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TMI Blog2025 (4) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... ment proceedings. 2. On the facts and in the circumstances of the case and in law the Ld. CIT(A) has grossly erred in deleting the disallowance of expenditure u/s 40A(3) of the IT. Act amounting to Rs. 6,48,20,559/- made by the AO without appreciating the fact that the assessee has failed to furnish supporting documentary evidences to substantiate his claim during the assessment proceedings." 3. Succinctly, the fact as culled out from the records is that the assessee is engaged in trading of FMCG Goods as a retailer and wholesaler. The assessee is Proprietor of M/s. Bansal Sales Corporation. The assessee filed its return of income for the above A.Y. 2017-18 on 26.09.2017 with a taxable income of Rs 5,50,970/- It was noted that during demonetization period i.e 09.11.2016 to 31.12.2016, the assessee deposited cash to the tune of Rs. 78,82,290/- in his HDFC Bank account. Hence, the case was selected for manual scrutiny and notices u/s 143(2) and 142(1) were issued. Ld. AO after considering the details and submission made by the assessee completed the assessment u/s 143(3) of the IT Act on 26.12.2019 by assessing the total income at Rs.7,33,52,530/. While completing the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w any huge variation. 4.11 In view of the above, the addition of Rs.79.81,000/- made by the AO as unexplained cash is not acceptable as the appellant sufficiently demonstrated the sources with all the documents called for by the AO. Hence, the AO is directed to delete the addition. The grounds taken by the appellant on this issue are allowed. 5.1 While completing the assessment, the AO found that the appellant is making payments of Rs.20,000/- or more in cash regularly which is in contravention of Sec. 40A(3) of the Act. The AO issued a notice dated 14.12.2019 and the relevant portion of the notice is at Page No.3 of the assessment, where he posted some of the examples of those cash payments. This issue was discussed further in Para 2 of the assessment order by reproducing the copies of those cash payment details from April, 2016 to December, 2016. As per the AO, such cash payment details for January, 2017 to March, 2017 was not available and he has taken average 9 months (April, 2016 to December, 2016) and quantified the sum into Rs. 6.48.20,559/- 5.2. In this regard, the appellant has furnished details in his written submissions. For the sake of convenience, the relevant po ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s without perusing the the details documents/evidences available on record and wholly unjustified and arbitrary. 5.3 Upon receipt of the details, it is noticed that whatever cash deposited into the bank was treated as expenditure incurred by cash in violation of Sec.40A(3) of the Act. The details of notices issued to the AO and the Range Head and their non- compliance is discussed in Para 4.8 and 4.9 of this appeal order. From the detailed written submissions, the following facts are noticed (a) The AO called for the details of Cash Book with day to day opening and closing balance for various months. The appellant uploaded the same and it was reproduced in the previous paragraphs in Annexure VI. (b) The appellant was into the business of sale of FMCG products and daily cash sales and the opening balance deposited into the bank account was mentioned as payments. (c) The AO, without having any common understanding considered these cash deposits into the bank account as cash payments made in violation of 40A(3) of the Act. Out of total purchases of Rs.7.45,96,081/ a sum of Rs 6,48,20,559/ was disallowed and added back. No prudent assessee incur expenditure in cash like this re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted u/s 143(3) of the IT Act on 26.12.2019 by assessing the total income at Rs 7,33,52,530/-. While completing the assessment, the AO has made an addition u/s 68 of the Act to the tune of Rs 79,81,000/- as unexplained cash deposits and disallowance of cash payment u/s 40A(3) of the Act to the tune of Rs. 6,48,20,559/-. Aggrieved by the above order, the assessee filed appeal before the Ld. CIT(A). The Ld. CIT(A) vide his order dated 22.11.2023 allowed the appeal of the assessee and deleted both the additions made by the AO. 1. Both the issues are discussed as below: Issue-1: Addition on account of unexplained cash deposits u/s 68 of Rs. 79,81,000:- The Ld. CIT(A) allowed the appeal of the assessee on this ground and deleted the addition made by the AO of Rs. 79,81,000/- holding that all the written submissions filed by the appellant during the course of appeal proceedings were made available to the AO whereas the AO failed to examine these details and added Rs. 79,81,000/- arbitrarily without examining the submissions made by the appellant. The CIT(A) has given following findings: (a) The appellant filed return of income and got his books audited u/s 44AB of the Act as his t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal of the assesses on the ground and deleted the sition made by the AD of Rs. 6,48,20,559/ by giving folowing findings. (a) The AO called for the details of Cash Book with day to day opening and closing balance for various months. The appellant uploaded the same. (b) The appellant was into the business of sale of FMCG products and daily cash sales and the opening balance deposited into the bank account was mentioned as payments. (c) The AO, without having any common understanding considered these cash deposits into the bank account as cash payments made in violation of 40A(3) of the Act. Out of total purchases of Rs. 7,45,96,081/- a sum of Rs.6,48,20,559/- was disallowed and added back. No prudent assessee incurs expenditure in cash like this regularly and submit such ledger to the AO in a tax audit case. (d) The AO has computed the quantum of disallowance by taking the figures from the ledger for initial 9 months. For the last three months i.e. from January, 2017 to March 2018, he has disallowed some expenses on estimate basis by quantifying average of earlier nine months deposits/payments. Disallowance of expenses u/s 40A(3) of the IT Act by estimating the sum