2014 (5) TMI 699 - AT - Income Tax

ITAT decision: Cash sales upheld, cash seized deletion confirmed, capital account credit remanded for investigation

The ITAT overturned the Assessing Officer's addition of Rs. 22,06,672 related to cash sales, citing the genuineness of the transactions and lack of ... Confirmation of addition made u/s 68 of the Act - Search and seizure – Cash sales made – Held that:- There is no law which prohibits a trader or a manufacturer in making cash sales – Relying upon R.B.Jessaram Fatehchand (Sugar Deptt) VS. CIT [1969 (7) TMI 10 - BOMBAY High Court ] - sales can be in cash and it is hardly necessary for the seller to bother about the name and address of the purchaser - so long as the availability of stock is there and there is nothing adverse against the cash memos issued by the assessee, such cash sales cannot be doubted - the volume of such cash sales at ₹ 22.06 is to be seen in the light of the assessee’s total turnover of ₹ 10.29 crore - It is but natural that if a customer makes cash purchase and lifts the goods, there is no duty cast upon the seller to insist for the address of the purchaser – the assessee has himself offered the amount of cash sales as his income by duly including it in his total sales -once a particular amount is already offered for taxation, it cannot be again considered u/s 68 of the Act - thus, any addition cannot be made by treating cash sales as bogus – Decided in favour of Assessee. Deletion of addition made during search – Held that:- The assessee has stated before the AO that a sum of ₹ 30.62 lacs belonged to Premji Bhanushali and Radha Bhanushali - The fact was confirmed by these two persons as well - when the assessee’s brother and his wife admitted the possession of cash belonging to them, there can be no reason for making addition in the hands of the assessee in respect of cash when the facts and circumstances amply show that the cash did belong to them - It is for them to explain the source of cash available with them in their respective hands - CIT(A) has rightly appreciated the facts in directing to delete the addition by asking the AO – Decided against Revenue. Deletion of amount credited to capital account – Held that:- The AO specifically requisitioned the assessee to explain the source of fresh capital amounting to ₹ 19.00 lacs and odd introduced in his books of accounts - The assessee gave only sketchy reply which has been reproduced above - CIT(A) was not justified in deleting this addition by rather strangely mentioning that the addition was made in a summary manner - when a certain sum is credited to the assessee’s capital account, the onus is on him to explain the source of such deposit to the satisfaction of the AO - thus, the order of the CIT(A) is set aside and the matter is remitted back to the AO for fresh adjudication – Decided in favour of Revenue. Issues:1. Addition of Rs. 22,06,672 in the assessee's appeal related to cash sales.2. Deletion of addition on account of cash seized amounting to Rs. 30.26 lacs.3. Deletion of addition of Rs. 19,00,674 credited to the assessee's capital account.Analysis:Issue 1: Addition of Rs. 22,06,672 in the assessee's appeal related to cash salesThe issue revolved around the confirmation of the addition of Rs. 22,06,672 in the assessee's appeal against the cash sales. The Assessing Officer observed discrepancies in the cash memos issued by the assessee before a search conducted by the Directorate of Revenue Intelligence. However, the ITAT Delhi found in favor of the assessee. The ITAT noted that the availability of stock and absence of adverse evidence against the cash memos supported the genuineness of the cash sales. Additionally, the ITAT highlighted that the law does not prohibit traders from making cash sales and cited a precedent from the Bombay High Court to support this. The ITAT concluded that the addition made by the Assessing Officer was unjustified, and the order was overturned.Issue 2: Deletion of addition on account of cash seized amounting to Rs. 30.26 lacsThe dispute in this issue concerned the deletion of the addition of Rs. 30.26 lacs related to cash seized during the search. The Assessing Officer had made the addition as the confirmation of the source of cash was not provided. However, the ITAT upheld the deletion by the CIT(A) as both individuals, Radha Bhanushali and Premji Bhanushali, confirmed the ownership of the cash seized. The ITAT reasoned that since the cash belonged to these individuals, there was no basis for adding it to the assessee's income. The ITAT found the CIT(A)'s decision appropriate and dismissed the Revenue's appeal on this ground.Issue 3: Deletion of addition of Rs. 19,00,674 credited to the assessee's capital accountThe third issue involved the deletion of the addition of Rs. 19,00,674 credited to the assessee's capital account. The Assessing Officer had added this sum under section 68 of the Act due to insufficient explanation regarding the source of the fresh capital introduced. The ITAT disagreed with the CIT(A)'s decision to delete the addition, emphasizing that the onus was on the assessee to explain the source of the deposit satisfactorily. The ITAT remitted the matter back to the Assessing Officer for a fresh decision, allowing the assessee to present additional evidence. The ITAT overturned the CIT(A)'s order on this issue and directed a reevaluation by the Assessing Officer.In conclusion, the ITAT's judgment addressed the issues of cash sales addition, cash seized addition, and capital account addition, providing detailed analysis and legal reasoning for each decision.