AI Drafter 
TaxTMI 
TaxTMI 
2023 (7) TMI 494
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....ced that the assessee company has deposited cash of Rs. 21,69,98,000/- from 09.11.2016 to 31.12.2016 during demonetization period and the assessee was asked to produce relevant documents in support of its cash deposits. The assessee furnished month wise cash sales, cash deposits, purchases, opening cash in hand, advances from debtors, closing cash balances in hand. Assessee also submitted that generally the showroom will be closed around 8.30 pm but after Prime Minister's Speech on 08.11.2011 that 1000 and 500 currency notes would no longer be a legal tender after 12:00 midnight of 08.11.2016 there was a huge rush of customers pouring in the showroom to purchase which the assessee had never seen before. It was also submitted that the customers did not bother to look for the design of the jewellery and they were just ready to pick the products which were below Rs. 2 lakhs as no one wanted to share the PAN details, contact details etc. The assessee submitted that the cash generated from out of cash sales was deposited in parts in its banks namely Kotak Mahindra Bank and Federal Bank Ltd. The assessee also furnished comparison chart showing cash sales, cash deposits, turnover and clos....
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.... since cash deposits during 09.11.2015 to 31.12.2015 was 08,09,50,000/- he has calculated the growth rate of turnover cash deposits at Rs. 10,45,46,925/- for the period from 09.11.2016 to 31.12.2016. This was allowed as proven. The AO also allowed 1,25,00,000/- which was deposited under Pradhan Mantri Garib Kalyan Scheme, 2016 and arrived at the addition to be made u/s 68 at Rs. 9,99,51,075/- after considering deposits of Rs. 10,45,46,925/- and Rs. 1,25,00,000/- as explained out of cash deposits of Rs. 21,69,98,000/-. This was treated as unexplained and brought to tax u/s 68 of the Act. On appeal the Ld.CIT(Appeals) deleted the addition made u/s 68 of the Act, against which order the Revenue is in appeal before us. 7. At the time of hearing, the Ld. DR strongly supported the orders of the Assessing Officer and the Ld. Counsel for the assessee placed reliance on the orders of the Ld.CIT(Appeals). The Ld. Counsel for the assessee further submits that the Ld.CIT(A) following the decision of the Tribunal in the case of Agson Global Pvt. Ltd. vs. ACIT dated 31.10.2019 deleted the addition on identical facts and this decision of the Tribunal was also affirmed by the Delhi High Court i....
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.... b) Total cash sales from 01.04.2016 to 08.11.2016 Rs. 38,59,60,848/- 5.3 a) Percentage increase between 5.2(a) and 5.1(a) 34% b) Percentage increase between 5.2(b) and 5.1(b) 111% The AO has also given an allowance of Rs. 1,25,00,000/- which was reflected under Pradhan Mantri Garib Kalyan Yojana (PMGKY), 2016. The AO further added Rs. 9,99,51,075/- to the total income of the assessee company, as the assessee company failed to discharge the onus of proving genuineness of the cash deposited in bank accounts u/s 68 of the Act. 9. The Ld.CIT(Appeals) after analyzing the details of cash deposits, cash sales, turnover and the averments in the assessment order and also the evidences furnished by the assessee deleted the addition observing as under: - "4.10 From the analysis of the closing stock for the said period, it is evident that the appellant has sufficient stock-in-hand to justify sales. It is noted that the appellant during the course of assessment proceedings, had provided a quantitative details as on 31.07.2017 of the stock position before the A.O. The A.O has not pointed out any discrepancy with respect to the quantitative d....
