VINAY KUMAR SETH,JAUNPUR V. INCOME TAX OFFICER, WARD - 2, JAUNPUR - NEW

ITA 16/VNS/2024

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The case involves Vinay Kumar Seth, a proprietor of S.N. Jewelers, who appealed against the order of the National Faceless Assessment Centre (NFAC), Delhi, which added Rs.21,99,560 to his income for the Assessment Year 2017-18 under section 68 of the Income Tax Act, 1961. This addition was based on cash deposits made during the demonetisation period, which the Assessing Officer (AO) deemed to be from unexplained sources. The Tribunal found that while the assessee's turnover increased significantly during the demonetisation period, the increase was not proportionate to the stock and income reported, leading to suspicion of undisclosed sales. The Tribunal applied a net profit rate of 10% on the disputed cash deposits, acknowledging them as undisclosed sales. Additionally, the Tribunal deleted another addition of Rs.10,91,500, which was a loan from the assessee's wife, as it was recorded in the previous year's accounts and disclosed in her tax return.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 473606 (ITAT-VARANASI)
• Duration Of Justice: 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-11-2024
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Next Hearing Date: 11-09-2024
• Assessment Year: 2017-2018
• Appeal Filed On: 05-02-2024
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAVITA MEENA
• Assessee Lawyers: ASHISH BANSAL
• Keywords: Business income; Unexplained cash credit; Bogus
• Section: 143(3); 68

