TaxTMI 
TaxTMI 
2023 (6) TMI 477
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....out appreciating the fact that the ratio of such cash sales is very abnormal when compared to similar sales claimed to have been made during the period of October 2015 to November 2015 to October 2016 to 8th November 2016 (being the date of announcement of demonetization)?" iii "Whether on the facts and circumstances of the case and the law the Ld.CIT(A) has erred in considering the assessee's submission that no KYC is required for sales below the limit of Rs. 2 lakhs by referring the Rule 114B r.w.s .139A(5)(c) of the Act without appreciating the fact that the said rule is relating to quoting of PAN for carrying out specified transaction and not maintaining basic details i.e., name, address, contact details etc.?" 2. The brief facts of the case are that the assessee company is engaged in the business of wholesale and retail trade of all kind of gold, diamond jewellary, silver articles and other precious stones. The assessee has filed the return of income for the A.Y 2017-18 on 01.011.2017 disclosing a total income of Rs. 3,88,87,990/- under normal provisions of the Act and book profits u/s 115JB of the Act of Rs. 3,78,90,828/- and the return of income was processed u/s 143(....
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....e to be legal tender after 12.00 pm due to which the customers have turned out in large. The AO was not satisfied with the explanations and observed that the assessee has neither furnished the details of parties / customers with names, address, party wise cash sales and the A.O. is of the opinion to treat the cash deposits as unexplained cash credits u/s 68 of the Act. Further the assessee has furnished the form -1 form of declaration u/s 199C of the Finance Act, 2016 in respect of taxation and investment regime for Pradhan Mantri Garib Kalyan yojana Rules, 2016 and on record no other facts were filed regarding the disclosure of income under the scheme and finally assessed the total income of Rs. 17,18,37,993/- and computed the book profit u/s 115JB of the Act of Rs. 3,78,90,828/- and passed the order u/s 143(3) of the Act on 23.12.2019. 4. Aggrieved by the order, the assessee has filed the appeal with the CIT(A). The CIT(A) considered the grounds of appeal submissions of the assessee, in the appellate proceedings and the assessee has filed the details substantiating the claim referred at page 2 Para 4.0 of the order as under: 4. Appellants submissions: During these appeal proc....
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....is. Most important fact is that immediately on deposit of cash after demonetization, the email/notice was received from the income tax department and source was asked to which the appellant had replied that same is arising out of the cash sales and list of sales alongwith details of parties were given. Further during the course of assessment proceeding appellant had submitted the following documents: Appellant had uploaded following documents on 20,12,2019: 1. Cash Summary for FY 2015-16 2 Cash Summary for FY 2016-17 3 Branchwise Cashbook 4 VAT Tax Return 5 Pamplet of Promotion Scheme 6 Reply in response to Notice u/s 131 7 Reply in response to Notice u/s 133(6) 8 Quantity details of Stock 9 Bank account Statements 10 Form 1 (Pradhan MantriGaribKalyan Yojana), 2016 We are re-submitting the same in paper book format for your ready reference. In the above mentioned cash summary and cash book appellant had submitted the Month-wise details. In respect of opening cash, cash received, cash deposited in bank and cash utilised for purchases and expenses and closing balance for FY 2015-16 and 2016- 17 along with Month wise details of purchases, Cash and credit ....
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....posit from April 18 to March 2019 F.Y 2018-19 13,55,00,000+ Below mentioned table depicts the total turnover, cash received, cash deposit for financial year 2015-16 and financial year 2016-17: F.Y Total Turnover Cash sales % of total sales Cash deposited in bank 2015-16 59 Cr 18.55 31.44 17.35 2016-17 82 Cr 25.64 31.27 23.73 The above statistics clearly prove that in this country, the majority of the people prefer to purchase jewellery in cash. It is not the case that the appellant has the unaccounted cash which is deposited. The appellant has submitted all the details of cash receipt and party wise details of purchases above Rs. 2,00,000/-. The income Tax Rules per se requires details party wise only above Rs. 2,00,000/-, Hence for sales below Rs. 2,00,000/-, income tax rules also does not require the party wise details to be maintained. As per section 139(A)(5)(c) road with rule 1148 of Income Tax Rules no KYC is required for gold sales upto Rs. 2,00,000/-. Requirement for KYC for purchases above Rs 10 lakh are part of India's commitments to the Financial Action Task Force (FATF), of which it has been a member since 2010. Thi....
