2024 (11) TMI 1197 - AT - Income Tax

Additions under Section 68 upheld for unexplained cash credits during demonetization period

Mohammad Rafik Jaliyawala Versus Income Tax Officer, Bhatapara, C.G.

ITAT Raipur upheld additions under section 68 for unexplained cash credits and rejected books of accounts. During demonetization period, assessee made ... Addition of unexplained cash credit into bank account u/s 68 - rejection of books of accounts - HELD THAT:- On perusal of the judgment in the case of CIT vs. Bahubali Neminath Muttin [2017 (1) TMI 1375 - KARNATAKA HIGH COURT] it is revealed that in the said case the books were rejected u/s 145(3) by the Ld. AO and at the same time the addition on account of trade creditors, also for the purpose of arriving at a closing stock, books of accounts of the assessee were relied, whereas in present case, Ld. AO have not resorted to the estimation of profit of the assessee, also the books of account of the assessee are rejected, but the quantification of additions qua the cash deposits during the demonetization period was as per undisputed information available from the bank statement of the assessee. It can be safely concluded that the rejected books of accounts have never been relied upon by the Ld. AO. The plea of assessee having been filed the annual VAT returns without filing the quarterly returns after one year cannot support, it was just to recharacterize the sham transaction into a genuine deal. Even the ITR for preceding year AY 2016-17 was filed by the assessee on 15.03.2017, much after the demonetization period, shows such steps are taken to cover bogus transactions. Further, nothing has been brought on record to show that the assessee is functioning with the similar magnitude in the business of trading of pulses in the preceding and succeeding year, thus, the finding of the Ld. AO on the basis of large transactions with the buyers without PAN / unidentifiable and were not produced before the Ld. AO, during the year of demonization and huge cash deposits. CIT(A) had rightly appreciated the facts that the total turnover of assessee of Rs. 93.17 lac includes cash deposit of Rs. 75.69 lacs i.e., almost 81%, during the period 13.11.2016 to 16.12.2016, further the month wise stocks, sales and purchase along with details of cash deposits were not furnished by the assessee. Another aspect observed by the revenue authorities was that the most of transactions were exclusively executed with the sister concern of the assessee, which could not be located by the Income Tax Inspector during the physical verification. In absence of plausible explanations qua the addition’s u/s 68 on account of fictitious purchase and sale transaction and personal cash deposit the additions were confirmed by the Ld. CIT(A) correctly. Also applicability of section 115BBE shall apply as per law. Decided against assessee. Issues Involved:1. Sustaining addition of Rs. 85,78,000 as unexplained cash credit under Section 68.2. Sustaining addition of Rs. 2,00,000 as unexplained cash credit under Section 68.3. Application of Section 115BBE.4. Validity of assessment under Section 143(3) after rejecting books under Section 145(3).Detailed Analysis:1. Sustaining Addition of Rs. 85,78,000 as Unexplained Cash Credit under Section 68:The primary issue is whether the addition of Rs. 85,78,000 as unexplained cash credit under Section 68 was justified. The assessee argued that the cash deposits were sourced from cash sales made during the demonetization period. However, the Assessing Officer (AO) found discrepancies in the assessee's books, noting that the business transactions appeared to be fictitious, primarily because the alleged sales were made in cash to unidentifiable persons without PANs. The AO rejected the books under Section 145(3) and treated the cash deposits as unexplained, adding them to the income under Section 68. The CIT(A) upheld this addition, emphasizing the improbability of conducting genuine business within such a short period and the lack of credible evidence supporting the transactions. The tribunal concurred with the CIT(A)'s findings, noting that the AO did not rely on the rejected books to quantify the additions, but rather on bank statements, thereby dismissing the assessee's appeal on this ground.2. Sustaining Addition of Rs. 2,00,000 as Unexplained Cash Credit under Section 68:The assessee contended that the Rs. 2,00,000 deposited in a personal bank account were personal savings. However, due to the absence of documentary evidence to substantiate this claim, the AO treated the amount as unexplained cash credit under Section 68. The CIT(A) upheld this addition, and the tribunal agreed, as the assessee failed to provide a satisfactory explanation for the source of the cash deposit.3. Application of Section 115BBE:This issue pertains to the applicability of Section 115BBE, which imposes a higher tax rate on income assessed under Section 68. Since the tribunal upheld the additions under Section 68, the application of Section 115BBE was deemed consequential and applicable as per law. The tribunal disposed of this ground accordingly.4. Validity of Assessment under Section 143(3) After Rejecting Books under Section 145(3):The assessee argued that once the books were rejected under Section 145(3), the AO should have resorted to a best judgment assessment under Section 144, rather than proceeding under Section 143(3). However, the tribunal found that the AO did not rely on the rejected books for making additions but used bank statements, which were undisputed. Therefore, the tribunal upheld the validity of the assessment under Section 143(3), dismissing the assessee's contention.Conclusion:The tribunal dismissed the appeal, upholding the additions under Section 68 and the applicability of Section 115BBE, while affirming the validity of the assessment under Section 143(3). The tribunal found no merit in the arguments presented by the assessee, leading to the dismissal of all grounds of appeal.