SUBBAIAH VAIRAMANI,MADURAI V. ACIT, CORPORATE CIRCLE-1, MADURAI

ITA 2380/CHNY/2024

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The case involves Subbaiah Vairamani, a wholesale fruit trader in Madurai, who appealed against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, which confirmed the addition made by the Assessing Officer under section 68 of the Income Tax Act, 1961. The addition was based on cash deposits during the demonetization period, which the Assessing Officer deemed unexplained. The Tribunal examined the records and found that the cash deposits were from legitimate business transactions and were properly recorded in the books of account, which were audited under section 44AB of the Act. The Tribunal also noted that there was no adverse remark regarding the books of account from the authorities below, and the cash sales were accepted as genuine.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 107458 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2017-2018
• Other Referred Cases: Tamil Nadu State Marketing Corporation Ltd. v. ACIT, Vidhiyasekaran Pradeep Malliraj v. ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C. MURUGESAN
• Assessee Lawyers: R. VENKATA RAMAN; R.S. LAKSHMI NARAYANA
• Keywords: Condonation of delay; Bogus
• Section: 143(2); 68; 22; 44AB; 20

Judgement Text

"आयकर अपीलीय अिधकरण, ’बी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी एस.एस. िवʷनेũ रिव, Ɋाियक सद˟ एवं ŵी जगदीश, लेखा सद˟ क े समƗ । Before Shri S.S. Viswanethra Ravi, Judicial Member & Shri Jagadish, Accountant Member आयकर अपील सं./I.T.A. No.2380/Chny/2024 िनधाŊरण वषŊ/Assessment Year: 2017-18 Subbaiah Vairamani, 134, North Market Street, Madurai 625 001. [PAN:ABRPV9397H] Vs. The Assistant Commissioner of Income Tax, Corporate Circle 1, Madurai 625 002. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri R. Venkata Raman, C.A., & Shri R.S. Lakshmi Narayana, Advocate ŮȑथŎ की ओर से/Respondent by : Shri C. Murugesan, Addl. CIT सुनवाई की तारीख/ Date of hearing : 06.02.2025 घोषणा की तारीख /Date of Pronouncement : 07.03.2025 आदेश /O R D E R PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER: This appeal filed by the assessee is directed against the order dated 19.06.2024 passed by the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi for the assessment year 2017-18. 2. We find that this appeal is filed with a delay of 24 days. The assessee filed an affidavit for condonation of delay stating the reasons. Upon hearing both the parties and on examination of the said affidavit, I.T.A. No.2380/Chny/24 2 we find the reasons stated by the assessee are bonafide, which really prevented in filing the appeal in time. Thus, the delay is condoned and admitted the appeal for adjudication. 3. The assessee raised 3 grounds of appeal, amongst which, the only issue emanates for consideration as to whether the ld. CIT(A) is justified in confirming the addition made by the Assessing Officer under section 68 of the Income Tax Act, 1961 [“Act” in short]. 4. Brief facts relating to the issue are that the assessee is an individual, engaged in the business of whole-sale fruit trader at Madurai Fruit Market. The assessee filed his return of income declaring total income of ₹.10,60,270/-. The case of the assessee was selected for scrutiny as having found large value of cash deposits during demonetization period. Notices under section 143(2) and section 142(1) of the Act were issued and the assessee filed necessary details. On examination of such details, the Assessing Officer observed that total deposits during demonetization period is of ₹.1,20,46,470/-, out of which Specified Bank Notes [SBNs] are at ₹.66,43,000/-. A show- cause notice dated 19.12.2019 was served on the assessee asking for the explanation for cash deposits made in the bank account. Against I.T.A. No.2380/Chny/24 3 the show-cause notice, the assessee filed his reply and the same is reproduced at page 2 of the assessment order. After considering the submissions of the assessee, the Assessing Officer concluded that the amount deposited during demonetization period in SBNs amounting to ₹.64,39,475/- as unexplained cash under section 68 of the Act. The ld. CIT(A) confirmed the order of the Assessing Officer. Aggrieved by the order of the ld. CIT(A), the assessee is in appeal before the Tribunal. 5. The ld. AR Shri R. Venkata Raman, C.A. submits and drew our attention to the written submissions and submitted that the sales disclosed in the profit and loss account is ₹.4,61,33,385/-, the purchases claimed at ₹.4,53,96,199/- and the assessee derived net profit in the said business is of ₹.13,77,512/-, referred to page 5 of the paper book. Further, he drew our attention to the bifurcation of sales made during the year under consideration and argued that the total sales disclosed was accepted by the Assessing Officer and completed the assessment. The ld. AR vehemently argued that the addition of cash sales during demonetization period is a double addition, not justified. Further, he argued that the assessee utilized cash deposits, towards purchases through bank account and referred to page 81 & 82 of paper book. He also argued that total cash deposits during I.T.A. No.2380/Chny/24 4 demonetization period were utilized towards payment to vendors and the Assessing Officer found no defect in the same. Further, he referred to payments through bank of Baroda and IDBL Bank at pages 10 & 11 of the paper book duly matches with the assessee’s books of account at page 20 to 22 of the paper book. Further, he referred to the entries in the purchase ledger account at page 81 & 82 of the paper book and argued that entries in the books of account relevant to Bank of Baroda are duly reflected in the purchase ledger and matches with the books of account at pages 28 & 29. Further, he drew our attention to the cash book at page 34 to 69 of the paper book and argued that the cash sales and deposits were duly reflected in the cash book. He argued that no addition is maintainable and prayed to allow the grounds of appeal. 