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....sing Officer and was compared with the stock and cash position as per books. The stock and cash position as per the books had been arrived at after the effect of the aforesaid cash sales. The stock position as well as the cash position as per the said books had been accepted by the Assessing Officer, The Commissioner of Income-tax (Appeals) also noted that the appellant had furnished the complete set of books of accounts and the cash books and no discrepancy had been pointed out. The Assessing Officer had doubled the aforesaid sales as bogus and had made the aforesaid addition. However, the Commissioner of Income-tax (Appeals) as well as the Income-tax Appellate Tribunal returned findings of fact to the contrary. The Tribunal also noted that the departmental representative could not challenge the factual finding recorded by the Commissioner of Income-tax (Appeals). Nor could he advance any substantive argument in support of his appeal. The Tribunal also observed that it is not in dispute that the sum of Rs 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. It is in these circumstances that the Tribunal obse....
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....t be any addition in undisclosed income, since the said amount has already been included in sales and hence in total Income. The honorable Delhi High Court accepted the contention if assessee. 4.Salem Sreeramavilas Chit Company (P.) Ltd. v. Deputy Commissioner of Income Tax, Circle 1(1) HIGH COURT OF MADRAS [2020] 114 taxmann.com 492 (Madras) Section 69A, read with section 153, of the Income-tax Act, 1961 Unexplained moneys (Demonitization Cash deposits) - Assessment year 2017-18- Government of India demonetized Rs. 500 and Rs. 1000 notes on 8-11-2016 Between 1-11-2016 and 8-11-2016, assessee had collected a sum of Rs. 57.86 lakhs from its chit fund business - Deputy Commissioner concluded that amount collected by assessee during said period was huge and remained unexplained and therefore, treated same as unaccounted money in hands of assessee under section 69A However, amount did not appear to be unusual as compared to collection made during previous year 2015 and amount deposited out of total collection was also not in variance with cash deposits made by assessee during Proceeding financial year Collection of monthly subscription/dues by assessee appeared to be reasonable as ....
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....efect in purchases and sales and same were matching with Inflow and outflow of stock - Audit report under section 44AB and financial statements clearly showed reduction of stock position matching with sales which clearly showed that cash generated represented sales Assessing officer accepted sales and stocks He had not disturbed closing stock which had direct nexus with sales Both Assessing Officer and DDIT (Inv.) did not find any defects in books of account, trading account, P&L account and financial statements of assessee Whether, on facts, Impugned addition made under section 68 was to be deleted-Held, yes [Paras 7, 7.2 and 9] [In favour of assessee). Ground of Appeal 2 On the facts and under the circumstances of the case and in law the learned AO erred in concluding that cash sales has increased drastically upto 10 times as compared to the previous year without appreciating the facts: 1. The total sales has increased during the year on the account that appellant company had celebrated 78 years of establishment and on the occasion company had given free gifts on purchase of all kind of jewellery, silver bar, loose diamond etc. hence there were many walk-in-clients during t....
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.... following reasons for increase in turnover of Cash sales and Cash deposited during the F.Y: 2016-17 (A.Y: 2017-18) as compared to P.Y 2015-16 (AY 2016-17). 1. Turnover of sales during F.Y. 2016-17 of the first 3 month was decreased due to strike by Jewellers association to protest against levy of excise duty on Jewellery therefore the customers could not buy Jewellery and they had bought Jewellery during Navratri to Diwali festival (October 2016) and therefore there was sufficient reason for increase in Sales during that period. 2. The company had also celebrated its 78 years of establishment and on this occasion the company had given free gifts on purchase of all kind of Jewellery, Silver Bar, Loose Diamond the scheme was only for the period from the period 12/10/2016 to 14/11/2016 at all three outlets. Customers have purchased the jewellery during festival period and availed the benefit of the said scheme. This was also one of the reason for increase in sales during that period. 3. Demonetization was on 08.11.2016 l.e immediately proceeded by Diwali sales on 30th October 2016 which is the main season of sales for all kinds of jewellery. The same trend existed in past yea....
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....he addition overlooking various facts, evidences and findings of the AO, where the assessee could not explained completely the cash deposits during the demonetization period and were not substantiated and the assessee has not maintained the proper books of accounts books and The Ld.DR prayed for allowing the revenue appeal. 6. Contra, the Ld. AR submitted that the assessee has filed the summary of cash book, invoices, stock register and also the comparison of the sales from earlier years and names, PAN of the customers in the assessment proceedings and were overlooked. Whereas, the CIT(A) has considered the primary and secondary evidences filed and relied on the judicial decisions and granted the relief. The Ld.AR substantiated the submissions relying on the order of the CIT(A), factual paper book, charts and judicial decisions. 7. We heard the rival submissions and perused the material on record. The sole crux of the disputed issue envisaged by the Ld. DR that the CIT(A) has erred in granting relief to the assessee overlooking the various facts and evidences and also the transactions are not to the satisfaction of the AO. The Ld.AR has submitted that the assessee has substantiat....
