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2023 (7) TMI 736
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....fficer in making disallowance @ 20% of cash deposits of Rs.3,85,80,075/- made in the bank accounts is erroneous in so far as it is prejudicial to the interests of revenue within the meaning of section 263 of the I.T. Act and need to be adjudicated afresh. 3. As transpires from orders of the authority below, the revisionary jurisdiction was exercised by the ld.Pr.CIT on the order passed by the AO in the present case under section 143(3) of the Act, noting that the despite the assessee not substantiating with evidences, the source of cash deposited during demonetisation period of Rs.3,85,80,075/- and the AO not being satisfied with the reply of the assessee, he had still gone to make an addition of only 20% of the cash so deposited, when he should have added back the entire amount of cash deposited during this period.The show cause notice issued in this regard by the ld.Pr.CIT for initiating proceedings under section 263 of the Act placed before us at PB page no.103 to 105, bringing out the above facts as under: 4. As also finding of the ld.Pr.CIT at para 5 and 5.1 of his order is as under: "5. I have carefully considered the facts o....
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....o prove that the amount credited did not represent his income in terms of Section 68 of the Act as ruled out by the Hon'ble Supreme Court in the case of SumatiDayal Vs. CIT (1995) 214 ITR 801. Since the assessee fails to prove to the satisfaction of the Assessing Officers, the source and nature of the amount of cash credits, AO is entitled to draw an inference that the entire credit entry represents income taxable in the hands of the assessee." 5.1. From the above, it is clear that the Assessing Officer was not satisfied with the explanation furnished by the assessee in respect of the nature and source of cash deposit made during the period of demonetization. However, despite, being not satisfied as regards the nature and source of such cash deposit of Rs.3,85,80,075/- made during the demonetization period of 09/11/2016 to 30/12/2016, the Assessing Officer has made addition of only 20% of such deposit as unexplained cash credit u/s 68 of the IT. Act, to the total income for the year under consideration. Here, it is pertinent to mention that in respect of any sum credited (in this case Rs.3,85,80,075/-), once in the opinion of the Ass....
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.... pass fresh assessment order after taking into consideration the issues as may have been already considered together with the issues discussed hereinabove also. Needless to mention that while passing the fresh assessment order, consequent to this order under section 263 of the I.T. Act, the Assessing Officer shall grant reasonable and sufficient opportunity of being heard to the assessee." 6. We have heard both the parties, and we have also gone through the assessment order passed in the case, under section 143(3) dated 19.12.2019, paper book filed by the ld.counsel for the assessee running into 132 pages and contentions of both the ld.counsel for the assessee and the ld.DR before us. After going through the above, and carefully considering all material and facts before us, we find that the impugned order passed by the ld.Pr.CIT under section 263 of the Act is not sustainable in law. As noted above, and as is evident from the order of the ld.Pr.CIT, his finding of the error was in relation to cash found deposited in the bank account of the assessee to the tune of Rs.3.85 crores during demonetization period and as per the ld.Pr.CIT, the AO&n....
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....s the assessee had demonstrated that the cash deposit in bank account during demonetization period was not an abnormal occurrence but in fact was attributable to the scale and manner of conducting business by the assessee ,having huge turnover ,all majorly in cash. He had explained the increase in turnover as compared to the preceding year in the year of demonetization, which is the impugned year in the present case .And had also explained the reason for turnover not increasing in the same proportion in the succeeding year. However, we have noted, the AO was not completely satisfied with this reply of the assessee, noting that during the period of demonetization ,i.e 01st to 8th November 2016 , there was abnormal increase in turnover, and therefore, he went to treat 20% of the cash deposit as unexplained credits. Taking note of the fact the assessee had established that majority of its sales were made in cash which was deposited in bank, but noting the fact that during demonetization period, the assessee had shown substantially larger increase in turnover, he therefore, considering it fit,to treat only 20% of the total cash deposit....
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....stantiate its explanation for cash sales completely is also not correct. In fact, as rightly found by the AO, to a great extent his explanation was substantiated that the majority of sales made by the assessee was in cash, but it was only vis-à-vis abnormal incremental sales made during the demonetization period, the AO refused to agree with the assessee. Also the finding of the ld.Pr.CIT therefore that the AO completely disagreed with the assessee regarding its explanation and found the explanation of the assessee to be unsatisfactory for the entire cash deposits, is also incorrect. As noted above, the AO was dissatisfied not with the explanation of the entire cash deposits, but only partially in view of the abnormal increase in the sales shown by the assessee during that period. 11. In view of the above, the finding of the ld.Pr.CIT that the entire cash deposits during the demonetization ought to have been treated as unexplained credit under section 68 of the Act, we hold, could not have been inferred from the facts on record, and there is no error as such in the order of the AO in this regard. The order pas....
