TMI Blog2022 (8) TMI 1483X X X X Extracts X X X X X X X X Extracts X X X X ..... us, once availability of cash in hand is proved, assessee cannot be asked to furnish proof of acquisition of such amount in currency notes of particular denomination. We note that balance of cash in hand as on 08.11.2016 is out of opening cash balance (duly subject to assessment in AY 2016-17) and receipts during the year on account of sale of medicines and hospital receipts. Income derived from sale of medicines and hospital receipts have been subject to tax while accepting the income returned at Rs. 84.71 lakhs. Thus, we find that cash balance being part of sale of medicines and hospital receipts, cannot be brought to tax at the hands of the assessee again which will otherwise lead to taxing the same amount twice. We find no reason to interfere with the finding of the Ld. CIT(A) in respect of deletion of addition relating to balance of cash in hand on the date of announcement of demonetization. Accordingly, the addition so made by the Ld. AO stands deleted. Grounds of appeal raised by the revenue are dismissed. Enhancement done by the CIT(A) - estimating the business income @ 4% of the SBNs of Rs. 3.30 Cr. deposited by the assessee in its bank account - Primary obje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in holding that assessee has shown huge amount of Rs. 3.83 crores without considering the facts that the assessee has not submitted full details of the cash bills for sale of medicine, hospital receipts from OPD IPD, nursing fees either during assessment proceedings or during remand report proceedings. 2. The Ld. CIT(A) has erred in holding that only 4% of cash deposit in SBN should be treated as income of the assessee without considering the facts that assessee has not submitted full details of sales of medicine which is stated to be the source for the cash receipts. 3. For these and such other grounds that may be adduced at the time of hearing it is prayed that the order of the CIT(A) may be reversed and that of the Assessing Officer restored. 4.1. Grounds of Cross Objection raised by the assessee are reproduced as under: 1. The learned CIT(A) erred in directing to make addition of Rs. 13.32 lacs as business income even though no such addition was made by A.O. 2. The learned CIT(A) erred in directing to make addition at Rs. 13.32 lacs without giving opportunity of heard before making addition. 3. That the addition made by learned CIT(A) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o tax u/s. 69A of the Act as unexplained money. 5.2. Further, in respect of the impugned year, ld. AO noted that assessee had cash balance of Rs. 3.83 Cr. as on the date of announcement of demonetization i.e. on 08.11.2016. Ld. AO held the said cash balance as undisclosed money/investment u/s. 69A of the Act to bring it to tax read with section 115BEE, after making the following observations, which are as follows: (i) that assessee has made cash deposits into bank at least sixteen times between 01.04.2016 and 08.11.2016; (ii) that one doctor single-handedly increased the turnover of assessee firm by 202%; (iii) that increase in cash receipts is also not accepted as the bills copies submitted does not give details of patients which are incomplete in details; (iv) that increasing in pharmacy sales is beyond human probabilities; (v) that books are unreliable and prepared in such a manner so as to regularize the undisclosed income by recording it as cash sales. 5.3. Aggrieved, assessee went in appeal before the Ld. CIT(A). 6. Before the Ld. CIT(A), assessee made elaborate submissions along with corroborative documents to demonstrate that deposit of cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he remand report, ld. AO has made the following observations, which are extracted as under: (i) On verification of the case records, it is seen that various details which in the course of assessment proceedings by issue of notice u/s. 142(1) has been submitted by the assessee from time to time. From the details available on record, it is seen that complete cash book for the period from 01.04.2016 to 31.03.2017 was submitted in the course of assessment proceedings. (ii) The bank account statements were directed to be submitted and assessee submitted the same during the course of the assessment proceedings. (iii) Details of gross receipts, copy of pharmacy sales and hospital receipts along with supportive receipts on sample basis have been placed on record. (iv) Details of purchase of medicines and expenses called for are available on record. (v) On verification of purchase of medicine and major items it was found that it is not matching with the quarterly P L Account but matched in toto for the full year at Rs. 1,21,10,580/-. (vi) On verification of sales of pharmacy and hospital receipts of OPD and IPD, it was seen that on three dates i.e. on 09.12.2016 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m the audited trading account which has been accepted in the assessment for AY 2016-17 and expenditure in the current year has not been doubted or disputed by the Ld. AO. Further, in this respect it was pointed out that aggregate purchase for all the quarters taken together are matching and minor variations in purchases on quarterly basis has no bearing on the computation of total income for the year. (viii) In respect of increase in creditors, the gross receipts in the year under consideration are Rs. 616.76 lakh as compared to gross receipts of Rs. 242.89 lakh in the immediately preceding assessment year. (ix) Reliance was placed on certain decisions of the coordinate bench including ITAT Mumbai in the case of DCIT v. M/s. Karthik Construction Co. in ITA No. 2292/Mum/2016 dated 23.02.2018 wherein it was held in respect of section 69A of the Act that addition can only be made when the assessee is found to be in possession of money, bullion, jewellery etc. not recorded in his books of account. Further, reliance was placed on the decision of coordinate bench of ITAT, Ahmedabad in Shree Sanand Textiles Industries Ltd. Vs. DCIT in ITA No. 995/Ahd/2014 dated 06.01.2020 wherei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reiterated the submissions made before the authorities below which we have captured in the above narrative of the facts of the case and therefore, are not repeated to avoid duplicity. 