Iapl/86/2024 Of The Pr Commissioner Of Income Tax And Another v. Sushil Kumar Sharma

Chief Justice's Court Case:- INCOME TAX APPEAL No. - 86 of 2024 Appellant:- The Pr Commissioner of Income Tax and anotherRespondent:- Sushil Kumar SharmaCounsel for Appellant:- Gaurav Mahajan, Sr. Standing Counsel Hon'ble Arun Bhansali, Chief JusticeHon'ble Vikas Budhwar, J. 1.This appeal under Section 260A of the Income Tax Act, 1961(for short ‘the Act’) is directed against judgement and order dated14.05.2024 passed by the Income Tax Appellate Tribunal (for short‘the Tribunal’) whereby the appeal filed by the assessee has beenallowed and appeal filed by the revenue has been dismissed againstorder dated 30.03.2023 passed by the National Faceless AppealCentre, Delhi against the order of assessment passed under Section143(3) of the Act. 2. The assessee, who was engaged in the business of providingsecurity, housekeeping, manpower supply since 2009, during thefinancial year 2016-17, under an Agreement as BusinessCorrespondent with First Rand Bank (for short ‘the FRB’), a SouthAfrican company, registered as foreign company in India under theCompanies Act, carried out business of banking as the scheduledcommercial bank after obtaining licence from the Reserve Bank ofIndia. In terms of the Agreement executed between the FRB and theassessee, the arrangement inter-alia included collection of loaninstalments from the micro borrowers who are thousands in numberspread all over the region in Mumbai and its suburb, the assesseecollected monthly instalments from the borrowers on behalf of theFRB in terms of the arrangement, whereafter the amount collectedfrom the borrowers was deposited in assessee’s bank account maintained with ICICI, HDFC and Axis Bank. The money in turnwas deposited by the assessee with the account of the FRB. Theassessee was charging fees and monthly bills were raised. During thefinancial year, the assessee earned fees of Rs. 8.91 crores from theFRB which was subjected to service tax and TDS. 3. During the course of assessment proceedings, when theAssessing Officer (for short ‘the AO’) sought explanation for hugecash deposits made in the bank account, the assessee produceddocuments explaining the source of cash deposits made in the bankaccount. However, the AO proceeded to determine the total incomeof assessee at Rs. 89,78,73,732/- by taking inter-alia cash deposit asincome in terms of provisions of Section 69A of the Act. 4.Feeling aggrieved, appeal was filed. The Commissioner ofIncome Tax (Appeals) [for short ‘the CIT(A)’], by its orderproceeded to delete the addition partially on account of cash depositsafter appreciating modus operandi adopted by the assessee. The CIT(A) deleted the addition made qua cash deposits made during theperiod 01.04.2016 to 08.11.2016 and 01.01.2017 to 31.03.2017.However, for the period of demonetization i.e. 09.11.2016 to31.12.2016 maintained the additions. Aggrieved by the order passedby the CIT(A), both the assessee and the department filed appeals. 5.The Tribunal, after hearing the parties and going through theAgreement between the FRB and the assessee, came to theconclusion that the plea raised by the department that the cashcollected from the borrowers was supposed to be deposited in theaccount of the FRB as the assessee was supposed to open a bankaccount with the said Bank but without depositing the money in theaccount of the FRB, the assessee had deposited the cash in his bankaccount and thereafter transferred the money to the account of theFRB, was totally irrelevant consideration inasmuch as ultimately themoney had reached the account of the FRB where there is absolutelyno dispute with regard to the recovery of any money due from theassessee. The Tribunal was also of the opinion that the department 5.The Tribunal, after hearing the parties and going through theAgreement between the FRB and the assessee, came to theconclusion that the plea raised by the department that the cashcollected from the borrowers was supposed to be deposited in theaccount of the FRB as the assessee was supposed to open a bankaccount with the said Bank but without depositing the money in theaccount of the FRB, the assessee had deposited the cash in his bankaccount and thereafter transferred the money to the account of theFRB, was totally irrelevant consideration inasmuch as ultimately themoney had reached the account of the FRB where there is absolutelyno dispute with regard to the recovery of any money due from theassessee. The Tribunal was also of the opinion that the department had no reason to assess income in the hands of the assessee only onaccount of assessee not depositing the amount in the account of theFRB when there is no dispute between the parties concerned. TheTribunal also was of the opinion that the amount deposited during thedemonetization period i.e. 09.11.2016 to 30.12.2016 as excluded bythe CIT(A) also was not justified as it was not the case of the revenuethat the assessee was not in receipt of Specified Bank Notes from thecustomers of the FRB during the period 09.11.2016 to 30.12.2016and consequently passed order as noticed hereinbefore. 