TaxTMI 
TaxTMI 
2023 (3) TMI 1148
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....CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief may please be granted by deleting the entire addition made by the ld. AO and confirmed by ld. CIT(A). 2. In the facts and circumstances of the case and in law, ld. CIT(A) has erred in confirming the act of the ld. AO, in invoking provisions of Section 115BBE of the Income Tax Act, 1961. The action of the ld. CIT(A) is illegal, unjustified, arbitrary and against the facts of the case. Relief and please be granted by quashing the invocation of Section 115BBE, as being not in accordance with the relevant law. 3. The assessee craves his right to add, amend or alter any of the grounds on or before the date of hearing." 3. The fact as culled out from the records is that the assessee is engaged in the business of wholesale and retrial business of gold and silver ornaments. He has filed return of income declaring total income at Rs. 45,83,340/- on 02.11.2017. The said income tax return was processed u/s 143(1) of the I.T. Act. Subsequently, the case was selected for complete scrutiny under computer assisted selection for scrutiny (CASS) to examine the issue of abnormal increase in cash ....
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....ld Please explain whether the sale made to the purchasers is matching with the nature of business carried on by you? Explain. 3.2 On the above two issue the assessee submitted written reply of the show cause notice on ITBA on 26.11.2019 which is reproduced as under: "1. As it has been brought to our notice that assessee has deposited cash of Rs. 82,50,000/- which is huge in comparison to the amount of cash deposited during the same period in the previous year. Your honor we would like to bring to your notice that starting from 19th of October 2016 Diwali Festival season was started and Marriage season also started form 11th of November 2016 due to which there was significant increase in retail sales during the period under consideration. Most part of sales was retail cash sales due to festive and wedding season which resulted in huge cash in hand with the assessee. As demonetization started from 08.11.2016, assessee deposited the previous year in the month of May assessee has deposited Rs. 42,00,000/- which was also a wedding season, which helps to indicate that during peak business season sales increases substantially which generate cash in hand. 2. C....
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....books of accounts, the pattern of cash deposits in the banks etc. I have particularly noted that the AO has observed that on 03.11.2016 and 07.11.2016 the appellant had deposited Rs. 1.5 lacs and 1 lac respectively in the bank account. After duly considering the circumstances of the case, I agree with the observations of the Assessing Officer that cash amounting to Rs.80,00,000/- deposited on 15.11.2016 is unlikely to be the sale proceeds from 08.11.2016 to 14.11.2016. As the addition has a sound basis, I find no need to interfere with the action of the Assessing Officer. 10. In the result, the appeal is dismissed." 5. As the assessee did not find any favour from the order of the ld. CIT(A), he has preferred an appeal before this tribunal on the grounds so raised and reproduced here in above in para 2. In support of the grounds so raised by the assessee the ld. AR of the assessee, filed the following written submission. "I. Assessee, an individual, is engaged in the wholesale and retail business of gold and silver ornaments through his proprietorship concern M/s KV Jewellers. Assessee, for the year under consideration, filed his return of income on 02.11.2017, ....
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....) in the order from Pages 9 to 43 may please be considered in correct perspective. 4.2. Assessee maintained regular books of accounts including day to day stock records. Books of accounts of the assessee were Audited under the provisions Section 44AB of the Income Tax Act, 1961. In the Audit, there were no adverse remarks of the Auditor and the Auditor found the underlying evidences, substantiating the transactions recorded in the books of accounts, to be adequate and reasonable. 4.3. Cash sales in the jewellery trade is a normal practice. Assessee has been selling jewellery in cash in past also. Breakup of the cash sales vis a vie total sales made by the assessee, during the year under consideration and in the preceding year is as under: - (Amt. in Rs.) Particulars AY 2016-17 AY 2017-18 Total Sales 1,48,81,725 7,60,31,534 Cash Sales 78,47,769 1,86,45,067 % of Cash Sales to Total Sales 53% 25% 4.4. Ld. AO disbelieved the cash sales for the sole reason that details of the buyers, including their name, PAN, addresses etc, were not available with the assessee, therefore, the same were not verifiable.....
