, since the assessee has offered explanation regarding the sales made and disclosed the same in the VAT Returns of the assessee. We also find from the statements of the Managing Partners recorded under section 131(1A) of the Act on 29.12.2016, the assessee has raised cash sales of gold bullion from 08.11.2016 to 21.11.2016 commenced date of survey to 2763 customers. The revenue has also not disputed the above statements. Merely because of disproportionate quantities of purchase and sales during the period of demonetization wherein the purchase bills and sales bills have been submitted by the assessee and the payments made to the suppliers by way of RTGS/NEFT has been provided by the assessee, cannot be a valid reason for invoking the provisions of section 68 of the Act by rejecting the books of accounts unless if there is any corroborative evidence regarding the source of cash seized during the survey proceedings. The Ld AO has also not brought on record any material to prove that the assessee made cash deposits out of bogus sales. In the light of facts and circumstances of the case as discussed above, we find that the only reason by the Ld.AO to make the addition under section 68 is by considering the High Denomination notes as illegal tender from 09.11.2016. From the provisions of the Specified Bank Notes (Cessation of Liabilities) Act, 2017, we find that these Specified Bank Notes can be measured in monetary I.T.A. No. 162/VIZ/2023 Sri Rajani Gold Page No. 11 terms since the guarantee of the Central Government and the liability of Reserve bank of India does not cease to exist till 31.12.2016. We are therefore of the considered view that the addition made by the Ld.AO invoking provisions of section 68 of the Act is unsustainable in law and deserves to be deleted. 18. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 11th October, 2024. Sd/- (दुव्वूरुआरएल रेड्डी) (DUVVURU RL REDDY) न्याधयक सदस्य/JUDICIAL MEMBER Sd/- (एस बालाक ृष्णन) (S. BALAKRISHNAN) लेखा सदस्य/ACCOUNTANT MEMBER Dated :11.10.2024 Giridhar, Sr.PS आदेशकीप्रनतनलनपअग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/ The Assessee : Sri Rajani Gold D.No. 11-49-336B Sivalayam Street, I Town Vijayawada – 520001 Andhra Pradesh 2. रधजस्व/ The Revenue : Asst. CIT – Circle – 1(1) Central Revenue Building MG Road – 520001 Vijayawada, Andhra Pradesh 3. The Principal Commissioner of Income Tax 4. नवभधगीयप्रनतनिनर्, आयकरअपीलीयअनर्करण, नवशधखधपटणम /DR,ITAT, Visakhapatnam 5. The Commissioner of Income Tax 6. गधर्ाफ़धईल / Guard file //True Copy// आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Visakhapatnam "