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....idences. At this juncture, we considered it appropriate to refer to the observations of the CIT(A) in granting the relief dealt at Para 5 of the order, read as under: 5.0 Decision on Grounds of appeal and reasons thereof:- In this appeal, as many as 5 Grounds were raised. Ground no. 5, being residual ground and in the entire appeal proceedings no ground having been amended or added during hearing is worth dismissal and therefore, Ground no. 5 is dismissed. Ground no. 4 challenges the levy of interest u/s 234B/234C of the Act. This being consequential in nature, Ground no. 4 is worth dismissal, and is dismissed. Ground no. 1,2 & 3 are related to one another and challenge the one & single addition of Rs. 13,29,50,000 on account of unexplained cash credit u/s 68 of the Act. 5.1 Ground no. 1,2&3 challenge the addition of Rs. 13,29,50,000 u/s 68 of the Act. These grounds are now adjudicated as under: - 5.1.1 The Ld. AO discussed the related addition in Para no. 5 of the impugned order dated 23.12.2019. The discussion is as under: "5. Cash Deposit: 5.1 The case of the assessee has been selected under scrutiny for verification of cash deposits during the demonetization period. I....
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....arge. 5.6 The assessee's submission is carefully perused but the same is not found tenable. During demonetization period the assessee has deposited amount of Rs. 13,29,50,000 in SBNs. In order to justify the cash deposits in SBNs assessee has afterthought taken the plea of cash sales during the month of October & November 2016. Further, perusal of the details reveals that there are (sic is) multifold increase in cash sales. Further, the assessee had neither furnished the details of the parties/customers with respect to names, address, party wise cash sales etc. In view of the above, this clearly evident that the assessee has not carried out any cash sales and the assessee was in possession of unexplained cash credits and that since the demonetization of notes were brought in the assessee had deposited all its unexplained cash credits into its bank account. In view of the above, amount of Rs. 13,29,50,000 is treated as unexplained cash credits u/s 68 of the IT Act, 1961 and added to the total income of the assessee. Since, the income of Rs. 13,29,50,000 has been determined under section 68 of the Income Tax Act, 1961 and tax is payable under section 115BBE of income Tax Ac....
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....nt company was also no exception to this general rule. It was furthermore submitted that this was one of the reasons for increase in sales in the corresponding period i.e. October & November, 2016. 5.1.3 All the facts and circumstances of relation addition of 13,29,50,000 are duly considered. Also, the arguments of Ld. A/R and facts in the Written Submission submitted/uploaded on 18.11.2021 on ITBA and the facts and to why circumstances as to why the Ld. AO had to make the addition, as discussed in the impugned assessment order dated 23.12.2019 have been given a thoughtful consideration. As a result, following points are found/noted: - i. That, the appellant company had submitted all the details of cash receipts and party wise details of sales above Rs. 2,00,000 each. ii. That, for sales below Rs. 2,00,000 each, Rule 114B of I.T. Rules, 1962 r.w.s . 139 (A) (5) (c) of the Act provide that no KYC (Know Your Customer) is required. This argument is also being taken by Ld. A/R. iii. That, the chart given by Ld. A/R on the page no. 4 of the Written Submission dated 18.11.2021 clearly shows that the percentage of cash sales out of total sales is almost the same i.e. 31.27% during....
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....ocks - He had not disturbed closing stock which had direct nexus with sales - Both Assessing Officer and DDIT(Inv.) did not find any defects in books of account, trading account, P&L account and financial statements of assessee - Whether, on facts, impugned addition made under section 68 was to be deleted - Held, yes". 5.1.6 In pursuance to the above discussion, the appellant gets the relief for which it is entitled to. The Ld. AO is directed to delete the impugned addition of Rs. 13, 29, 50,000. Ground no.1, 2 &3 are, therefore, allowed. 6.0 As a result, this appeal is allowed for the statistical purposes. 9. We found that the CIT(A) has relied on the information, evidences and findings of the AO and the judicial decisions. Further in the course of hearing, the Ld. DR has filed the information received from the AO by letter dated 23-11-2022 that the cash deposits in the bank accounts are specified bank notes during the demonetization period. The Ld. DR emphasized that no doubt the assessee has made the cash deposits in the old currency but the sources are not satisfactory. The Ld. AR submitted that that the assessee has filed the details of purchase of the jewellery by the cu....