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....ted Rs.180.53 crore post-demonetization in its Bank accounts, out of sale proceeds. During the course of assessment proceedings, assessee submitted details of closing stock, list of debtors, details of purchases and sales party-wise for year, VAT returns etc. However, AO made an addition of Rs. 150.53 crore as income u/s 68. CIT (A), restricted addition to Rs. 73.13 crores. Hon'ble Bench deleted the addition. The relevant para 126 (vii) is reproduced hereunder: "It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer. The assessee has maintained the complete stock tally in its accounting software. Such books of accounts are audited, quantitative records produced before the tax auditor, such quantitative records are certified by tax audit and no questions have been raised by the assessing officer. Thus, it cannot be said that the figures of sales and purchases are not supported by the quantity details." The said decision has also been upheld by Hon'ble Delhi High Court in Agson Global (P.) Ltd [2022] 134 taxmann.com 256 (Delhi). [CLC Page 280-309] 4.8. Attention is also invited towards the deci....
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....assessee was receiving money from the customers in hands against the payment on delivery of the vehicles on receipt from the dealer the question of such amount standing in the books of account of the assessee would not attract section 68 because the cash deposits becomes self-explanatory and such amounts were received by the assessee from the customers against which the delivery of the vehicle was made to the customers. The question of sustaining the addition of Rs. 6,98,000 would not arise." "We, therefore, hold that no addition was required to be made in respect of Rs. 6,98,000, which was found to be the cash receipts from the customers and against which delivery of vehicle was made to them." 4.10. Ld. AO invoked provision of Section 68 in respect of sales. Section 68 deems non-income to be income. In the instant case, the credits by way of sales were already offered for tax. Hence, Section 68 per se cannot be invoked. Provisions of Section 68 can only be invoked in cases where an assessee is unable to explain the source of a particular receipt to the satisfaction of the Assessing Officer. These provisions have no application in case where an amount already disc....
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..../2021 : (2021) 128 Taxmann.com 29 held that the assessee was maintaining complete stock tally, the sales were recorded in the regular books of accounts and the amount was deposited in the bank account out of the sale proceeds, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was no justified. Sales made by the assessee to cover the cash deposited in the bank post demonetization, was sufficient source of the cash deposited i.e.; the sales from the existing stock available with the assessee and was well explained, therefore, the addition made by the AO and sustained by the Ld. CIT(A) was not justified. - Decided in favour of assessee. 4.14.ii ITAT, Jaipur Bench, in the case of Motisons Jewellers Ltd., ITA Nos. 161 and 178/JP/2022 [CLC - Page 1- 93], vide order dated 29.09.2022, dismissed the appeal of the Department. Hon'ble ITAT relied upon the decision of Hon'ble Rajasthan High Court in the case of Smt. Harshil Chordia Vs. ITO reported at MANU/RH/0851/2006 : 298 ITR 349 (Rajasthan-HC) and held as under:- "...Thus, the fact of the case on hand is similar to the jurisdictional high court decision cited by the Ld. AR of the assessee. The Ld. AR ....
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....1.2016 to 08.11.2016, along with the Sales Bills. [AO Order Page 3] 4.15.ii Copy of the Monthly summary of Stock Register. [PB : 94] 4.15.iii Copy of Sales Register from the books of accounts of assessee for the relevant previous year. [PB : 92] 4.15.iv Copy of cash book for the relevant previous year [PB : 34-91]. 4.15.v Copies of VAT Return filed by the assessee, for the year under consideration. [PB : 30-33] 4.15.vi Tax Audit Report 4.15.vii Audited Financial Statements [PB : 1-5] 4.16. Assessee was a registered VAT dealer and all such sales had been reflected in the VAT returns of the assessee. 4.17. It is worthwhile to note that ld. AO has accepted the opening stock, purchase, as well as the closing stock at the year-end to be genuine and correct. It is also worthwhile to mention that the ld. AO has not rejected the books of accounts of the assessee by invoking the provisions of Section 145(3). Ld. AO has not brought any material on record to establish that the sale bills were bogus or any evidences indicating that sales were bogus. Ld. AO is wrong in not accepting the declared cash sales as not verifiable....
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....ndisclosed sources, and the burden was not on the assessee to prove how it had received these high denomination currency notes; for, until the Demonetisation Ordinance came into force high denomination currency notes could be used as freely as notes of any lower denomination and no one had any idea that it should be necessary for him to explain the possession of high denomination currency notes, the assessee has naturally not kept any statement regarding the receipt of these currency notes, and it was for the first time on January 12, 1946, when the Ordinance came into force, that it became necessary for the assessee to explain its possession of these currency notes; and (ii) that the explanation given by the assessee that the notes formed part of the cash balance of Rs. 34,000 and odd was fairly satisfactory and was not found by the Tribunal to be false; the statement of sales was hardly relevant to the question; the Department, in relying on the entries relating to the bills of each day, committed an error and no inference should have been drawn from them; that any one single transaction did not exceed Rs. 399 did not preclude the possibility of payment in high denomination notes....
