TaxTMI 
TaxTMI 
2021 (5) TMI 447
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.... filed it's return of income on 04.11.2017, admitting total income of Rs. 95,59,210/-. A survey u/s 133A of the act, was conducted in the business premises of the assessee on 27.03.2017 by the Deputy Director of Income Tax (Investigation) [DDIT(Inv)], Unit-III(2), Visakhapatnam and found that the assessee had deposited the sum of Rs. 5,72,00,000/- in high denominations of specified bank notes (SBNs) post demonetization. The assessee has explained the sources of cash deposits as cash sales and the advances received on 08.11.2016 against the sales. In support of it's explanation, the assessee also produced the sale bills and books of accounts before the DDIT(Inv.). However, the DDIT was not satisfied with the assessee's explanation of sales, since, the assessee could not furnish proper KYC documents of the buyers during the course of survey, the average sales of the firm was not matching with peak and non-peak season. Even on special occasions like Akshaya Tritiya, Dhanteras, Ugadi etc. the average sales were Rs. 1.5 to 2.0 crores and whereas on 08.11.2016, on a single day, the sales were increased by Rs. 4.72 crores during 7.50 P.M to 12 A.M consisting of 270 bills and the cash was....
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....elied on the decision of Sumati Dayal Vs. CIT (1995) 214 ITR 801 (SC). 4. Against the order of the AO, the assessee went on appeal before the CIT(A) and made written submissions and submitted that there was huge rush on 08.11.2016 for sale of jewellery not only in the assessee's shop, but also in all the shops in Visakhapatnam as well as throughout the country, since, the citizens intended to liquidate the old notes in view of the demonetization and made invalid from the mid night of 08.11.2016 i.e. 09.11.2016. The assessee further submitted before the Ld.CIT(A) that the assessee has made the sales and the same was offered as revenue receipt in the return of income. The Ld.A.R argued that since, the sale proceeds were offered and admitted as income, hence the AO is not permitted to make the same amount as addition u/s 68 of the Act, which amount to double addition once as sales and secondly as unexplained cash credit. The assessee further argued that since the assessee is engaged in the jewellery business and having no other source of income, the AO is not permitted to tax the same u/s 115BBE of the Act as income from other sources. The assessee relied on the decision of Hon'ble G....
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.... discussed in detail in the assessment order and also discussed in this order in the earlier paragraphs. The Ld.DR argued that it is impossible to believe that the assessee had prepared 270 bills in short span of time and made the sales to the extent of Rs. 4.71 crores when the daily sales of the assessee was Rs. 10 - 16 lakhs in normal period and Rs. 40-50 lakhs per day in the peak time and Rs. 1.5 to 3 cores on specific occasions like Dhanteras etc. The Ld.DR further argued that in the absence of CCTV footage, details of KYC of customers, non availability of details of tag numbers of the jewellery, non identification of the customers, the AO rightly held that the sum of Rs. 4.72 crores was nothing but sham transaction to bring unaccounted money in the guise of jewellery, sales and paper work is nothing but a device. Therefore, argued that the AO rightly made the addition and the deletion of addition by the Ld.CIT(A) is bad in law. The Ld.DR relied on the decisions of Naresh Kumar Tulshan Vs. 5th ITO, ITAT Bombay reported in [1985] 11 ITD 537 (Bombay), the decision of coordinate bench of ITAT in J.M.J. Essential Oil Company Vs. ITO, the decision of Hon'ble Supreme Court of India ....
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.... of that previous year : From the perusal of section 68, the sum found credited in the books of accounts for which the assessee offers no explanation, the said sum is deemed to be income of the assessee. In the instant case the assessee had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock registers. Both the DDIT (Inv.) and the AO have conducted the surveys on different dates, independently and no difference was found in the stock register or the stocks of the assessee. Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/ stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of stock, there is no reason to disbelieve the sales. The assessing officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. T....
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....nuine and the balance in cash is matching with the books, it can be said that the assessee has explained the nature and source of such deposit. In the case of Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.) Hon'ble Patna High court held as under: "It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law." All the decisions cited supra suggest that once, the assessing officer accepts the books of accounts and the entries in the books of accounts are matched, there is no case for making the addition as unexplained. Hon'ble Delhi High court considered the issue of taxing the opening stocks in the case of Principal Commissioner of Income Tax, 20, Delhi. v. Akshit Kumar, [2021] 12....
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....observed from the newspaper clippings that there was undue rush in various jewellery shops immediately after announcement of demonetization through the country. 8. The Ld.DR placed reliance on various decisions. In the case of Sumati Dayal Vs. CIT (supra), CIT vs Durga Prasad More 82 ITR 540) both the cases are related to the circumstantial evidences in the absence of direct evidence. In the instant case, the facts clearly support that the assessee has made the sales and there were sufficient stocks to meet the sales. Thus, the facts of the assessee's case are clearly distinguishable. The Ld.DR further relied on the decisions of Kale Khan Mohammad Hanif, 50 ITR1 (SC), wherein, the Hon'ble Supreme Court held that the AO is permitted to make addition of unexplained cash credits even though the income is estimated on sales. In the instant case, the AO had accepted the sales and no unexplained cash credits were found, thus, the case law relied upon by the Ld.DR is also distinguishable on the facts of the case. The Ld.DR relied on the decision of CIT Vs P.MohanaKala, 161 Taxmann 169, CIT vs Devi Prasad Vishwanath Prasad 72 ITR 194(SC) both the cases refer to the sums found credited in ....