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....f the old currency. Furthermore, it is submitted that the cash deposit ratio which is 82.73% in FY 2015-2016 and 82.23% in FY2016-2017 establishes the fact that there was regular deposition of cash in bank accounts owned by the assessee company. All these cash deposits are out of cash sales made from regular books of accounts. As far as FY 2017-18 is concerned the cash sales decreased slightly due to after effects of demonetization. 4.14 It was also noted that the cash in hand as on 09.11.2016, amounting to Rs. 21,33,29,127/- was deposited in the various bank accounts on 11.11.2016, 13.11.2016 and 15.11.2016. This shows no time lag between sales and deposit. This is also an important pointer to the fact regarding sales effected and deposits made. 4.15 Similarly, the appellant was asked to provide an analysis of the trend in GP, which is seen to be consistent. The same is enumerated hereunder: - Particulars 31.03.2018 31.07.2017 31.03.2016 31.03.2015 Total turnover 45,10,16,448 58,09,41,333 44,98,39,568 40,29,00,621 Gross Profit 3,80,49,895 4,46,08,482 3,04,83,358 2,71,43,369 GP ratio 8.44 7.68 6.78 6.74 ....
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....in the case under appeal before us and therefore, Section 69C is also not applicable. > Further, we find the stand of the Assessing Officer to be contradictory. On one hand, he mentioned the high sea sales to be not genuine and on the other, he has accepted the business income disclosed by the assessee. Admittedly, the business income disclosed by the assessee has been worked out after considering the purchases and sales of mobile phones. The sales included the high sea sales also. Once the Assessing Officer has accepted the trading results, he has accepted the sales including high sea sales. Therefore, his stand while making the addition under Section 68 or 69C is contradictory to his stand taken while accepting the business income which is not permissible in law. The Hon'ble ITAT has held that on one hand, the AO has accepted the sales as genuine by accepting the trading result disclosed by the assessee, and on the other hand, has held the high-sea sales to be 'not genuine'. The Hon'ble ITAT has held that there is an inherent contradiction in the same. The order of the A.O in the present case also suffers from the stated contradicti....
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.... as income, addition on the same account u/s 68 of the Act would be tantamount to double taxation of the same income. (iv) Similarly, the ratio of decision of Hon'ble ITAT, Hyderabad in the case of S.B. Steel Industries (ITA No. 264/Hyd/2011), has held that it is an established fact that only cash credits can be considered u/s 68, but, not trade receipts. The Hon'ble Tribunal took into consideration the decision of the coordinate bench of ITAT in the case of ITO vs. Rajender Kumar Kataria (106 TTJ 712) (Jodhpur) that held the amount received by the assessee were cash credits but recovery from the dates which were available in the books of account. Since the assessee has furnished details debtors and also entries made in the books of account, the invocation of Section 68 was held to be not applicable to trade recovery made by the assessee during the year. In the present case, the cash deposited in the bank is nothing but in the nature of trade-receipts only. (v) The A.O in the present case has based her estimation on the sales effected. The cash proceeds of the business, recorded in the books, deposited in the bank was offered to tax addition of the receipts of....
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....source of income. While dismissing the appeal of the revenue, the Hon'ble Court has made the following observations, which are relevant to the facts of the present case A. At the level of CIT(A), it was held that > Cash sales were duly recorded in the books and they found a place in the profit and loss account; > The assessee had furnished books of account and no discrepancy was pointed out B. At the level of ITAT, it was held that it was not disputed that the sum was credited in the sales account. It was also duly included in the profit disclosed by the assessee in the return of income. The Hon'ble Court endorsed the views of the Tribunal that in such cases, it could not be treated as undisclosed income and no addition could be made once again in respect of the same. In the present case, the AO has not pointed out any defects. Books of account have been accepted. No defects have been pointed out. In the absence of the same, resorting to an estimation, based on statistical extrapolation cannot be accepted. (vii) The Hon'ble ITAT, Delhi in the case of Agson Global Pvt. Ltd. vs. ACIT [ITA No. 3741 to 3746/Del/201....