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....s, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstances of the case is not accepted and we see no reason to interfere in the order of the ld. CIT(A). Thus, we sustain the order of the ld. CIT(A) with the observations above. The appeal of the revenue stands dismissed..." 4.20.ii Similar observations were made by ITAT, Jaipur Bench, in the case of Raj Kumar Nowal, ITA No. 165/JP/2022, Jaipur Bench, [CLC Pages 144 to 182] 4.21. Ld. AO at Page 4 of his order has stated that the opening balance of cash amount with the assessee was Rs. 11,03,263 on 21.10.2016. Thereafter, 112 cash sale bills were issued by the assessee for sale of Rs. 70,80,378. 4.21.i It is submitted that such period, from mid of October 2016 till the time when demonetization was announced, the assessee had peak season of sales. 4.21.ii Diwali was on 30.10.2016 and thereafter, marriage season had started from November 2016. As a result, there wa....
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....ct. Rate of Tax 30% 01.04.2013 Cash sales by the assessee 01.10.2016 to 08.11.2016 Amendment -115BBE introduced in Lok Sabha 28.11.2016 Amendment -115BBE passed by Lok Sabha 29.11.2016 Amendment -115BBE received President assent 15.12.2016 4.27. Attention is drawn towards the STATEMENT OF OBJECTS AND REASONS presented before the Hon'ble Parliament while introducing "The Taxation Laws (Amendment) Bill, 2021". Relevant Para 5 is reproduced below to emphsise that law cannot take effect on transaction which have taken place before the relevant law getting assent of the President: "5. The Bill proposes to amend the Income-tax Act, 1961 so as to provide that no tax demand shall be raised in future on the basis of the said retrospective amendment for any indirect transfer of Indian assets if the transaction was undertaken before 28th May, 2012 (i.e., the date on which the Finance Bill, 2012 received the assent of the President). It is further proposed to provide that the demand raised for indirect transfer of Indian assets made before 28th May, 2012 shall be nullified." 4.28. Thus, the law, applied by the ld. AO did not see the light o....
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....f applicability of the new inserted proviso to Section 113 levying surcharge over and above the tax rate of 30% in case of block assessments; 4.32.ii Proviso was introduced vide Finance Act, 2002, with effect from 1.06.2003. Thus, the law stood enacted as on 1.04.2003 and, accordingly, as per normal principles should have applied on all searches carried out during Financial Year 2002-03 (AY 2003-04). 4.32.iii Hon'ble Apex Court was pleased to hold that amendment would apply prospectively and would be applicable on searches conducted after 1.06.2002. 4.32.iv The facts of the issue involved in the present appeal are identical. Therefore the issue is squarely covered by the judgement of Hon'ble Supreme Court in Vatika Township (P) Ltd (Supra). Accordingly, the amended provision of Section 115 BBE should apply on incomes accruing after the law having received assent of the President. 4.33. In the case of Govind Das (1976) 1 SCC 906 (SC), following observation was made by the Hon'ble Supreme Court while holding Section 171(6) of the Income Tax Act to be prospective and inapplicable for any assessment year prior to 1-4-1962, the date on which the Incom....
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....ourse must be the first to be given effect to), but because the law which was intended to be given retrospective effect to as a clarificatory amendment, is in its true nature one that expands the scope of the section it seeks to clarify, and resultantly introduces new principles, upon which liabilities might arise. Such amendments though framed as clarificatory, are in fact transformative substantive amendments, and incapable of being given retrospective effect. An important question, which arises in this context, is whether a "clarificatory" amendment remains true to its nature when it purports to annul, or has the undeniable effect of annulling, an interpretation given by the courts to the term sought to be clarified. In other words, does the rule against clarificatory amendments laying down new principles of law extend to situations where law had been judicially interpreted and the legislature seeks to overcome it by declaring that the law in question was never meant to have the import given to it by the Court? The general position of the courts in this regard is where the purpose of a special interpretive statute is to correct a judicial interpretation of a prior law, which the....
