TaxTMI 
TaxTMI 
2022 (11) TMI 711
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....ry to Rule 46A of the I.T. Rules ? 3. The Appellant craves leave to add, amend, modify, vary, omit or substitute any of the aforesaid grounds of appeal at any time before or at the time of hearing of the appeal. 3. The only grievance of the Department in this appeal relates to the deletion of addition of Rs. 97,50,000/- made by the AO on account of cash deposited during the demonetization period by invoking the provisions of Section 69 A of the Income Tax Act, 1961 (for short the 'Act'). 4. The facts of the case in brief are that the group cases of M/s Roop Square Group of Companies to which the assessee belongs were searched under section 132(1) of the Act on 01/11/2017. Thereafter notice under section 153A of the Act requiring the assessee to file the return of income was issued on 14/02/2019. In response no return was filed by the assessee and nobody appeared on behalf of the assessee when the notice under section 142(1) was issued. 4.1 The AO observed that the assessee had declared an income of Rs. 2,35,350/- under the head income from Business & Profession in its return of income filed on 31/10/2017 under section 139 of the Act. The AO during the course of assessment proc....
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.... dated 28/12/2019. The AO also asked the assessee to explain the source of the deposit in its bank account. He further observed that the assessee had deposited Rs. 2,47,50,000/- during demonetization period and failed to submit any satisfactory reply with regard to cash deposited. He was of the view that the assessee had introduced its own unaccounted money in the disguise of sale in the wake of demonetization. The AO worked out the average sale from April 2016 to October 2016 at Rs. 1,00,27,807/- and considering this fact that due to festive season there was surge in October 2016. He estimated the sales of the assessee at Rs. 1,50,00,000/- considering the 50% surge in sale of October 2016. The AO opined that the assessee had deposited excess cash of Rs. 97,50,000/- (Rs. 2,47,50,000 - Rs. 1,50,00,000 ) from undisclosed sources during the demonetization period. The AO invoked the provision of section 69A of the Act by observing that the assessee was found owner of the money but had not offered any acceptable and cogent explanation regarding the source of such money found in its bank account. The reliance was placed on the following case laws: * Churarmal Vs. CIT (1988) 172 ITR 250....
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....h was conducted and for which, we have given our detailed submissions in our appeal for Asstt. Year 2012-13. Since the facts are identical, the same submissions may, please, be considered here also alongwith the evidences as furnished by us in the form of paper book for Asstt. Year 2012-13. 2. The only addition in this year has been of the amount deposited in the regular bank account, out of cash sale/realization from debtors from the accounted for parties, and the Ld. Assessing Officer out of the cash of Rs. 2,47,50,000/-, deposited on estimated basis during the demonetization period, has accepted the sales of the assessee at Rs. 1,50,00,000/- and for the balance, addition of Rs. 97,50,000/- has been made u/s 69A and applied the provisions of section 115BBE. 3. It is an accepted fact that the business of the assessee is of trading in ladies dress material/hosiery cloth and some of the sales are made in cash due to the nature of trade and this modus operandi has been accepted in the earlier years and, later years, as per chart being enclosed in the Paper Book at page no 132 and on account of this, the Ld. Assessing Officer has given the benefit of Rs. 1,50,00,000/- out of the t....
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....stablished beyond any iota of doubt. Even most of the parties from whom the cash has been realized are identifiable parties as is evident from the copy of cash book submitted to the Investigation Wing. Thus, no doubt could have been raised for which, the ad-hoc addition has been made without any justification by the Assessing Officer. In short, your goodself shall observe that cash sales in the Financial Year 2015-16 are more by Rs. 2,77,03,961/- as compared to Asstt.Year 2017-18 and realization from debtors is more in the earlier year by Rs. 2,99,39,800/-. iv).It is also a fact that the assessee is a trader and running the business from the past many years in the same mode and manner and had deposited the cash in the regular bank account during the demonetization period, out of the cash sales and on account of realization of debtors made by him regularly not only in this year, but in the earlier years also. It is also apparent from the previous history of the case that some credit sales are made to identifiable parties and our salesmen are deputed to collect the amount regularly from such parties, who are located in small towns/villages and such parties make the cash payments ag....
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....ssee offers no explanation about the nature and source of valuable articles with him. The assessee has offered explanation supported by documentary evidences of audited books of accounts, purchase and sale vouchers, past history of the case and even the reply was submitted immediately in the month of December 2016 to the Investigation Wing and no doubt was raised by the Investigation Wing. Or the explanation offered by him is not in the opinion of the Assessing Officer satisfactory. The Ld. Assessing Officer has accepted the sale and cash realisation from the debtors to the tune of Rs. 1.50 crores and even the sales during the earlier financial year in some months i.e. in October and November 2015 were much more which have totally been ignored by the Assessing Officer. Thus, no issue of not accepting the valid explanation. Such income may be deemed to the Income of the assessee. When the basic fact that the sales have been recorded in the audited books of accounts, the nature of source stands identified as per past practice, the whole basis of making the addition is unjustified. The Assessing Officer has disregarded the evidence based on document....