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....055 9,70,075 (erstwhile Vijay Bank) Total 3,85,80,075 3.1. It is seen that during the course of assessment proceedings, you have stated that the sources of the above cash deposits were out of the sales made during the year under consideration. However, on perusal of the case records, it is noticed that you have not furnished any supporting evidences to substantiate the sales which were claimed to be the sources of the cash deposits made during the demonetization period. Accordingly, it is found that during the course of assessment proceedings, you have failed to explain the sources of the above cash deposits with supporting evidences. However, while finalizing the assessment, the Assessing Officer has made addition of only 20% of the above cash deposits of Rs.3,85,80,075/- as unexplained cash credit u/s 68 of the I.T. Act. As per the provisions of Section 68 of the I.T. Act, no such provision is available with the Assessing Officer to restrict the addition based on his judgement in case the credits are found to be unexplained within the meaning of Section 68 of the I.T. Act. From the above facts, it is seen that while finalizing....
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.... Cheques Cash Total Increase FY 2015-16 31.40 2703.58 2734.98 FY 2016-17 416.33 3410.33 3826.46 1091.48 FY 2017-18 2345.84 2023.45 4369.129 542.83 Document 5 "Explanation for increase in sales during the FY 2016-17 and down fall in sales during FY 2017-18, Sir, we like to mentioned that the figure of sales which we have submitted earlier were inclusive of VAT. During the period when vat was applicable we have accounted sales inclusive of vat. However after the GST after applicable i.e. 01.07.2017 the sales are accounted excusive of GST. Sir, the figures of sales as per SCN of FY 2015-196 to FY 2017- 18 is without VAT/GST. In our opinion such comparison is not desirable. The figures of sales are not with in the control of Tax payer. It is the tax authority who decide different rate of tax at different time. At one end this is the position and at the other, for the customer, it is total price which is inclusive of tax is important to decide the cost of purchase for him based on which he decide whether to purchase or not. So in our opinion, if sales figures are to be compared. The total sales inclusive of V....
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.... exceeding Rs. 2 lacs from single customer even during the year is not permitted under the income tax law and because we follow the advice, the cash sales further effected." Document 7 The reply of the assessee has been duly perused and examined but has not been found to be acceptable on the following reasons:- 1. During the course of assessment proceedings, it is seen that the sales of the assessee is abnormally increased during the FY 2016-17 as compared to subsequent year and preceding years. During the course of assessment proceedings, the assessee was many of times asked to submit the credible reply but the assessee has failed to substantiate the source of cash deposits. The assessee has intentionally increased the sales and utilizes the unaccounted cash in the form of cash deposits during the demonetization period. The assessee has manipulated the facts of the case during the year under consideration. 2. As per the cash books submitted by the assessee, the sales is abnormally increased in the period of 01/11/16 to period of earlier years. COME TAX DE8/11/16 in comparison to the same Period Cash sales in Cash Sales in FY P....
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....le Supreme Court in the case of SumatiDayal Vs. CIT [1995] 214 ITR 801. Since, the assessee fails to prove to the satisfaction of the assessing officers, the source and nature of the amount of cash credits, AO is entitled to draw an inference that the entire credit entry represents income taxable in the hands of the assessee. It is not the duty of AO to locate exact source of the cash credits. Therefore, to plug the revenue leakage, 20% of total cash deposit during the demonetization period which calculated at Rs. 77,160,15/- (3,85,80,075/- x 20%) is added to total income of the assessee as unexplained cash credit u/s. 68 of the Act. Penalty proceeding u/s. 271AAC(1) is initiated for income deemed u/s. 68 of the I.T. Act. Document 9 (4) Even before demonetisation period during F. Y. 16-17, we had deposited cash into bank account on a regular and routine basis as under :- Before demononetisation period cash deposited in bank was as follow April 2016 zpen Rs. 1,91,40,000/- Rs. 3,15,55,000/- May 2016 COME TAX DERS. 2,67,38,000 June 2016 July 2016 Rs. 2,83,18,000/- August 2016 Rs. 3,20,82,450/- September 2016 ....
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.... such data pertaining to A. Y. 14-15, 15-16, 16-17 & 17-18 are as under. Particulars Sales Turnover [Rs. in lacs] Assessment Year 14-15 15-16 16-17 17-18 1740.12 2083.86 Sales turnover realized in cash [Rs. in lacs] 1 728.42 Percentage Cash Sales to total sales 2761.17 3838.25 1955.01 2725.13 3444.54 99.33% 93.82% 98.69% 89.74 Document 10 Percentage increase in cash Sales Turnover over previous year Cash deposited in bank accounts Percentage cash deposited in bank accounts to cash sales Sales Turnover [Rs. in lacs] 13.11% 39.39% 26.40% 1 699.85 1959.61 2703.58 3410.12 98.35% 100% 99.21% 99.00% 1740.12 2083.86 2761.17 3838.25 FurtheFurther, there was no unusual increase in cash sales during the year and the same can be demonstrated by referring to the monthly cash sales figures of the year reference as well as that of preceding two years: F.Y. F.Y. F.Y. Month % increased in % increased in 14-15 15-16 16-17 A. Y. A.Y.15-16 A. Y. 16-17 17-18 cash sales as compared to cash sales as compared corresponding to ....