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....8 to 69A are made. Penal statutes which create offences or which have the effect of increasing penalties for existing offences will only be prospective by reason of the constitutional restriction imposed by ARTICLE 20 of the CONSTITUTION OF INDIA. Therefore, if an Act creates a new offence, it will bring into its fold only those offenders who commit all ingredients of the office after the Act comes into operations. This rule of construction against retroactivity of penal laws is not restricted to criminal offences punished with imprisonment, but also applies to laws which provide for other penal consequences, such as fines and penalties. 4.40. Attention is also drawn towards the decision of Full Bench of Hon'ble Patna High Court in the case of Loknath Goenka [2019] 417 ITR 521 (Patna) (FB) 4.40.i Hon'ble High Court held the tax is charged on the point of time of accrual of income; 4.40.ii In the case before Hon'ble High Court, the substantial question of law for decision was whether law relating to clubbing of minor son's share of income under Section 64(1)(iii) which was introduced by Taxation Law (Amendment) Act, 1975, w.e.f 1.04.1976 would be applicabl....
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....dding the same income twice. The demonetization was announced on the night on 08.11.2016 and cash has been deposited into the bank account on 15.11.2016. The cash is duly supported on the sale bills and same is recorded in the audited books of account. The said books were never found defective and not rejected. During the assessment proceeding assessee has submitted purchase register, sales register, details of the stock, cash book and submitted the entire other details called for by the AO from the assessee. The assessee also has the cash sale for the other period for marriage season which has not been doubted. Demonetization was announced in the night on 08.11.2016 whereas these days from 19th October, 2016 Deepavali festival were on and Marriage seasons were to start in November, 2016. So, on account of these reasons the selling of goods worth Rs. 80,00,000/- made by the assessee cannot be doubted merely during these period cash was deposited in the demonetized currency. The ld. AO has not rejected the books, not doubted about the availability of the stock with the assessee to support the sales so made. The sales were ranging below Rs. 2 lac the assessee cannot be obligated to m....
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....ase of Mahendra Kumar Agarwal, ITA No. 172/JP/2022 106-143 4 Copy of the order of ITAT, Jaipur Bench in the case of Raj Kumar Nowal, ITA No. 165/JP/2022 144-182 5 Copy of the order of ITAT, Chandigarh Bench in the case of Roop Square Pvt. Ltd. ITA No. 198 and 249/Chand/2021. 183-190 6 Copy of the order of ITAT, Kolkata Bench in the case of Senco Alankar, ITA No. 10/Kol/2021 191-197 7 Copy of the order of ITAT, Visakhapatnam Bench in the case of Hirapanna Jewellers ITA No. 253/Viz/2020 and CO No. 02/Viz/2021. 198-205 8 Copy of the order of ITAT, Delhi Bench in the case of Agson Global(P) Ltd. 115 taxmann.com 342 (Delhi) 206-279 9 Copy of the order of High Court of Delhi in the case of PCIT vs. Agson Global (P) Ltd. 134 taxamnn.com 256 (Delhi) 280-309 10 Copy of the order of High Court of Rajasthan in the case of Smt. Harshita Chordia 298 ITR 349 (Rajasthan) 310-315 8. The ld. DR is heard who read and relied on the relevant findings of the lower authorities and also on the report of the ld. AO bearing dated 03.03.2023 the same is reproduced here in below : "Kindly refer to your office letter No. 564 dated 0....
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....e received against cash sales. It cannot be denied that the unexplained money kept in the SBN could be introduced in books of accounts in the garb of cash sales. Since the assessee has not maintained address and contact no of the buyers, he has failed to prove genuineness of the inconsistent cash sales shown in books of accounts. 4 The Id. CIT(A) has confirmed the finding of the AO while in para -9 of his order which is given as under: "I have noted that the Assessing officer has thoroughly examined the books of accounts, the pattern of cash deposits in the bank etc. I have particularly noted that the AO has observed that on 03.11 2016 and 07.11 2016 the appellant had deposited Rs. 1.50 lacs and 1 lac respectively in the bank account. After duly considering the circumstances of the case, I agree with the observations of the Assessing officer that cash amounting to Rs. 80,00,000/- deposited on 15.11.2016 is unlikely to be the sale proceeds from 08.11.2016 to 14.11.2016. As the addition had a sound basis. I find no need to interfere with the action of the Assessing officer." Point 4(A) As regards making addition u/s 68 of the Act, in the a....
