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Section 68, 69A and 115BBE: Demonetization . Deposit of cash into bank. Where the assessee proves that regular bank deposits of cash from 01.04.2016 to 2.11.2016, as well as after demonetization and also Opening balance are commensurate with the accepted turnover then the addition was not warranted and it is directed to be deleted. ITAT– Gauhati on on 20 January, 2021 in the case of Nurul Islam, Nagaon vs Income Tax Officer, Ward-Nagaon, … A.Y. 2017-18
IN THE INCOME TAX APPELLATE TRIBUNAL GAUHATI BENCH: GUWAHATI
“VIRTUAL HEARING” AT KOLKATA
[Before Shri A. T. Varkey, JM]
I.T.A. No. 144/Gau/2020
Assessment Year: 2017-18
Nurul Islam Vs. ITO, Ward-2, Nagaon
(PAN: AAPPI 3563 D )
Date of Hearing (Virtual) 15.01.2021
Date of Pronouncement 20.01.2021
For the Appellant Shri Akkal Dudhwewala, A.R
For the Respondent Shri Subrajyoti Bhattacharya, Addl. CIT
This is an appeal preferred by the assessee against the order of Ld. CIT(A)- Guwahati-1, dated 29.05.2020 for A.Y. 2017-18.
- At the outset, it is noted that there is a delay of 34 days in filing this appeal. It is noted that the impugned order is dated 29.05.2020 and due to covid-19 pandemic, the assessee could not file the appeal on time and, therefore, there is a delay of 34 days in filing this appeal. Therefore, there is reasonable cause for causing the delay. So, I condone the delay and admit the appeal.
- The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition of Rs. 8,75,500/- made by the AO.
- Brief facts of the case as noted by the AO is that the assessee has not filed his income tax return (ITR) for AY 2017-18. The AO issued notice u/s 142(1) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) on 15.03.2018 and directed the assessee to submit his return of income. According to AO , the assessee finally filed his return of income showing income of Rs. 2,86,934/-. The AO notes that the assessee had deposited cash to the tune of Rs.17,01,000/- after 8/9th November, 2016 wherein the currency notes of the denomination of Rs. 500 and Rs. 1,000 was declared no longer a legal tender (demonetized).
- The AO notes that the assessee has deposited cash amounting to Rs. 17,01,000/- in the bank after 8th November, 2016 and before 31st of December 2016. The AO notes at para 9 of the assessment order as under:
“9. ….. After 08/11/2019 the assessee has deposited cash to the tune of Rs. 17,01,000/- in his bank accounts and does not give the source Notice u/s 133(6) of the Income-tax was issued to the, Indian Overseas Bank, Bara Bazar, Maulana Azad Road, Haibargaon, Deccanpatty, Nagaon-782001 and State Bank of India, Christian Patty, Palashani, Nagaon-782001, Assam to provide the details of Specified Bank Notes deposited in the bank account of the assessee, In response to the notice the State Bank replied and furnished the detail of Specified Bank Notes deposited during the demonetization period. The assessee had also admitted that Rs. 10,75,500/- was deposited in Specified Bank Notes out of total deposit of Rs. 17,01,000/- during the demonetization period, but the source of the cash was not explained. Thus, it is clear that the assessee is found to be the owner of such money and the same has come to the knowledge of the department because it was deposited to the bank. Since the demonetization was a special instance which required all cash to be deposited and as assessee is a businessman, so they have to keep some liquid cash for day-to-day expenses, therefore Rs. 2,00,000/- is added to business income and computed u/s 44AD and Rs. 8,75,5000/- i.e. (Rs. 10,75,000/- minus Rs. 2,00,000) treated as unexplained money in absence of verifiable information or documents/evidences u/s 69A of Income Tax Act, 1961 and taxed thereon as per provision of section 115BBE. (emphasis given by me)
- Thus, the AO made an addition of Rs. 8,75,500/-. Against the action of the AO, the assessee preferred an appeal before the Ld. CIT(A), which was dismissed. Aggrieved the assessee is before me.
- I have heard both the parties and perused the records. The Ld. A.R of the assessee Shri Akkal Dudhwewala assailing the action of the AO drew my attention to para 12 of the assessment order and wherein the AO has made the following findings:
“In this case, provisions of Section 44AD of Act are clearly attracted, As per the bank statements total credits/ deposits made during the period 01/04/2016 to 31/03/2017 is Rs. 59,46,583/- out of which Rs. 17,01,000/- was deposited during the demonetization period and out of that Rs. 10,75,500/- was deposited in Specified Bank Notes (Old currency) and Rs. 6,25,500/- was deposited in the new currency notes (i.e. Rs. 2000/- new denomination notes), therefore, the amount of Rs. 6,25,500/- has been presumed as business turnover in absence of books of accounts and documents/evidence or any verifiable information, therefore Rs. 4,05,686/- which is determined u/s 44AD of the Act @ 8% of Rs. 50,71,083/- (Rs. 42,45,583/- + 6,25,500/- + 2,00,000/-) in absence of regular books of accounts and added to the Total income of the assessee.”
