2022 (11) TMI 331 - AT - Income Tax

Addition made u/s. 69A r.w.s. 115BBE - cash deposited during demonetisation period as unexplained - HELD THAT - As it is very important to note that whether the case of the assessee falls into statistical analysis, which suggests that there is a booking of sales, which is non-existent and thereby unaccounted money of the assessee in old currency notes (SBN) have been pumped into as unaccounted money. The instruction dated 21/02/2017 that the assessing officer basic relevant information e.g. monthly sales summary, relevant stock register entries and bank statement to identify cases with preliminary suspicion of back dating of cash and is or fictitious sales. The instruction is also suggested some indicators for suspicion of back dating of cash else or fictitious sales where there is an abnormal jump in the cases during the period November to December 2016 as compared to earlier year. It also suggests that, abnormal jump in percentage of cash trails to on identifiable persons as compared to earlier histories will also give some indication for suspicion. Non-availability of stock or attempts to inflate stock by introducing fictitious purchases is also some indication for suspicion of fictitious sales. Transfer of deposit of cash to another account or entity, which is not in line with the earlier history. Therefore, it is important to examine whether the case of the assessee falls into any of the above parameters are not. Assessee is directed to establish all relevant details to substantiate its claim in line with the above applicable instructions. We are aware of the fact that not every deposit during the demonetisation period would fall under category of unaccounted cash. However the burden is on the assessee to establish the genuineness of the deposit in order to fall outside the scope of unaccounted cash. AO shall verify all the details / evidences filed by the assessee based on the above direction and to consider the claim in accordance with law. Appeal filed by assessee as well as the appeal of revenue stands allowed for statistical purposes.

Summary

Issues:
Addition made u/s. 69A r.w.s. 115BBE for cash deposited during demonetization period as unexplained.

Analysis:
The case involves cross-appeals by the assessee and revenue challenging the order passed by the National Faceless Appeal Centre for A.Y. 2017-18. The assessee, a company acting as a franchise for telecom and DTH service providers, declared a turnover of Rs.70,40,80,419/- and a profit of Rs.23,92,516/-. The main issue pertains to the addition made u/s. 69A r.w.s. 115BBE for cash deposited during the demonetization period. The assessee argued that the entire business is digitized with no human involvement in sales, and the deposits were from small customers making cash purchases. The Assessing Officer (AO) made additions without considering the turnover, leading to a total income determination of Rs. 5,82,76,300/-. The AO's order was challenged before the CIT(A) and subsequently before the ITAT.

The assessee contended that the AO's order was null and void due to non-service of statutory notice and emphasized the online nature of transactions with automated accounting. The net profit calculation at 4% was disputed as unfounded and not based on evidence. The assessee maintained computerized books of accounts, and the deposits were from small customers with audited profits of Rs.23,92,516/-. Issues were raised regarding notices sent to a defunct email address, hindering the assessee's response and resulting in an ex-parte order.

The ITAT observed that the AO's addition was based on the post-demonetization cash deposits, and due to notices sent to a non-functional email, deemed it necessary to remand the issue for verification. The ITAT referred to standard operating procedures issued by the CBDT in similar cases, highlighting the need for thorough investigation and consideration of evidence. Instructions emphasized the comparative analysis of cash deposits and sales, indicators of suspicious transactions, and the burden on the assessee to substantiate claims.

The ITAT directed the AO to verify all details and evidence provided by the assessee, considering the applicable instructions and granting a proper opportunity for the assessee to justify its claim. The appeals by both the assessee and revenue were allowed for statistical purposes, emphasizing the importance of due process and thorough verification in such cases.