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....nd accordingly we set aside the same with the direction to the AO to delete the addition made by him.''' 5. Without prejudice to above, now coming to the merits of the case, it is submitted that the assessee has deposited the amount of Rs. 2,47,50,000/- in its regular bank account during the demonetization period, out of the cash sales and realization from the debtors and cash sales are forming part of total sales of Rs. 13.82 crores as reflected in the trading account forming the part of the paper book and similarly realization from debtors is from identifiable parties.. 6. As already substantiated in reply to the Investigation Wing that the cash sales during the financial year 2015-16 and 2016-17 as per books are as under:- Month Total cash sales in the month Total sales in the month October 2015 1,99,88,776/- 3,46,95,947/- November 2015 3,18,76,008/- 4,66,82,641/- October 2016 1,04,97,098/- 2,11,65,607/- November 2016 62,00,849/- 1,31,46,206/- From the above chart, your goodself would appreciate that the cash sales were much more in the earlier years months and rather it is a regular phenomenon as is evident from the following facts:- Asstt. Yea....
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....ts which had not been rejected by the AO under section 145(3) of the Act. It was also stated that the stock position depicted in the books of account had been accepted by the AO and the sales were made out of the accounted stock, accepted as such by the AO, thus, it was only exchange of asset from stock to cash by way of cash sales and realization from debtors to whom sales were made in earlier period, the stock available with the assessee was commensurate with sales made as per the books of accounts on which gross profit had been declared and taxed. 5.4 The assessee submitted before the Ld. CIT(A) that the sales were duly supported by relevant vouchers which were produced before the AO in the course of assessment proceedings and nothing adverse in connection therewith was noted by the AO, the figures of sales, inclusive of cash sales, offered by the assessee in its Return of Income for the F.Y. 2016-17 was accepted as such by the AO and considered in arriving at the assessed income of the assessee, therefore, the cash sales and realization from debtors duly recorded in the books of the assessee having been accepted as such by the AO, the corresponding cash deposits made out of th....
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.... * ACIT Vs. Ercon Composites reported in 49 taxmann.com 489 (Jodhpur Bench) * ITO Vs. Pranab Prakash Dutta in ITA No. 1492/Kol/2011 vide order dt. 25/06/2012 * CIT Vs. PashupatiNath Agro Food Products P Ltd. ITA No. 165 of 2010 (Allahabad HC) * Ramjiwan Lal Vs. CIT (1980) 123 ITR 319 (All.) * ACIT Vs. Roopchand Tharani (2012) 66 DTR 104 (Chattisgarh) * CIT Vs. Paradise Holidays (2010) 325 ITR 13 (Del HC) * CIT Vs. Smt. Poonam Rani (2010) 326 ITR 223 (Del HC) * CIT Vs. Om Overseas (2009) 315 ITR 185 (P&H HC) * CIT Vs. Ludhiana Steel Rolling Mills(2007) 295 ITR 111 * Dewas Soya Ltd. Ujjain Vs. Income Tax (Appeal No. 336/Ind/2012) * CIT Vs. Devi Prasad Vishwnath Prasad (1969) 72 ITR 194 (SC) * CIT Vs. Durga Prasad More (1969) 72 ITR 807 (SC) * Smt. Harshila Chordia Vs. ITO (2008) 298 ITR 349 * M/s Heera Steel Limited Vs. ITO (2005) 4 ITJ 437 * CIT Vs. Ghai Lime Stone Co. (1983) 144 ITR 140 (MP) * R.B. Jessaram Fatehchand (Sugar Dept.) Vs. CIT [1970] 75 ITR 33 (Bom) * M. Durai Raj Vs. CIT [1972] 83 ITR 484 (Kerala) * M/s Asian Consolidated Industries Ltd. Vs. ITO in ITA No. 4873/Del/1998 vide order dt. 05/10/2018 (Del) * ITO Vs. M/s Sunny Jewellery ....
