TaxTMI 
TaxTMI 
2026 (1) TMI 465
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....firming the same. 2. Because it was fully explained that the purchase and sales of petrol and diesel i.e. petroleum product against cash were allowed during demonetization period and therefore, the provision of section 69A/69C of the Act is not applicable on the deposit in bank account during demonetization period. The learned Assessing Officer has erred and acted illegally in not placing reliance on the same and erred and acted illegally in applying the provision of section 69A/69C of the I. T. Act on the excess amount and adding back Rs. 17,19,275/- u/s 69A of the I. T. Act as well as Rs. 9,07,100/- u/s 69C of the I. T. Act. The learned CIT(A) has also erred and acted illegally in confirming the same. 3. Because the learned Assessing Officer has erred and acted illegally in disallowing Rs. 1,38,143/- out of workman and staff welfare expenses. The learned CIT(A) has also erred and acted illegally in confirming the same. 4. Because the assessment is bad both on facts and in law and not maintainable." (B) In this case, there was difference of opinion between Hon'ble Judicial Member and Hon'ble Accountant Member. The qu....
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....allowed and remaining 23% hike is to added back to the income of the assessee as unexplained expenditure u/s 69C of the Act and accordingly, he disallowed an amount of Rs. 9,07,100/-. Ld. CIT(A) mainly confirmed the said addition without dwelling upon the applicability of section 69C of the Act which was challenged before him. 4. Before the Tribunal, the only dispute was applicability of section 69C on such addition /disallowance of Rs. 9,07,100/- and not the disallowance per se. Both the Hon'ble AM and Hon'ble JM have categorically noted that assessee does not want to contest the quantum of addition of Rs. 9,07,100/- made by the AO. The only issue which was contested by the assessee before the Tribunal was applicability of section 69C of the Act on the addition /disallowance. 5. Hon'ble JM in his order held that since the provision of section 69C is a deeming provision in respect of any expenditure incurred by the assessee without offering any explanation about the source of such expenditure or part thereof or the explanation of the assessee in the opinion of the AO is not satisfactory. Thus, the precondition for applying this deeming provision is tha....
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....llowed as a deduction under any head of income.]" The assessee has claimed to have incurred the expenditure of Rs. 52,35,600/-under the head 'Compensation to Employees/Salary & Wages' during the year under consideration, but no explanation/details etc. are forthcoming from the assessee w.r.t. these expenses even until the stage of tribunal. The assessee is in the business of sale of petroleum products of Bharat Petroleum Corporation Limited (BPCL) i.e. petrol pump in the name and style of 'Bagahi Filing Station'. The assessee did not furnish any details, register or basis of these expenditure, to enable AO to verify these payments/expenditure. There is an hike of 33% in the expenditure incurred during the current year under the head Compensation to Employees/Salary and Wages' vis-à-vis preceding year, while no new facility or installation was installed during the year under consideration at Petrol Pump run by the assessee. The AO allowed hike of expenditure @10% in the current year under the head 'Compensation to Employees/Salary and Wages' vis-à-vis expenditure incurred in the preceding year under the same head, while remaining 23....
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....pplicability of Section 69C in the instant case requires investigation of facts while complete facts are not on record, and the AO applied provisions of Section 69C in the absence of any details of the expenses filed by the assessee, while Id. CIT(A) chose not to specifically adjudicate this issue. The Power of Id. CIT(A) are co-terminus with powers of the AO, and I do not have benefit of views of Id. CIT(A) on this issue. This issue has wide ramification, and views of Id. CIT(A) as well availability of complete facts on record, are absolutely essential before arriving at any decision. As complete facts are not on record and also keeping in view factual matrix of the case, in my considered view, it will be fit and appropriate and in the in the interest of justice, that the matter can be restored back to the file of the AO, who shall adjudicate this issue after considering the entire factual matrix of the case and investigating the facts. 1) xxxx 2) xxxx Thus in nut-shell, the issue of applicability of Section 69C to the disallowance/addition made by the AO to the tune of Rs. 9,07,100/- under the head 'Compensation to Employees/Salary and Wages', i....