Drawing my attention to the aforesaid finding the Ld. A.R submitted that the assessee who is into the business of a tea trading has deposited in his bank accounts from 01.04.2016 to 31.03.2017 total sum of Rs. 59,46,583/-. It was pointed out by the Ld. A.R that after the demonetization on 8/9 November, 2016 the assessee had deposited only Rs. 17,01,000/- out of which Rs. 6,25,500/- was the new currency notes issued by the RBI and only an amount of Rs. 10,75,500/- was invalid tender (Old Currency Notes). According to Ld. A.R, the AO has accepted Rs. 50,71,083/- (Rs. 42,45,583/- + Rs. 6,25,500/- + 2,00,000) out of total Rs. 59,46,583/- deposited in the bank account. According to Ld. A.R, the assessee’s total turnover is less than Rs. 60 lakhs it attracts Section 44AD of the Act and therefore, as per law, the assessee is not required to maintain its books of account. According to Ld. A.R, a perusal of bank statement would reveal that there were regular bank deposits of cash and payment to the creditors (tea vendors). Moreover, my attention was drawn to pages 3 to 9 of the paper book wherein the assessee has kept the extracts of the daily bank book for the period between 01.04.2016 – 31.03.2017. The Ld. AR pointed out that the opening balance was to the tune of Rs.4,83,122/- and there were several deposits and payments/withdrawals regularly which I find to be correct. Further, he pointed out the peak credit in the bank book on 30.04.2016 was to the tune of Rs.5,10,109/-, which commensurate with the daily bank balances during the period 08.11.2016 to 30.12.2016, which were in the range of Rs.2,39,505/- to Rs.27,550/-. So, according to Ld. AR, these figures demonstrate that the cash deposits of special Bank notes of Rs.500/- and Rs.1000/- made during the demonetization period, was nothing unusual and fortifies assessee’s contention that these deposits were made in the regular course of business. The details of deposit of cash in various accounts of assessee are captured in the chart below:
- From the aforesaid details, it can be seen that there has been regular bank deposits of cash from 01.04.2016 to 2.11.2016 and as well as after demonetization also. It is noted that the total turnover of assessee is around Rs.60 Lakhs. So, the average monthly turnover come to Rs. 5,00,000/- and the amount added by the AO is to the tune of Rs. 8,75,500/-. And from a perusal of the monthly deposit of cash in his accounts it is noted that assessee has deposited an amount of Rs.21,14,600/- (pre- November demonetization) and Rs.29,36,400/- (post-demonetization) other than the Rs.8,75,000/- which has been brought to tax u/s. 68 of the Act. Since the AO has accepted the assessee’s claim that he is involved in eligible business in accordance to Section 44ADof the Act and the total deposit comes to Rs. 59,46,583/- and out of which Rs. 50,71,083/- has been accepted by the AO as turnover from eligible business just because the assessee had with him an amount of Rs.8,75,000/- specified notes which he deposited in the banks could not be taken adversely against the assessee. The assessee has demonstrated that he was into the business of tea-trading and as noted from the extracts of the daily bank book, the opening balance was to the tune of Rs.4,83,122/- and there were several deposits and payments/withdrawals regularly and the peak credit in the bank book on 30.04.2016 was to the tune of Rs.5,10,109/-, which commensurate with the daily bank balances during the period 08.11.2016 to 30.12.2016, which were in the range of Rs.2,39,505/- to Rs.27,550/-, therefore the deposit of Rs 8,75,000/- [Rs 2,00,000/-accepted by AO] cannot be said to be as result of non-genuine business receipt or a case of black money and therefore, in the peculiar facts narrated above, including the past history taken note of and the pattern of money deposited pre-demonetization and post that event as discussed, addition was not warranted and it is directed to be deleted; and further, I am of the opinion that the profit embedded in Rs. 8,75,500/- need to be taxed @ 8% and it is ordered accordingly.
- In the result, the appeal of the assessee is partly allowed.
Order is pronounced in the open court on 20th January, 2021.
Dated: 20 January, 2021. ((A. T. Varkey)
Vice President Judicial Member