2023 (2) TMI 122 - AT - Income Tax

Addition being cash deposit during demonetization period - HELD THAT - We note that assessee has a turnover in the year under consideration and in the immediately preceding year. At such volume of turnover, the quantum of cash sales and realization in cash are normal in the conduct of its business. We also note that all the details in respect of collection from the debtors were identified and submitted before the AO as well as before the Investigation wing of the Department, prior to the assessment proceedings. Considering the factual matrix, corroborated with documentary evidence, we are inclined to accept the contentions of the assessee and direct to delete the addition made by AO and confirmed by ld. CIT(A), by setting aside their orders. Accordingly, ground taken by the assessee in this respect is allowed.

Issues Involved:
1. Addition of Rs. 75,00,000/- as unexplained cash deposit during the demonetization period.
2. Jurisdictional challenge regarding the assessment completed under section 143(3) without issuing a notice under section 143(2) after transfer of the case.

Issue-wise Detailed Analysis:

1. Addition of Rs. 75,00,000/- as Unexplained Cash Deposit During Demonetization:

The primary issue in this appeal is the addition of Rs. 75,00,000/- made by the Assessing Officer (AO) under section 68 read with section 115BBE of the Income-tax Act, 1961, which was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)]. The assessee argued that this amount was fully explained as it was derived from the realization of debtors and cash sales made during the year.

The assessee filed its return of income on 09/09/2017, reporting a loss of Rs. 37,62,376/-. During the scrutiny assessment, the AO noted that the assessee had deposited Rs. 75,00,000/- in cash in the bank account during the demonetization period. The assessee explained that Rs. 47,61,890/- was realized from debtors before the demonetization announcement, and Rs. 27,38,110/- was from cash sales to unidentified persons. The closing cash balance as per the cash book on 08/11/2016 was Rs. 77,37,460/-, which included Rs. 75,00,000/- in Specified Bank Notes (SBNs).

The assessee maintained regular books of accounts audited under the Companies Act, 2013, and tax audit under section 44AB of the Act. The auditors certified the cash deposit during the demonetization period in Note No. 13 of the audited accounts. The entire amount of cash sales and realization from debtors had already been included in the turnover and reported in the audited profit and loss account.

The assessee provided details of the sundry debtors, including their PANs, from whom the amount of Rs. 47,61,890/- was realized. The details were corroborated with the standard operating procedure (SOP) issued by the CBDT, which did not require additional information for cash received from identifiable persons with PANs. The assessee also submitted date-wise details of cash sales, including Excise duty and VAT charged, which matched the Excise and VAT returns.

The Tribunal noted that the cash deposit was from the opening cash balance as on 08/11/2016, arising from realization from debtors and cash sales. The Tribunal found that the assessee had a turnover of Rs. 85.28 Crores in the year under consideration, and the quantum of cash sales and realization in cash was normal for its business. All details regarding collection from debtors were submitted before the AO and the Investigation wing of the Department.

Considering the factual matrix corroborated with documentary evidence, the Tribunal accepted the assessee's contentions and directed the deletion of the addition made by the AO and confirmed by the CIT(A). The ground taken by the assessee was allowed.

2. Jurisdictional Challenge Regarding the Assessment:

The assessee raised an additional ground challenging the jurisdiction of the assessment completed under section 143(3) due to the non-issuance of a notice under section 143(2) after the transfer of the case. However, during the hearing, the assessee's counsel could not provide the necessary documents to support this ground and did not press for it. Consequently, the additional ground was dismissed as not pressed.

Conclusion:

The Tribunal allowed the appeal of the assessee, directing the deletion of the addition of Rs. 75,00,000/- made by the AO and confirmed by the CIT(A). The jurisdictional challenge was dismissed as not pressed. The order was pronounced in the open court on 01.02.2023.

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