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....e independent Chartered Accountant and copy of audit report and statement of profit and loss account is filed by the assessee. It is noted from the record that the case of the assessee was taken up for scrutiny assessment u/s 143(3) on the basis of CASS and desired information by the AO were submitted by the assessee from time to time. After completion of assessment the AO vide his order dated 03-12-2019 assessed the income of the assessee at Rs.1,25,83,340/- as against return income of Rs. 45,83,340/- thereby making a single addition of Rs. 80,00,000 out of the total cash deposited being the demonetized currency for an amount of Rs. 84,00,000/-. The assessee is selling the jewellery in cash in past year also and the ld. AR of the assessee in his submission explained that in fact in the year under consideration the overall sales as % to total sales has reduced and to support this contention he has submitted the relevant data and the same is reiterated here in below: (Amt. in Rs.) Particulars AY 2016-17 AY 2017-18 Total Sales 1,48,81,725 7,60,31,534 Cash Sales 78,47,769 1,86,45,067 % of Cash Sales to Total Sales 53% 25% 9....
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....rse remark and in fact even the ld. AO has not made any adverse remark on the sales register and cash book submitted by the assessee to support the contentions of having been sold the goods/jewellery in cash. 9.3 The bench noted the ld. AR of the assessee has relied upon the various judgment and the some of the judgment which has direct bearing on the dispute and having similar facts are considered one by one in brief. Decision in the case of Hirapana Jewellers in ITA no. 253/Viz/2020 where in it is held that since the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s. 68. The second decision relied upon is in the case of Agson Gobal Private Limited 115 taxmann.com 342 wherein it is held that " "It is not the case of the revenue that assessee has not shown the relevant stock register before the assessing officer. The assessee has maintained the complete stock tally in its accounting software. Such books of accounts are audited, quantitative records produced before the tax auditor, such quantitative records are certified by tax audit and no questions have been raised by the assessing officer. Thus, it cannot be said that the ....
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....ircumstances available on record. The court further held that the opinion of the assessing officer is required to be formed objectively with reference to the material available on record. Hence, application of mind is sine qua non for forming the opinion. The only reason placed by the ld. AO in his order that the full name, address or/and PAN of the customer to whom goods were sold in cash during the course of business below to the prescribed limit has not been given. It is voluntary to the customer to provide their personal information to the assessee while goods being sold and even the law does not mandate to the assessee up to an amount of Rs. 2 lac. This view is also taken by co-ordinate bench of this Jaipur bench in the case of Mahendra Kumar Agarwal in ITA No. 172/JP/2022 the relevant finding is reiterated here in below: "...As regards not providing the name, address and PAN of the customers to whom cash sales was made, the assessee has explained that the sales were below the prescribed limit so it is not compulsory or mandatory under the Income Tax Act, 1961 to collect the information related to full name, address and PAN of the customer to whom goods were sold in c....
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....ding that has been recorded by us in the preceding para we are of the considered view that the action of the ld. AO making an addition under section 68 for an amount of Rs. 80,00,000/- as unexplained cash deposit without rejecting the books of account is unwarranted based on the discussion so recorded here in above. Even the ld.AO has not find any defects in the details submitted by the assessee and audited books were considered and accepted while finalizing the assessment. Similar view has been taken by this coordinate bench of Jaipur in the case of Chandra Surana in ITA No. 166/JP/2022 wherein the similar view has been taken. The relevant finding is reproduced here in below; 2.6 We have heard both the parties and perused the materials available on record. From the assessment records, it is noted that the AO made an addition of Rs.2,90,93,500/- in declared income by holding that said amount of cash deposited by the assessee in his bank account during the demonetization period is nothing but the undisclosed income of assessee which was shown under the garb of cash sales and thus it is liable to be added u/s 68 of the Act and taxable @ 60% under the provision of Section 115....
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....ent proceedings before the AO and it is not the case of the AO that the assessee did not have sufficient stock for making the sales. Hence, it cannot be said that the figures of sales and purchases are not supported by the quantitative details and the AO did not make any enquiry on the material supplied by the assessee. Thus the AO neither brought any material on record to establish that the sale bills are bogus nor provided any evidence that such sales are bogus. It is also an open fact that the demonetization of Rs.500/- and Rs.1000/-note was declared by the Hon'ble Prime Minister at 8 PM on 8-11-2016 and after this announcement the persons reached the jewellery shop to buy jewellery in exchange of notes. Thus all such scenario indicates that the assessee had duly substantiated its claim from the documentary evidences and also with the facts. It is also observed from the assessment order that the AO had not rejected the books of account of the assesee as no contrary material was available with him to reject the books of account of the assessee. As regards the addition of Rs.2,90,93,500/- made by the AO by applying the provisions of Section 68 of the Act, it is noted that provisio....