6. The ld. DR Shri C. Murugesan, Addl. CIT relied on the impugned order passed by the ld. CIT(A). He drew our attention to the comparative data submitted by the assessee before the Assessing Officer, reproduced at page 12 of the impugned order and submits that the transactions of cash sales of fruits shown in SBN are not genuine and natural transaction, but, it is an afterthought by making entries in the form of bogus sales to explain the source of undisclosed income I.T.A. No.2380/Chny/24 5 deposited in the bank in SBN during the demonetization period. After analyzing the cash deposits, documentary evidences, circumstantial evidences, human conduct and preponderance of probabilities that is what apparent in this case is not real, showing enhanced sales during demonetization period is a sham one and the entries made by the assessee are colorable device to evade tax and prayed to confirm the orders of authorities below. 7. Heard both the parties and perused the material available on record. We find that the total cash deposits during demonetization period were at ₹.1,20,46,470/- including SBNs of ₹.66,43,000/-. We note that the contention of the ld. AR that entire cash deposits were made out of cash sales during demonetization period. We find there is no dispute with regard to the cash sales. Therefore, source of entire cash deposits for SBNs and non-SBNs are arising out of cash sales. We note that the Assessing Officer accepted the source for cash deposits other than demonetization period arising out of cash sales, but, however, held the cash deposits during demonetization period has not been explained by the assessee, which means to say not arising from cash sales. We note that the cash sales in SBNs were duly recorded in the books of account and the same were audited under I.T.A. No.2380/Chny/24 6 section 44AB of the Act. We find no adverse remark endorsed by both the authorities below regarding the books of account and when that is accepted, the Assessing Officer cannot add the same under section 68 of the Act, which is, in our opinion amounts to double addition. Further, we find no dispute with regard to genuineness of the business of the assessee and Revenue also not disputed the same. No other evidence brought on record by the Assessing Officer regarding the source for cash deposits during demonetization period other than the cash sales. 8. The ld. AR drew our attention to the order of this Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd. v. ACIT in ITA No. 431/Chny/2023 dated 07.10.2024, which is at page 32 to 38 of the case law compilation and on perusal of relevant paras at 8.2 to 8.5, we note that if genuine explanation is offered regarding cash deposits during demonetization period until 31.12.2016, the same cannot be rejected merely for the reason that there is a violation of certain notification/Govt. orders. Further, it is pertinent to note that the Assessing Officer accepted the current purchase from vendors, which are arising out of sales and therefore, the cash deposits in the bank during demonetization period cannot be doubted. Since the Assessing Officer and the ld. CIT(A) could not point out any defects in purchases, I.T.A. No.2380/Chny/24 7 we find that the assessee has clearly demonstrated that the payments made towards purchases to the vendors were arising out of cash sales. We find force in the argument of the ld. AR that the assessee is not obliged to maintain identity records of the retail customers as there is no requirement in the Act by a fruit vendor to collect PAN, address proof, etc. Therefore, the order of the ld. CIT(A) is not justified in confirming the addition made by the Assessing Officer in holding that there is no identity records of purchaser available on record. Therefore, the source of cash deposits are out of ordinary business sales, which are credited into books of account and offered to tax in the return of income, which is accepted by the Assessing Officer. Therefore, the addition as confirmed by the ld. CIT(A) on account of unexplained cash is not justified, which is outside purview of section 68 of the Act. 9. Coming to the decision of this Tribunal in the case of Vidhiyasekaran Pradeep Malliraj v. ITO in ITAS No. 698/Chny/2022 dated 07.02.2023 as relied on by the ld. DR for a proposition that cash sales made during demonetization period cannot be treated as valid sales, we find force in the arguments of the ld. AR that the order of the Tribunal in the case of Tamil Nadu State Marketing Corporation Ltd. v. ACIT (supra) is latest to the order as relied on by the ld. DR. Therefore, I.T.A. No.2380/Chny/24 8 the addition of ₹.64,39,475/-, as confirmed by the ld. CIT(A) is deleted. Thus, the grounds raised by the assessee are allowed. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced on 07th March, 2025 at Chennai. Sd/- Sd/- (JAGADISH) ACCOUNTANT MEMBER (S.S. VISWANETHRA RAVI) JUDICIAL MEMBER Chennai, Dated, 07.03.2025 Vm/- आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3. आयकर आयुƅ/CIT, Chennai/Madurai/Coimbatore/Salem 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF. "