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, CIRCUIT BENCH, VARANASI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA No.16/VNS/2024 (Assessment Year :2017-18) Vinay Kumar Seth Prop. S.N. Jewelers Hanuman Ghat Das Katra, Jaunpur-222 001 Uttar Pradesh Vs. Income Tax Officer Ward-2, Jaunpur-New PAN/GIR No.BHKPS4677K (Appellant) .. (Respondent) Assessee by Shri Ashish Bansal, Advocate Revenue by Smt Kavita Meena, Sr. DR Date of Hearing 11/09/2024 Date of Pronouncement 29/11/2024 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 08/12/2023, passed by NFAC Delhi for the quantum of the assessment passed u/s 143(3) for the Assessment Year 2017-18. 2. In various grounds of appeal assessee has challenged the addition of Rs.21,99,560/- added u/s.68 on account of cash deposited in SBN during the demonetisation period. 3. The brief facts are that assessee is in his individual capacity has been carrying out business of gold ornaments under a proprietary concern named as “S.N. Jewellers’. From his ITA No.16/VNS/2024 Shri Vinay Kumar Seth 2 business activities assessee had shown turnover of Rs.1,06,61,069/- which has been duly disclosed the return of income filed alongwith audit report and has declared income of Rs.5,69,940/- from his business. Ld. AO after noting that assessee was doing business of gold ornaments, however looking to the abnormal increase in cash deposits during demonetisation period compared to period prior to it, he held that the cash deposits are from unexplained sources. He has compared the turnover of A.Ys. 2015-16, 2016-17 and 2017-18 and found that there was a huge jump in the turn over and there was an opening stock of Rs .33,13,858/- and closing stock of Rs.39,97,591/- and unsecured loan of Rs.18,91,500/- and as compared to the turn over, the increase in income is less. The ld. AO held that the cash deposits stated to be out of sales cannot be accepted and accordingly, he held that it is bogus sales to manage his undisclosed cash of Rs.21,99,560/-. His relevant finding reads as under:- “4 From the facts and circumstances discussed above, it is evident that the data and figures is being fabricated to explain the cash deposited during the demonetization period and to explain the same, the assessee even submitted an illegal (having no values in the eye of law) ITR-4 to misguide the department which is not acceptable in any circumstances. So the assessee has taken the shelter of bogus sales to manage his undisclosed cash of Rs. 21,99,560/- and the explanation of the assessee that the cash of Rs. 21,99,560/- is being accumulated from sales is being rejected as per the facts and circumstances that there was no stock available till his first purchase taken place le. on 28.10.2016 which was reported in VAT statement. And after demonetization, the assessee deposited his old currency of denomination of Rs. 500/- and 1000/- as the same were no more legal tender and tried to establish the undisclosed cash available with him as his ITA No.16/VNS/2024 Shri Vinay Kumar Seth 3 business receipts, which is rejected as per the fact and material discussed above. Hence the sum of Rs. 21,99,560/- credited in the books of the assessee as sales proceeds without having any stock and the nature and source of cash accumulated/generated through alleged sales remained unexplained and is being charged to income tax as the income of the assessee u/s 68 of the provisions of Income Tax Act, 1961 at special rate available u/s 115BBE Penalty proceedings is being initiated separately u/s 271AAC. 4. The ld. CIT(A) held that all the evidences and explanation which has been given by the assessee are an afterthought and accordingly, he has confirmed the addition after referring to various judgments and held that assessee could not establish the source of cash sales during the demonetisation period. 5. Before me ld. Counsel for the assessee submitted that assessee has disclosed sales of Rs.1.06 Crore and all sales have also been shown in the VAT return. The copy of which has also placed in the paper book from pages 35-36. In earlier year also assessee was doing jewellery business and was regularly filing the VAT return. Further, assessee has duly disclosed net profit rate of 6% from the entire turnover. Thus, the cash deposits are out of sales only and therefore, no adverse inference should be drawn because the source of money has been explained from the business of the assessee. 6. On the other hand, ld. DR referred to the observations of the ld. AO and submitted that assessee could not establish such a huge jump of turnover which was four times higher than the earlier year. This goes to show that, this jump was purely to accommodate unaccounted cash deposited in the bank account. ITA No.16/VNS/2024 Shri Vinay Kumar Seth 4 7. After considering the submissions made by the parties and on perusal of the material placed on record, it is seen that it is not in dispute that assessee was carrying out the business of jewellery and for which accounts were duly maintained in regular course and were also audited. Ld. AO pointed out some discrepancy in quantum of sales shown during the demonetisation period as compared to earlier years in his order; however, fact of the matter is that there is no other source of income of the assessee apart from jewellery business. In such a case it could inferred that cash deposit are from undisclosed sales. If it is undisclosed sales then at the most some net profit rate can be applied. Accordingly, net profit rate of 10% on cash deposit of Rs.21,99,560/- is applied on undisclosed sales and in the regular sales assessee had already offered NP rate of 6%. 8. The next issue relates to addition of Rs.10,91,500/- added u/s.68 on account of loan from Mrs. Preety Soni. At the outset, ld. Counsel pointed out that she is the wife of the assessee had she has given credit loan of Rs.18,91,500/- and out of which Rs.10,91,500/- was received in the earlier year which has been carried forwarded from the previous year and during the year assessee has received only Rs.8,00,000/- which has been accepted by the ld. AO. The only dispute is with regard to Rs.10,91,500/- which was the opening balance. The ld. AO has added the same on the ground that assessee had not shown in the return of income and on this ground ld. CIT (A) also confirmed the same addition. ITA No.16/VNS/2024 Shri Vinay Kumar Seth 5 9. On perusal of the bank statement of Mrs. Preety Soni it is seen that during the year she has given a loan of Rs.8,00,000/- and the loan of Rs.10,91,500 /- was given in the earlier year. Once loan has been received in the earlier year, then same cannot be added u/s. 68 as unexplained credit in this year. Apart from that, assessee has also filed copy of income tax return of Mrs. Preety Soni that she separately assessed to tax and she has duly disclosed this loan in the earlier year. Thus, even if assessee in the earlier year has not shown this loan in his return but if the credit entry pertains to the earlier year and credited in bank account in the earlier year, then addition cannot be made in this year u/s.68. Accordingly, the addition of Rs.10,91,500/- is deleted. 10. In the result, appeal of the assessee is partly allowed. Order pronounced on 29/11/2024. Sd/- (AMIT SHUKLA) JUDICIAL MEMBER Varanasi; Dated 29/11/2024 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A), Varanasi. 4. CIT 5. DR, ITAT, Varanasi 6. Guard file. ITA No.16/VNS/2024 Shri Vinay Kumar Seth 6 BY ORDER, (Asstt. Registrar) ITAT, Varanasi //True Copy// "