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....applicability of section 69C of the Act on such disallowance. 10. After considering the submissions made by both the parties and on perusal of the record, it is noticed that here it is a case of claim of deduction for payment of salary and wages to the employees u/s 37(1). Such claim of deduction has been made on the basis of expenditure debited in the books of account and the source of payment have been shown from the books of account. The AO has made adhoc disallowance to restrict the claim of deduction while computing the total income of the assessee. The claim of deduction of expenditure debited to the profit & loss account has been made u/s 37(1) of the Act on the ground that the expenditure incurred was wholly and exclusively for the purpose of business. Section 69C is a deeming provision, it deems that if assessee incurs expenditure for which he offers no explanation about the source of such expenditure on part thereof, then it is deemed to be income of the assessee for such financial year. For the sake of ready reference, section 69C read with its proviso reads as under :- Unexplained expenditure, etc. 69C. "Where in any financial year an assessee....
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.... was not able to explain the quantum of expenditure incurred wholly and exclusively for the purpose of business. The AO nowhere doubted the source of expenditure but excess claim under the head salary and wages as compared to the last year, which assessee has already explained that such hike was due to increments given to the employees in this year. Nowhere the AO held that such increment and hike is unexplained expenditure, then where was the occasion to invoke the deeming provision of section 69C of the Act so as to attract the higher rate of taxes u/s 115BBE which has been brought in the statute w.e.f. 01.04.2017 for AY 2017-18. 12. It has been brought on record by the Ld. Counsel for the assessee that in the subsequent year, the AO had made adhoc disallowance of similar expenditure including under the staff but AO has not invoked the provision of section 69C neither there is no dispute in any of the subsequent year or the earlier years. Accordingly, I concur with the findings and the observations of Hon'ble JM that on these facts, provision of section 69C is not applicable. Admittedly, the quantum of additions has not been disputed by the assessee before the Tribun....
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....dition made by the AO to the tune of Rs. 9,07,100/- under the head 'Compensation to Employees/Salary and Wages', wherein while adjudicating the aforesaid applicability of Section 69C vide para 12 to 15 of his appellate order, my ld. Brother(JM) has held that provisions of Section 69C of the 1961 Act has no applicability to the disallowance/addition made by learned Assessing Officer (hereinafter called "the AO") to the tune of Rs. 9,07,100/- under the head 'Compensation to Employees/Salary and Wages' (DIN & Order No. ITBA/AST/S/143(3)2019-20/1023413282(1)) . The Id. Commissioner of Income- tax (Appeals) (hereinafter called "the CIT(A)") has upheld the quantum additions wherein ld. CIT(A) dismissed the appeal of the assessee on this issue, vide appellate order dated 19.01.2023(DIN & Order No. ITBA/NFAC/S/250/2022- 23/1048934293(1)), but ld. CIT(A) did not specifically adjudicated this issue of applicability of provisions of Section 69C to the disallowance/additions made by the AO to the tune of Rs. 9,07,100/- under the head 'Compensation to Employees/Salary and Wages'. With due respect, I donot concur with the above said view of my ld. Brother(JM), and in my v....
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....e of Rs. 9,07,100/- under the head 'Compensation to Employees/Salary and Wages'. Now, the assessee has filed second appeal before tribunal, and it is submitted that so far as addition of Rs. 9,07,100/- is concerned as was made by the AO (which was later upheld by ld. CIT(A)), the assessee is not challenging the said quantum addition, and the only challenge made by assessee before the tribunal is as to the applicability of provisions of Section 69C to the aforesaid addition of Rs. 9,07,100/- made by AO under the head 'Compensation to Employees/Salary and Wages'. My ld. Brother(JM) has accepted the contentions of the assessee and has held that Section 69C shall not be applicable in the instant case, as there is no dispute as to source of these expenditure. Before proceeding further, it will be profitable at this stage to reproduce Section 69C of the 1961 Act, which reads as under: "Unexplained expenditure, etc. 69C. Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the [Assessing] O....