6.Learned counsel for the appellant made submissions that theTribunal was not justified in passing the order impugned, inasmuchas it is an admitted fact that huge cash was deposited in the bankaccount of the assessee, which was totally contrary to thearrangements with the FRB and, therefore, the provisions of Section69A of the Act were attracted. Submissions have been made that asthe violation of the Agreement took place, the explanation providedby the assessee, which was contrary to the said Agreement, could notbe accepted and, therefore, on that count the order impugned passedby the Tribunal gives rise to a substantial question of law. 7.We have considered the submissions made by learned counselfor the appellant and have perused the material available on record. 8.The CIT(A) and the Tribunal have recorded the objection ofthe department that the account of the assessee was contrary to theAgreement wherein he was supposed to deposit the money in theaccount of the FRB instead he deposited the cash in his bank accountand thereafter transferred the money to the account of FRB whichbrings the deposit within the mischief of Section 69A of the Act. TheCIT(A) and the Tribunal were justified in coming to the conclusionthat only on account of purported infraction of the Agreementbetween the FRB and the assessee, without there being any disputeregarding the amount collected by the assessee which, in turn, hasbeen deposited with the FRB, the deposits in the bank account ofassessee cannot be termed as unexplained cash deposits by the 8.The CIT(A) and the Tribunal have recorded the objection ofthe department that the account of the assessee was contrary to theAgreement wherein he was supposed to deposit the money in theaccount of the FRB instead he deposited the cash in his bank accountand thereafter transferred the money to the account of FRB whichbrings the deposit within the mischief of Section 69A of the Act. TheCIT(A) and the Tribunal were justified in coming to the conclusionthat only on account of purported infraction of the Agreementbetween the FRB and the assessee, without there being any disputeregarding the amount collected by the assessee which, in turn, hasbeen deposited with the FRB, the deposits in the bank account ofassessee cannot be termed as unexplained cash deposits by the assessee. Both the authorities have concurrently found that theamount indeed has been collected from the micro borrowers of theFRB and after deposit in the bank account has been transferred to theFRB. The said finding of fact recorded by the two authorities, cannotand does not give rise to any substantial question of law as projected. 9.So far as the fact regarding the period of demonetisation isconcerned, the CIT(A) only on assumption, that the deposit was ininfraction of the Agreement that the appellant was not authorised tocollect money in Specified Bank Notes, rejected the appeal, theTribunal came to the conclusion that merely because certain cashdeposits in the Specified Bank Notes by the assessee during thedemonetization period, the same did not make the deposit as taintedwhen the very same transactions were being made by the assessee inthe past and have been accepted by the CIT(A). The Tribunal wasalso of the opinion that it was not the case of the revenue thatassessee was not in receipt of Specified Bank Notes from thecustomers of the FRB during the period 09.11.2016 to 30.12.2016.The findings recorded by the Tribunal, are in consonance with thematerial available before it and by no stretch of imagination thedeposits received by the respondent assessee from the microborrowers of the FRB can be termed as unexplained cash deposits inhis bank account. The findings recorded by the Tribunal do not giverise to any substantial question of law. 10.The appeal has no substance. The same is accordinglydismissed. Order Date :- 27.11.2024AHA/RK (Vikas Budhwar, J) (Arun Bhansali, CJ)