on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nal evidences and place the same on record for disposal of relevant grounds of appeal." Therefore, it is clear that the assessee did not produce relevant documents during the course of assessment proceedings before the AO. However, even if as per claim of the assessee he was submitting other documents then the above mentioned relevant extracts of books could also had been submitted as required by the AO. This proves that the notices were not being complied with and the relevant books of accounts were later on submitted with Id. CIT(A) as additional evidence. Further, it is also submitted that as per u/r 46A(1) of the 1. T. Rules 1962, the appellant shall not be entitled to produce before the Commissioner (Appeals) any evidence other than the evidence produced by him during the course of proceedings before the AD except in the following circumstances, namely 1. Where the AO has refused to admit evidence which out to have been admitted or 2. Where the appellant was prevented by sufficient cause from producing the evidence which he was called upon to produce by the AO or 3. Where the appellant was prevented by sufficient cause from producing before the AO any evidence which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted before the Hon'ble bench by the id. A/R 2.3 As per id. CIT(A)'s own order, the AO fumished his reply in the remand proceedings on 10.11.23 requesting the id. CIT(A) to clarify as to what was required at his end. But instead of clarifying as to what details were being sought from the AO, Id. CIT(A) passed his order just after 12 days from the date of submission of AO in remand proceedings on 22.11.23. The Id. CIT(A) proceedings are not time bound and once the AO had started communication in remand proceedings, the Id. CIT(A) should have clarified the issues, the AO had asked for. There was no reason to pass the order hurriedly. For the sake of justice Id. CIT(A) should had given another opportunity to AO and clarified to the AO as to what specific comments were required by the CIT(A). 2.4 It is also important to note that it is the assesee, who has submitted before the Hon'ble ITAT at Page no. 9 of paper book an application to Id. CIT(A) for admission of additional evidence was filed. It means that the assessee himself admits he had never submitted books of account including cash book before the AO and is now submitting these documents for the first time be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -77 13. Other Details/documents annexed to Letter dated 14.12.2019 78-78 14. Letter dated 16.12.2019 before the AO. 79-79 15. Copy of Audit report in Form No.3CD. 80-90 16. Copy of Cash Book for the relevant F.Y.2016-17. 91-158 6.1 The ld. AR of the assessee also filed a detailed written submission in support of the contentions recorded in the order of the ld. CIT(A) which reads as follows: 1. The assessee is a Registered Dealer of certain Well-known/reputed manufactures and thus engaged in Trading of FMCG Products since several preceding years. 2. The assessee sales goods to various retailers both in cash and on credit. The credit sales to retailers is realized both in cash and cheques /Drafts/online payments etc. 3. The daily cash sales and collection from retailers after meeting the routine and petty expenses is deposited in to the Bank Account of the assessee. 4. The assessee is maintaining regular books of accounts, Bills, Vouchers, Receipts etc. and other relevant records. 5. The daily Sales, realization from Debtors, payments for Expenses and Creditors both whether in cash or through Bank Accounts is recorded in such Books of Accounts on day to day bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of demonetization disputed in Ground No1 of the Appeal of the assessee.(Page No.9-27 of Order of ld.CIT(A). 14. In respect of Ground No.2, the ld. CIT(A) observed the written submission of the assessee along with details and documents available on record.(reproduced at page No.28-29 of Order of ld.CIT(A) . 15. The ld.CIT(A) after considering the written submission along with relevant details and evidences available on record, remand report of the AO deleted relevant addition of Rs.64820559/-towards alleged cash payments in excess of limits prescribed u/s 40A(3) of IT Act 1961.(Page No.29-30 of Order of ld.CIT(A) Written submission of ld. D/R: 16.The ld.D/R vide his written submission filed before this Hon. Bench has submitted that the assesse has filed only basic details and other necessary details/documents have not been submitted. 17.The ld. CIT(A) has given categorical findings: "As the evidences are very much available in the e-filing portal where the appellant has proved that he had participated, those details submitted has to be considered as per principles of natural justice." (Para 4.10, Page No.26 of Order of ld.CIT(A).) "In view of the above, the addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding Tab of the assesse. 24. The case law relied by ld. D/R are clearly distinguishable on facts and not applicable to present case of the assesse. 25. The assessee reiterate on submission/details/documents submitted before the ld. CIT(A) and rely on the Order of ld. CIT(A). 26. The Appeal of the Department is devoid of merits and liable to be dismissed. " 6.2 The ld. AR of the assessee in addition vehemently argued that the assessee has participated in the assessment proceeding and has submitted all the details that has been asked for even the details of the SBN and legal tendered money deposited into the bank account as supported by the bank certificate was placed on record. The ld. CIT(A) has considering the submission and facts of the case that the same made was available on the portal he has given reminders to the AO but AO did not submit the remind report, when the matter was brought the higher officer he has submitted that the assessee has submitted additional evidence and that should not be accepted rather than to submit the comments on the merits of the case. Ld. CIT(A) has in detailed given the finding on all the aspect of the matter and therefore, that order ..... X X X X Extracts X X X X X X X X Extracts X X X X
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