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.... ld. CIT(A) on this issue. This issue has wide ramification, and views of ld. CIT(A) as well availability of complete facts on record, are absolutely essential before arriving at any decision. Before us, ld. Counsel for the assessee has submitted that the assessee does not want to contest the quantum addition of Rs. 9,07,100/- made by AO which was later confirmed by ld. CIT(A) under the head 'Compensation to Employee/Salary & Wages', but the only issue contested by the assessee before tribunal is applicability of Section 69C to the addition/disallowance made by authorities below to the tune of Rs. 9,07,100/- under the head 'Compensation to Employees/Salary and Wages'. . Perusal of Section 69C clearly reveals that if the assessee incurs any expenditure during the financial year, and if the source of expenditure is either not explained at all or not explained satisfactorily, the amount covered by such expenditure may be deemed to be the income of the assessee, to the extent explanation is not forthcoming or is not satisfactory. It is the assessee who is claiming these expenditure, and it is for the assessee to come forward and explain the source of expenditure, but in....
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....er dated 19.01.2023 of CIT(A) (National Faceless Appeal Centre, Delhi) for the assessment year 2017-18. 2. The assessee has raised the following grounds: "1. Because it was fully explained that the books of accounts have been maintained in due course of business reveals fully and truly each and every aspect of business, the stock register has been maintained which clearly indicate the sales amount against the quantity of petrol and diesel sold by the assessee. The Ld. Assessing Officer has erred and acted illegally in applying the provision of section 145(3) of the I.T. Act, 1961. The Ld. CIT(A) has also erred and acted illegally in confirming the same. 2. Because it was fully explained that the purchase and sales of petrol and diesel i.e. petroleum product against cash were allowed during demonetization period and therefore the provision of section 69A/69C of the Act is not applicable on the deposit in bank account during demonetization period. The Ld. Assessing Officer has erred and acted illegally in not placing reliance on the same and erred and acted illegally in applying the provision of section 69A/69C of the I.T. Act, 1961 on the....
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....ut the AO has made specific additions / disallowances of various claims of the assessee. Therefore, in view of the facts and circumstances of the case that only the cash book of the assessee was not accepted by the AO in -respect of the source of cash deposit in the bank account and there was no rejection of books of accounts as such the ground no. 1 of the appeal is de void of any merits or substance deserves dismissal. We order accordingly. 5. Ground no. 2 is regarding addition made by the AO on account of cash deposit made in the bank account of the assessee to the tune of Rs. 17,19,275/- as well as addition made on account of excess claim of compensation to employee / salary / wages to the tune of Rs. 09,07,100/-. 5.1 As regards the addition made on account of cash deposit in the bank account, the AO has noted that during the demonetization period from 09.11.2016 to 30.12.2016, the assessee has deposited cash of Rs. 8,38,51,500/- in the bank account with Union Bank of India and Rs. 01,10,000/- in the bank account with ICICI bank. The AO further noted that the assessee has shown the deposit of sale proceeds in the bank account on 10:11.2016 of Rs. 47,66,500/- w....
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....he cash deposited in the bank account during the month of November and December was out of sales affected by the assessee. The AO has made the addition by treating the part sales as bogus whereas there is no scope of any manipulation or tempering of the stock, purchases and sales of petrol and diesel which is maintained on day to day basis. Thus, the learned AR has submitted that due to demonetization of currency notes of denomination of 500 and 1000 w.e.f. midnight of 8th November, 2016, there was an increase in the cash sales as the public utilized their old currency notes for purchasing of petrol and diesel and specifically the institutions like transport companies and educational institutions made extra purchase of petrol and diesel by utilizing the old currency notes available with them. Since there was no restriction of accepting the old currency notes for sale of petrol and diesel therefore, there was increase in sales during this period which is the real figure as reflected in the books of accounts and particularly the stock register maintained by the assessee. Hence, the learned AR has submitted that the AO has made the addition on the basis of surmises by doubting the gen....