9.1. Admittedly, it is a fact that Ld. AO has made the addition of balance of cash in hand on the date of announcement of demonetization i.e. on 08.11.2016 which is of Rs. 3,83,33,860.74 as appearing in the cash book for the relevant date, placed on record at page 76 of the paper book. It is also a fact on record that the deposit of cash in SBNs by the assessee is of Rs. 3.30 Cr. Further, Department of Economic Affairs vide its notification dated 09.11.2016 in SO 3416 E had permitted acceptance of SBNs in pharmacy during the period of demonetization. It is also important to note that Ld. AO in his remand report dated 25.08.2020 forming part of the order of Ld. CIT(A) as annexure, has observed that assessee had submitted all the details called from time to time and produced books of account and other relevant documents and records for which no specific mistake or defect has been noted or found on verification of the same by the Ld. AO both in the course of assessment proceedings and remand proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explain the possession of 61 High Denomination Notes of Rs. 1,000 each and the Tribunal came to the conclusion that the assessee had satisfactorily explained the possession of 31 of these notes and not of the remaining 30. The High Court had treated the finding of the Tribunal as a finding of fact. It was held by this Court that the entries in cash-book and the statements made in the affidavit in support of the explanation, which were binding on the Revenue and could not be questioned, clearly showed that it was quite within the range of possibility that the assessee had in their possession the 61 High denomination notes on the relevant date and their explanation in that behalf could not be assailed by a purely imaginary Calculation of the nature made by the income-tax officer or the Appellate Assistant Commissioner. It further held that the Tribunal made a wrong approach and while accepting the assessee's explanation with regard to 31 of the notes, it had absolutely no reason to exclude the rest as not covered by it in the absence of any evidence to show that the excluded notes were profits earned by the assessee from undisclosed sources. The assessee having given a reasonable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had naturally not kept any statement regarding the receipt of these currency notes, and it was for the first time on January 12, 1946, when the Ordinance came into force, that it became necessary for the assessee to explain its possession of these currency notes and (ii) that the explanation given by the assessee that the notes formed part of the cash balance of Rs. 34,000 and odd was fairly satisfactory and was not found by the Tribunal to be false; the statement of sales was hardly relevant to the question; the Department, in relying on the entries relating to the bills of each day committed an error and no inference should have been drawn from them; that any one single transaction did not exceed Rs. 399 did not preclude the possibility of payment in high denomination notes for such transaction; therefore, the Tribunal rejected the explanation of the assessee on surmises, and there was no material for the Tribunal to hold that the sum of Rs. 25,000 represented suppressed income of the assessee from undisclosed sources. In arriving at the above decision the High Court referred to the cases of Mehta Parikh Co. v. Commissioner of Income- tax, (supra) and Chunilal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). We find it difficult to agree with this finding of the Tribunal. In our opinion, the Tribunal took a wholly erroneous approach in the matter. What the assessee is required to prove in such cases is the source of money and once he is successful in proving the same, he cannot be put to further proof of acquisition of such amount in the currency notes of particular denomination. If the explanation shows that the receipt was not of income nature, the Revenue cannot reject the explanation of the assessee to hold that it was income. Where the business and the state of accounts and dealings of the assessee justify a reasonable inference that he might have for convenience kept the whole or a part of a particular sum in high denomination notes, the assessee, prima facie, discharges his initial burden when he proves the cash balance and that it might have been kept in high denomination notes. Before the Department rejects such evidence, it must either show an inherent weakness in the explanation or rebut it by putting to the assessee some information or evidence which it has in its possession. The Department cannot by merely rejecting unreasonably a good explanation, convert good proof in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e enhancement done by the ld. CIT(A) by estimating the business income of Rs. 13,32,000/- @ 4% of the SBNs of Rs. 3.30 Cr. deposited by the assessee in its bank account. In this respect, the first and primary objection of the assessee is that deposit of SBNs is from the hospital and pharmacy receipts, on which tax is paid by the assessee on the income embedded in such receipts. Thus, on such receipts, further estimation of income is unjustified and tantamounting to double addition. 11.1. Further, without complying with the provisions of section 251(2) of the Act, Ld. CIT(A) proceeded to make the enhancement i.e. without providing an opportunity to the assessee. Ld. Counsel of the assessee placed reliance on the decision of Hon'ble jurisdiction High Court in Madras in the case of CIT v. Lotte India Corporation Ltd. [2007] 290 ITR 248 (Mad). Further, it was submitted that estimated addition on account of trading was not a matter of assessment and thus, it is beyond the scope of powers of Ld. CIT(A) to make such an addition, for which reliance was placed on the decision of Hon'ble High Court of Delhi in the case of CIT v. Union Tyres [1999] 240 ITR 556 (Del). 11.2. It wa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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