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....it of cash which was duly accounted for in the books of account was totally against the law. The reliance was placed on the following case laws: * CIT Vs. K.C. Malhotra reported in 164 Taxman 101 (P&H) * CIT Vs. Surinder Pal Anand reported in 192 Taxman 264 (P&H) * Nand Lal Popli Vs. DCIT reported in 71 taxmann.com 246 (Chd. Trib) * Pr. CIT Vs. Akshit Kumar reported in 197 DTR 121(Del) * Agsons Global P Ltd. Vs. ACIT in Appeal No. 3741 to 3746/Del/2019 dt. 31/10/2019 * R.B. Jessaram Fatehchand (Sugar Dept.)Vs. CIT [1970] 75 ITR 33 (Bom) * M. Durai Raj Vs. CIT [1972] 83 ITR 484 (Kerala) * M/s Asian Consolidated Industries Limited Vs. ITO in ITA No. 4873/Del/1998 dt. 05/10/2018 (Delhi Bench) * ITO Vs. M/s Sunny Jewellery House in ITA No. 196/Chd/2014 dt. 06/05/2016 * ACIT Vs. M/s Kewal Singh in ITA No. 664/Chd/2016 dt. 08/02/2017 * President Industries reported in 258 ITR 654 (Guj) * Chuharmal Vs. CIT reported in 172 ITR 250 (SC) 5.10 The assesse concluded the submissions before the Ld. CIT(A), in the following words: CONCLUSION: Therefore, to conclude the issue, on the basis of above facts and judicial pronouncements, it is submitted that the addition as....
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.... allowing the benefit of cash balance as on 30.09.2016 which means the AO himself has accepted part of the book results of the assessee then addition of the balance cash deposits is incorrect and in-genuine. ❖ Addition so made by the AO deeming the impugned cash deposits arising out of accounted cash sales and realisation from debtors as unexplained u/s 69A merely on the basis surmises & conjectures is fallacious and deserves to be deleted. 5.11 It was also stated that the AO had erred in invoking the provisions of Section 115BBE of the Act which came into effect on 15/12/2016 which was applicable for the A.Y. 2017-18 and not for the year under consideration. The reliance was placed on the following case laws: * CIT(Central)-1 Vs. Vatika Township Private Limited (2014) 367 ITR 466(SC) * CIT Vs. Scindia Steam Navigation (1961) 42 ITR 589 (SC) * Karimtharuvi Tea Estate Ltd. Vs. State Of Kerala (1966) 60 ITR 0262 (SC) * STO Vs. Oriental Coal Corporation [1998] 68 STC 398 (SC) * CIT Vs. Ansal Land Mark Township (P) Ltd. [2015] 61 taxmann.com 45(Del) * DIT vs. Medical Trust of the Seventh Day Adventists [2017] 84 Taxmann.com 202 (Madras HC) * National Agricultura....
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....nd Bhagat Ambica Ram Vs. CIT [1959] 37 ITR 288(SC) 5.13 The Ld. CIT(A) after considering the submissions of the assessee asked the AO to furnish the factual report on the following points raised by the assesse. 2. It is contended in the grounds of appeal that there was no search & seizure operation on the Company and therefore the assessment framed by the Assessing Officer u/s 153 A is void-ab-initio. A copy of the submission filed by the AR during the appellate proceedings for the assessment year 2012-13 is enclosed. The AR in his written submission claimed that there was search and seizure operation at the residential premises of the partners of the firm (M/s. Roop Fashion) and there was only a survey operation at the business premises of the partnership firm (M/s. Roop Fashion) at Dr. Gujjar Mai Road, Ludhiana. The AR has enclosed the copy of order dated 01.11.2017 passed u/s 133A(3)(ia) of the Income Tax Act, 1961 and copy of summon dated 12.01.2018 along with Annexure-A in support of his claim regarding survey. 3. To clarify whether any authorization u/s 132 was executed for conducting search in the case of M/s. Roop Fashions, Dr. Gujjar Mai Road, Ludhiana and if so, plea....
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....Panchnama is enclosed herewith. 5. In view of the Warrant of Authorization issued u/s 132(1) in the name of M/s. Roop Fashion, the assessments completed by the AO u/s 153A in the case of M/s. Roop Fashion for the A. Y. 2012-13 to 2017-18 are valid and as per law. The above is submitted for your kind personal." 5.15 The aforesaid report furnished by the AO was forwarded to the assessee for comments, in response the assessee submitted the rejoinder as under: We have to very humbly submit that we have already filed a reply in connection with the appeal for the relevant year and the only addition made by the Assessing Officer is on account of cash deposited in the regular bank account of the assessee out of sale proceeds of ladies dress material. It is submitted that before the Ld. Assessing Officer, we had submitted a chart, which have been reproduced in the assessment order by the Assessing Officer and a readable copy is being filed herewith. From this chart, your goodself would find that last year in October 2015, we had deposited an amount of Rs. 2.74 crores and in November 2015 an amount of Rs. 3.61 crores was deposited and, whereas, during the year under consideration, w....