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....016 should be sale proceeds of 08.11.2016 and 09.11.2016. Hence, the remaining portion of cash deposits remain unexplained. Hence, the cash book of the assessee cannot be accepted u/s 145 of the I.T. Act, 1961. So as per calculation i.e. 4719275-(1500000x2)=Rs. 17,19,275/- is treated as unexplained sales and the same amount accordingly added to his income as unexplained cash deposit u/s 69A and penalty proceeding is being initiated for the same in u/s 271AAC." 9. Thus, the AO has taken note of the deposit of Rs. 47,19,275/- on 10.11.2010 and considered the same as excessive. The AO accordingly applied the average sales of Rs. 15 Lac per day for 8th November and 9th November which comes to Rs. 30 lac and the balance deposit of Rs. 17,19,275/- was treated as unexplained sales and added to the income of the assessee as unexplained cash deposit under section 69A of the Income Tax Act. The CIT(A) has confirmed the addition made by the AO by referring to the various case laws as referred in the impugned order. It is pertinent to note that as a dealer of petrol and diesel, the assessee is required to maintain the daily record of stock, purchases, sales which the assessee claimed ....
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....h November and 9^th, guess November. Therefore, the AO has made the addition only on guess work without considering the real facts of actual sales made by the assessee as recorded in the books of accounts and particularly in the stock register with quantitative details of opening stock, purchases, sales and closing stock on daily basis. The assessee has now filed the compilation of the details of cash sales as well as deposit made in the bank account of the assessee for the month of November and particularly from 1st November to 15th November, 2016 which would throw the light on the actual cash available with the assessee for each day and particularly on 10th November, 2016 after considering the sales for the period 1st to 9th November, 2016 and corresponding deposits of cash made in the bank account. Prima facie, it appears that the assessee was having the cash of more than Rs. 48 lac as on 10th November, 2016 from the sales made by the assessee in the past. It is also undisputed fact that after the announcement of demonetization, the people used the cash in the old currency note of denomination of 500 and 1000 for purchase of petrol and diesel to avoid the inconvenience of deposi....
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....rship of the assessee of any money bullion, jewellery or valuable article not recorded in the books of accounts. In the case in hand, the assessee has explained the source of cash deposit as sale proceeds of petrol and diesel which is duly recorded in the books of accounts therefore, prima facie the provisions of section 69A are not applicable when the sales which is recorded in the books of accounts is explained as cash deposit. However, when the addition itself is set aside to the record of the AO then this issue is also set aside to the record of the AO for deciding the same by considering the provisions of section 69A as well as the relevant facts. Needless to say the assessee be given an appropriate opportunity of hearing before passing the fresh order. 12. As regards, the addition of Rs. 09,07,100/- on account of excessive claim of compensation and wages to the employees, the learned AR of the assessee has submitted that the assessee is pressing the issue of only applicability of provisions of section 69C as applied by the AO. He has pointed out that when it is a claim of expenses duly recorded in the books of accounts then the mere ad hoc disallowance made by t....
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.... may be, may be deemed to be the income of the assessee for such financial year:] Provided that, notwithstanding anything contained in any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.]" 15. Thus, this is a deeming provision in respect of any expenditure incurred by the assessee without offering explanation about the source of such expenditure or part thereof or the explanation of the assessee in the opinion of the AO is not satisfactory. Thus, the pre-condition for applying this deeming provision is that there is no explanation or unsatisfactory explanation about the source of expenditure incurred by the assessee. In the case in hand, there is no dispute about the source of expenditure but the AO has made the addition by making the disallowance of Claim of excess expenditure. Hence, in our considered opinion, the provisions of section 69C is not applicable on this disallowance / addition made by the AO. 16. Now, we take up the ground no. 3 which is regarding addition made by the AO by making disallowance on account of excess claim of wor....