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....essment year 2014-15 Assessee was engaged in business of textiles - All sales undertaken by assessee were in cash only. Noting such peculiarities, Revenue decided for spot verification at place from where assessee purportedly carried on business - Survey revealed that business premises was abandoned and that there was no proof of any business undertaken by assessee - Based on survey report, Assessing Officer concluded that entire cash deposit found in assessee's bank account was unexplained income and not sale proceeds - Additions were thus made towards unexplained income - On appeal, Tribunal recorded that assessee had closed business in July, 2015 and survey was carried out in November, 2016 - It was also noted that entire opening stock, sales and closing stock of assessee was accepted during scrutiny assessment of previous year - Based on such findings, Tribunal deleted additions made - Whether where quantum figure and opening stock was accepted in previous years during scrutiny assessments, receipt from sales made by assessee proprietary concern out of its opening stock could not be treated as unexplained income to be taxed as 'income from other sources' - Held, yes....
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....ring the demonetization period into their account and that the assessee had claimed the source of cash deposit during demonetization as the accumulated cash balance as on 8-11-2016 wrongly. The Deputy Commissioner had also concluded that the assessee had not properly explained the source and the purpose of huge cash along with party wise break-up as was requested vide notice under section 142(1). iv. ACIT Vs. Hirapanna Jewellers, [2021] 128 taxmann.com 291 (Visakhapatnam - Trib) Section 68 of the Income-tax Act, 1961 Cash credit (Bank deposits post demonetization) - Assessment year 201718-Assessee firm was engaged in business of jewellery trading - A survey under section 133A was conducted at business premises of assessee by Deputy Director (Investigation) in which he found that assessee deposited huge sum in high denominations of specified bank notes post demonetization. Assessee had explained source of cash deposits as cash sales and advances received against sales - However, Assessing Officer held that said amount was unexplained cash credits representing unaccounted money brought in to business in guise of jewellery sales, and, accordingly, made addition under section 68 on....
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....receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. He submitted that the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It was also submitted that the assessee was having only one source of income from beedi, tea power and pan masala and therefore provisions of section 115BBE of the Act will have no application so as to treat the income of the assessee as income from other sources. It was also submitted that the government permitted all to deposit old demonetized notes upto 31-12-2016. Since the amounts deposited were sale proceeds of business and the income from the business have already been taxed, the impugned addition should be deleted. Our attention was also drawn to section 26(2) of the RBI Act, 1934 which provides that government can specify certain notes as not legal tender. It wa....
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.... the decision of Hon'ble Delhi High Court in the case of Kailash Jewellery House (supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld.CIT(A) and the same is upheld. 10. The assessee filed cross objections supporting the order of the Id. CIT(A). Since, the appeal of the revenue is dismissed, the cross objection filed by the assessee becomes infructuous, hence, dismissed. 11. In the result, appeal of the revenue as well as the cross objection of the assessee are dismissed." 8. Learned DR reiterated the stand of the Revenue as reflected in the order of the CIT(A). 9. I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to....
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....nd 14.4] [In favour of - assessee] II. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus sales/purchases) - Assessment years 2012-13 to 2014-15 Assessee-company was engaged in business of selling dry fruits - Assessing Officer on basis of statement of director of assessee-company which was recorded during search held that assessee booked bogus purchases in its books of account to inflate expenses and to educe its taxable profits, and made an addition at rate of 25 per cent of such purchases - It was noted that said additions were made without conducting any enquiry - Furthermore, entire purchase and sale transactions were duly recorded in regular books of account of all parties concerned and were channels - routed through regular banking Also, in original assessments, all these details were verified and assessments were framed under section 143(3) Whether, in view of above facts, since no - incriminating evidences were found, impugned addition was to be deleted - Held, yes [Para 15.1] [In favour of assessee] III. Section 69C of the Income-tax Act, 1961 - Unexplained expenditure (Bogus purchases) - Assessment years 201516 to 2017-18 - Assessee-company was ....
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.... parties and perused the record. The facts that the deposit made into the bank account is from out of the books of accounts and the said deposits have been duly recorded in the books of account are not disputed. It is the submission of the assessee that it had received advance money from walk in customers for sale of jewellery over the counter and the amount so received was duly recorded in the books of account. The said amount alongwith other cash balance available with the assessee was deposited into the bank account after announcement of demonetization by the Government of India. He also submitted that the assessee has raised sale bills against the said advances in the name of respective customers. Since the transaction was less than Rs. 2.00 lakhs, it was stated that the assessee did not collect complete details of the customers. Thus, it is seen that the advance amount collected from customers, the sales bill raised against them etc., have been duly recorded in the books of account. The impugned deposits have been made from cash balance available with books of account. I also notice that the Assessing Officer has not rejected the books of account. When cash deposits have been ....