2023 (12) TMI 1348 - AT - Income Tax

Unexplained cash deposits - Addition u/s 68 - cash sales made before demonetization which was deposited in the bank account as alleged unexplained amount cash sales to unverifiable persons - HELD THAT - For Cash receipts from the customers and against which delivery of vehicle was made to them cash is generated out of the stock already on record and thus the sales made by the assessee company is genuine sales recorded in the books of account. All the details required to prove the sales made by the assessee were provided in the assessment proceedings. Now on the part of the receipt of the cash from the customer the jurisdiction high court judgement in the case of Smt. Harshil Chordia 2006 (11) TMI 117 - RAJASTHAN HIGH COURT held that So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition would not arise. We, therefore, hold that no addition was required to be made nwhich was found to be the cash receipts from the customers and against which delivery of vehicle was made to them. When the revenue partly considered the sales on the same invoice for an amount of Rs. 16,00,000/- why not on the balance. Thus, the facts of the case are different considering the finding recorded here in above. Therefore, the contention of the revenue based on the facts and circumstance of the case is not accepted and we direct to delete the addition - Decided in favour of assessee.

Summary

Issues Involved:

1. Legality and validity of the assessment order under Section 143(3) of the Income Tax Act.
2. Adequacy of opportunity provided to the assessee for being heard.
3. Justification for the addition of Rs. 1,78,08,630/- under Section 68 of the Income Tax Act.
4. Applicability of Section 115BBE for taxing the income at a higher rate.
5. Charging of interest under Sections 234A, 234B, and 234C of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Legality and Validity of the Assessment Order under Section 143(3):

The assessee challenged the assessment order dated 21.12.2019, claiming it was illegal, bad in law, barred by limitation, and without jurisdiction. The Tribunal noted that the case was selected for scrutiny under CASS, and notices under Sections 143(2) and 142(1) were duly issued. The assessee's return of income for the assessment year 2017-18 was scrutinized, and the assessment proceedings were conducted as per the legal requirements. Therefore, the Tribunal found no merit in the assessee's claim that the assessment order was illegal or without jurisdiction.

2. Adequacy of Opportunity Provided to the Assessee:

The assessee argued that the CIT(A) passed an ex-parte order without providing adequate and reasonable opportunity of being heard, thereby breaching the principles of natural justice. The Tribunal observed that the CIT(A) had accorded sufficient opportunities to the assessee, but the assessee chose not to respond to the hearing notices. The case was adjudicated based on the details available on record, including the assessment order, statement of facts, and grounds of appeal filed by the assessee. Thus, the Tribunal concluded that there was no breach of natural justice.

3. Justification for the Addition of Rs. 1,78,08,630/- under Section 68:

The AO noted that the assessee deposited a substantial amount of cash in the bank during the demonetization period, claiming it was from cash sales. However, the AO found discrepancies in the sales records, such as unprecedented high sales in October and November 2016, unverifiable sales bills, and lack of customer details. The AO concluded that the cash sales were not genuine and added Rs. 1,78,08,630/- as unexplained cash credits under Section 68.

The Tribunal examined the AO's findings and the assessee's submissions, including the stock register, sales ledger, and cash book. The Tribunal noted that the books of accounts were audited, and no defects were found. The Tribunal also referred to the jurisdictional High Court's decision in Smt. Harshil Chordia vs. ITO, which held that cash receipts from customers do not attract Section 68 if they are supported by delivery of goods. The Tribunal concluded that the AO's addition under Section 68 was not justified, as the sales were genuine and supported by the necessary documentation.

4. Applicability of Section 115BBE for Taxing the Income at a Higher Rate:

The assessee contended that the AO invoked Section 115BBE without issuing a show-cause notice, which was against the principles of natural justice. The Tribunal agreed with the assessee, citing the recent decision in Smt. Suraj Kanwar Devra vs. ITO, which held that specific show-cause notice is mandatory before invoking Section 115BBE. The Tribunal found that the AO's action of taxing the income at a higher rate under Section 115BBE without proper notice was illegal and against the law.

5. Charging of Interest under Sections 234A, 234B, and 234C:

The assessee argued that the interest charged under Sections 234A, 234B, and 234C was contrary to the provisions of law. Since the Tribunal deleted the addition made by the AO, the consequential interest charged under these sections was also directed to be deleted.

Conclusion:

The Tribunal allowed the assessee's appeal, deleted the addition of Rs. 1,78,08,630/- made under Section 68, and held that the invocation of Section 115BBE was illegal. The interest charged under Sections 234A, 234B, and 234C was also deleted. The Tribunal emphasized the importance of providing adequate opportunity to the assessee and adhering to the principles of natural justice.