a discussion on issues arising from income tax assessments ... · the taxation laws (second...

A discussion on issues arising from income tax assessments framed involving demonetisation

Presentation by CA Ashwani Kumar

© 2020 | ashwani & associates

1.Demonitisation 2.115BBE - Extract of Section 3.Cash Deposit - Different Scenarios 4.Some Key Issues on Demonitisation 5.Relevant Judgements 6.Q&A

Contents


Demonetisation• Demonetisation was announced by the Prime Minister on

08/11/2016. The Prime Minister declared that use of all Rs. 500 and Rs.1000 bank notes would be invalid post midnight of 08/11/2016.

• Demonetisation resulted in cash deposits in large magnitude. General Public was allowed to deposit the demonetised bank notes between the period 09/11/2016 to 30/12/2016.

• For Indians abroad during the specified period deposit of demonetised notes were permitted upto 31/03/2017 at the offices of Reserve Bank of India.


The Taxation Laws (Second Amendment) Act, 2016. (w.e.f 01.04.2017 relevant for AY 2017-18)

Amendment of section 115BBE. “(1) Where the total income of an assessee,— (a) includes any income referred to in section 68, section 69, section 69A, section 69B,

section 69C or section 69D and reflected in the return of income furnished under section 139 ; or

(b) determined by the Assessing Officer includes any income referred to in section 68, section 69, section 69A, section 69B, section 69C or section 69D, if such income is not covered under clause (a),the income-tax payable shall be the aggregate of • (i) the amount of income-tax calculated on the income referred to in clause (a)

and clause (b), at the rate of sixty per cent.; and • ii) the amount of income-tax with which the assessee would have been

chargeable had his total income been reduced by the amount of income referred to in clause


Relevant sections under Income Tax Act 19611.Section 68 : Cash Credits 2.Section 69:Unexplained Investments 3.S e c t i o n 6 9 A : U n e x p l a i n e d

Money ,etc. 4.Section 69B: Amount of investments,

etc. not fully disclosed in books of accounts.

5.S e c t i o n 6 9 C : U n e x p l a i n e d Expenditure ,etc.

6.Section 69D: Amount borrowed or repaid on hundi

The onus is on the Assessing Officer to determine that income being assessed is to be taxed u/s 68, 69, 69A, 69B, 69C or 69D


SOP’s Issued by CBDT

Operation Clean Money

Instruction No. 3/2017 dated 21.02.2017

Instruction No. 4/2017 dated 03.03.2017

Circular Dated 15.11.2017 in FNo. 225/363/17-ITA II

Circular Dated 09.08.2019 in FNo. 225/145/19-ITA II


Cash Deposits

No Books are there and provisions of 44AD is also not opted

• Deposits are stated to be out of earlier withdrawals or can be sale proceeds of agricultural land or any other asset.

• Gifts

Proper Books are Maintained, duly audited

Credits are either by way of cash sales, withdrawals from the bank, realisation from debtors

Cases Where 44AD Opted by Assessee

Not Required to Maintain Books of Accounts


Some Key IssuesIssue/AreaWhether AO has rejected the books of account ?Whether Assessee has maintained complete stock tally ? To examine the need to file any additional evidence before CIT (Appeal)Has the AO accepted the sales as declared in the books of accounts - concept of double addition Has the AO doubted the Purchases ?

Is it a case of Search/Survey and no difference found in the stock ?

Where the assessee has filed stock statements with bank authorities which have not been doubted by them - any ground on this count?Provisions of Section 115BBE - propspective or retrospective - Case of Deepak Maratha challenged before Rajasthan HC


Some Key IssuesIssue/AreaWhether the sales have been found to be true in VAT assessments - an additional factor ?Can Section 115BBE be invoked on preponderance of probability

Has the AO treated the entire cash sales as unexplained or only a part of it has been ?

Confirmation from debtors with respect to cash received from debtors

Could the assessee have issued such large number of invoices in one day ? Order of Forensic Audit by the Department in some search/survey cases to evaluate whether back dating has been done in the books


Some Key Issues

Issue/AreaDeposit of SBN in bank on or after 08/11/2016 - Violation under which Act ? Are there are any takeaway’s from the demonetisation done in 1978 (Similarities/Differences) ?Declaration of higher income during the course of survey u/s 133A or search u/s 132


Some Relevant Judgements • Hon’ble High Court of Delhi in the case of Kailash Jewellery House (ITA No.

613/2010) dt. 09.04.2010

• Hon’ble ITAT Delhi in the case of Singhal Exim Pvt. Ltd. (ITA No. 6520/D/2018)

• Hon’ble ITAT Delhi in the case of Kishore Jeram Bhai Kanhaiya (ITA No. 1220/D/

2011) dt 13.03.2014

• Hon’ble ITAT Jodhpur in the case of Lovish Singhal (ITA No. 143/Jodhpur/2018)

dt 25.03.2018

• Hon’ble ITAT Mumbai in the case of Rahil Agencies ITA 4413/Mum/2014 dated

23.11.2016

• Hon’ble ITAT Ahmedabad in the case of Shree Sanand Textiles ITA 995/Ahd/2014

dated 06.01.2020


Some Relevant Judgements • Hon’ble ITAT Delhi in the case of Agson Global Limited ITA 3741/Del/2019 dated

31.10.2019

• Hon’ble ITAT Delhi in the case of Akshit Kumar ITA 6527/Del/2017 dated 27.04.2018

• Hon’ble Delhi High Court in case of J.M. Wire 205 Taxman 13 dated 15.07.2010

• Hon’ble ITAT Delhi in the case of Naresh Dayanand Ghandani vs ACIT (ITA No.

5339/Del/2017) 25.05.2018

• Hon’ble Madras high court in OCM case in a writ filed by Salem Sree Chit Company

in WP No. 1732/2020 dated 04.02.2020

Against

• Hon’ble Delhi High Court in the case of CIT vs. Rajiv Gupta in ITA No. 828/2005

dated 31.07.2019

• Hon’ble ITAT Indore in the case in the case of Rajesh Bajaj ITA 16/Indore/2019 dated

09.03.2020


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