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....epancy in the books of accounts of the assessee which had not been rejected by the AO under section 145(3) of the Act and that the stock position depicted in the books of account had been accepted by the AO, the cash sales were made out of the accounted stock, so there was only exchange of asset from stock to cash. The Ld. CIT(A) was of the view that when the sales recorded in the books of account having been accepted by the AO the corresponding cash deposit made out of such cash sales and cash realization from debtors could not be rejected. He further observed that the AO had accepted the substantial portion of cash sales but had not given any reason / justification for accepting the availability of cash to the tune of Rs. 1.5 crores only and that the whole basis of making the addition was on surmises and conjectures. 5.18 The Ld. CIT(A) found merit in this submission of the assessee that the entries in the books of accounts depicted a true state of affairs unless some contrary evidence was found and the books were rejected by the AO. The Ld. CIT(A) categorically stated that there was no such findings regarding any evidence about bogus sales or bogus purchase by the assessee and ....
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....ess of cash deposited during the demonetization period. He also pointed out that during the search no irregularity, regarding unaccounted sales or purchase was noticed and the discrepancy in the stock was explained. The Ld. CIT(A) opined that there was merit in the contention of the assessee that when book results of the assessee had been accepted and the GP rate declared was also accepted which included all the sales recorded then without rejecting the books of accounts and only doubting part of sales and adding the part sale as cash, would give an absurd result which would also result in double addition because those sales had already been accounted for while arriving at gross profit in the trading account and then adding them separately also as unaccounted cash which means that sales of Rs. 97,50,000/- had once been credited in the trading account forming part of gross profit and then also adding them separately treating as unaccounted cash of Rs. 97,50,000/-. The Ld. CIT(A) observed that there was no indication as to which sales bills out of total sales of Rs. 2,47,50,000/were treated as genuine and which sales bills were not treated as genuine, and that why this distinction wa....
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.... assessment order which gives the total cash sale and other details copy of which is also placed at page no. 447 of the assessee's compilation but the AO had not given any adverse comments with respect to the said chart. It was further stated that the AO adopted the adhoc method and that out of the total cash deposits of Rs. 2,47,50,000/-, he accepted the cash sales of Rs. 1,50,00,000/- the balance amount of Rs. 97,50,000/- was added to the income of the assessee but without any basis. The Ld. Counsel for the assessee reiterated the submissions of the assessee made before the Ld. CIT(A) which had been summarized in para 19 of his written submission copy of which is placed on record and reads as under: i). Our opening stock, sales and closing stock have been accepted and no defects have been pointed out in day to day maintenance of books of accounts and it is also a fact that the assessee is in trading of ladies dress material and from October onwards, the sales are much higher side because of festivals/marriages and also in this trade, the case sale is the modus operandi of the trade as per past practice, not denied by the Assessing Officer. ii). All purchases are from identifi....
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.... order of CIT(A). ix). There is Delhi ITAT Judgment in the case of "Agson Global" which finding have been reproduced at page no. 23 of the order of CIT(A) and the said judgment had been approved by the Hon'ble High Court very recently and the copy of that decision is dated 19.01.2022 placed at pages 262 to 314 of the 'Paper Book' and it has been held that the finding of the tribunal was not perverse and this issue of the deposit of cash during post demonetization period had been discussed at length. x). Similar view, has been taken by the 'Vishakhapatnam Bench of the ITAT' in the case of "Hirapanna Jewellers vs. ACIT" in ITA No. 253/Viz/2020 vide order dated 12.05.2021 and the copy placed at page no. 315 to 321 of the Paper Book and in the above said case, again the issue was with regard to deposit of cash during the demonetization and it was held that there was no defect in the purchases & sales and same were matching with the inflow and outflow of stock and the financial statements, clearly shows that the reduction of stock position matching with the sales which clearly showed that the cash generated, represented sales and the Assessing Officer accepted sa....
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....count maintained by the assessee, no inflated purchases or suppressed sales were found. In the instant case, even the Investigation Wing asked the assessee to furnish the details which were submitted, copy of which is placed at page no. 75 to 123 of the assessee's compilation, on those details, no adverse comment was made by the Investigation Wing. It is also noticed that the assessee is having cash sales in all the years which is evident from page no. 4 of the impugned order passed by the Ld. CIT(A). For the year under consideration the assessee was having cash sales of Rs. 4,12,59,227/- out of total sale of Rs. 13,82,27,373/-, the cash sale was about 1/3rd of the total sales, similar was the position there in the preceding year. The assessee was also having cash realized from the debtors and it was not the case of the AO that the debtors of the assessee were bogus or those were not related to the business of the assesee. The cash deposited in the bank by the assessee during the demonetization period was out of the cash sales and the realization from the trade debtors duly shown in the book of accounts which were accepted by the A.O. The assessee had deposited Rs. 2,47,50,000/- du....