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....f section 115BBE read with section 68 of the Act to the income already offered for tax by the Assessee (as cash sales) at a higher rate of tax of 77.25% (i.e. flat rate of 60% plus surcharge @ 25% on such tax and cess as applicable) on gross basis (without any deduction/allowance). In fact the treatment of the cash deposits as unexplained cash credits u/s 68 by the A.O has resulted in double taxation of the same amount, once in the form of cash sales already offered to tax by the Assessee at the rate of tax applicable to companies and again by way unexplained cash credit on deposits arising from such sales u/s 68 at higher rates specified u/s 115BBE. Section 115BBE of the Act is a machinery provision to levy tax on income and it should not enlarge the ambit of section 68 of the Act to create a deeming fiction to tax any sum already credited/offered to tax as income. Section 68 of the Act traditionally applies to unexplained 'cash credit1 like loans, deposits, advances, share capital, etc. and not to sums already offered to tax as income by the assessee in its return of income at the highest slab rate. Such recourse is unwarranted keeping in mind the objective to introduce secti....
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....explanation offered by the taxpayer. From the facts of the case at hand, it is clear that the A.O has acted unreasonably and capriciously in rejecting the genuine explanations offered by the Assessee in respect of the impugned cash deposits as unsatisfactory solely with the aim of fastening exorbitant tax liability on the Assessee-Company under the garb of unexplained cash credit u/s 68 of the Act. Such recourse primarily hedged on surmises, conjecture, assumptions, presumptions and whims of the Revenue Authorities is clearly unwarranted and the additions so made is unsustainable in the eyes of law and thus deserves to be quashed. iv) In view of the above, it is prayed that the addition made by the A.O (and partly sustained by the CIT (A)) u/s 68 on account of cash deposited in banks during the demonetization period may kindly be deleted." 4.17 From the above discussion, with respect to the facts on record and judicial pronouncements on the subject, the following can be concluded: i) The AO did not question the sales figure and accepted books of account. In the absence of any adverse finding with respect to the acceptability/veracity of books of account, ....
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....s 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 dosing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchase and the sales. Audit report u/s 44AB, the financial statements furnished in paper book clearly shows the reduction of stock position and matching with the sales which goes to say that the cash generated represent the sales. The assessee has furnished the trading account, P& L account in page No. 7 of paper book and we observe that the reduction of stock is matching with the corresponding sales and the assessee has not declared the exorbitant profits. Though certain suspicious features were noticed by the AO as well as the DDIT (Inv.), both the authorities did not find any defects in the books of accounts and trading account, P&L account and the financial statements and failed to disprove the condition of the assessee. Suspicion however strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence, (para 7) In the instant cas....
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....and stocks were recorded in the books of account which had not been doubted by the AO. The sales shown by the assessee had been accepted by VAT/ Sales Tax Department, the book result shown by the assesee were in the same line as had been accepted by the Department in the preceding years, the cash sales made by the assessee had been credited in the books of account and reduction in the stock has not been doubted, even during the course of search just after the dosing of the year under consideration, neither excess nor shortage of stock was found in the stock register maintained by the assessee, the identity of the purchasers to whom cash sales had been made was disclosed in the sale bills where the name, address and PAN was mentioned. It is also not a case that there was sudden spurt in the sale only in the month of October 2016 as the chart furnished by the assessee before the Ld. CIT(A) clearly revealed that the cash sales were on higher side in another months of different preceding years. The AO made the addition on the basis of difference in the cash sales from 01-10-2016 to 29-10-2016, only on this basis that the said difference was there in the computer and the pen-drive found....
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....h denomination notes which were legal tender at the relevant time." 10.9 Further 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. 10.11 In the present case also the opening stock, purchases & sales and dosing stock, declared by the assessee has not been doubted, the sales were made by the assessee out of the opening stock and purchases and the resultant dosing stock has been accepted, the safes had not been disturbed either by the AO or by the sales tax/VA TDepartment and even there was no difference in the quantum figures of the stock at the time of search on 12/04/2017, therefore, the sales made by the assessee out of the existing stock were sufficient to explain the deposit of cash (obtained from realization of the sales) in the bank account and cannot be treated as undisclosed income of the assessee. 10.13 In the present case also the cash deposited post demonetization by the assessee was out of the c....