TaxTMI 
TaxTMI 
2023 (10) TMI 202
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.... 9.11.2016 to 30.12.2016 wherein assessee had deposited Rs. 2,16,87,500/- in its bank accounts. Assessee had made a submission that the cash was deposited out of cash balance available from cash sales and as the assessee is in the business of wheat flour, maida etc. accordingly, it is regular business practice to receive cash and all the cash deposited is out of cash in hand. 2.1 The Ld. AO has not accepted the aforesaid explanation on the ground, primarily, based on the comparison from the previous year 2015-16 and 2016- 17, he considered the deposits to be abnormal. Then he found the cash retention was on the higher side. Ld. AO considered the comparative sales in month of October, 2016, and from 1st to 8th November, 2016 as suspicious and abnormal. He observed that the increase in sales in this period has been shown because Vat returns having been filed for October and thus, concluded in para 5 as follows ; 1455 & 2006/Del/2021 "5. Thus, in view of the above facts and from the figures of cash in hand submitted by the assessee for the last year it is seen that the assessee was having opening cash in hand from Rs. 80 lakhs to Rs. 1 crore on monthly basis and also as th....
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....er on the facts and circumstances of the case and in law the ld. CIT(A) has erred in restricting addition of the Rs. 2,16,87,500/- on account of cash deposit during demonetization to Rs. 35,50,000/- despite the fact that assessee failed to furnish complete cash book but only cash book related to 2-3 days and this failed to satisfy the AO about the true nature and source of cash deposit. iii. (a) The ld. CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, amend any/ all the grounds of appeal before or during the course of the hearing of the appeal." 4. Heard and perused the record. 5. On behalf of assessee it was submitted by the Ld. AR that Ld. CIT(A) has recorded factual findings at pages 48-64 of the appeal order by recording inter alia as under: 1. That Ld. AO had used figures of some other case and Ld. AO has based his analysis on partly wrong data. 2. That the assessee was not required under the statute to file VAT returns of October, 2016 and November, 2016 till 08.11.2016. 3. The cash sales in the year under appeal is at same percentage as that of AY 2015-16. 4. The cash s....
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....ports were filed delayed. 8. Now giving thoughtful consideration to the matter on record and the submissions we are of view that the grounds in appeals are interconnected so both appeals are taken up together for determination of the grounds. It can be appreciated from the order of Ld. AO that assessee had taken a plea that being into business of wheat floor there was regular practice to receive cash and all the cash deposited is out of cash in hand. The Ld. AO however disbelieved the explanation and comparing the sales and cash sales of 2015-16 and 2016-17 had made the addition. As before Ld. CIT(A) in appeal he asked assessee to submit data on various accounts in the desired formats. He had sought data of following facts; 1. Comparable details of sales made by the appellant during the F.Y. 2015-16 and 2016-17, 2. Month wise cash sales from 01.04.2016 to 31.03.2017, 3. Month wise cash sales and cash deposits from 01.04.2016 to 31.03.2017, 4. Month wise cash sales and cash deposits from 01.04.2015, 31.03.2016, 5. Cash deposits in bank between 09.11.2016 to 30.11.2016, 6. Total deposits in the bank including SBNS, 7. ....
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.... of this data, particularly the cash sales data upto September, 2016. (iv) It is observed that the increase in the cash sales in the month of October, 2016 was 1.9 times compared to the corresponding period in the preceding year. This data of sales is in line with the past months trend in the F.Y. 2016-17 as per the table above. Even in absolute terms the cash sales of October, 2016 at Rs. 3.02 crores are as per the trend of cash sales of earlier months in the current year, as the appellant had cash sales of Rs. 3.53 crore in the month of September, 2016 and had cash sales of more than Rs. 2.5 crores in the months of May & June, 2016. The appellant has not revised any of the VAT returns filed by it. The appellant cannot manipulate the sales data of retruns filed before demonetization up to the month of September, 2016. In these facts, the cash sales made by the appellant in October, 2016 is found to be in line with the increase in cash sales of earlier year and the trend of earlier months in the current year. (v) The appellant had shown cash in hand of Rs. 98,69,664/- as on 31.10.2016. The appellant was asked to give the data of cash in hand of more than Rs. 1 cro....
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.... books or tempered books. The ground thus raised by the Revenue has no substance. 11. Now coming to the addition sustained by the Ld. CIT(A) it will be beneficial to again reproduce the discussion of ld. CIT(A) and see how justified he was to sustain certain part of additions as made by Ld.AO. Ld. CIT(A) observes; "8. The AO had alleged that data for 1 to 8th November, 2016 could have been subjected to manipulation by the appellant, as the VAT return was not filed for this month till 08.11.2016. 8.1 In continuity to the discussion made in Para 7.1(i) to 7.1(iii), it is observed as under: (i). The appellant had made cash sales between 1 to 7th November, 2016 in the range of 20-26 lakhs per day, whereas the sales on 08.11.2016 had been shown at Rs. 47.55 lakhs. The average cash sales between the period 1 to 7th November, 2016 is at Rs. 23.49 lakhs. The appellant had explained that the sales on 08.11.2016 actually represents the average sales of more than two days, due to following reasons: " However; the cash sales on 08.11.2016 was quite higher because of the fact that after the announcement of demonetization the general public made a lot of pu....
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....es of shortage of daily household use items, dealt in by the appellant. 9. The amount of Cash deposited in SBNs after demonetization had been claimed to be at Rs. 2,08,87,500/- instead of the cash deposited in SBN of Rs. 2,16,87,500/- considered by the AO in the assessment order. In support of the contention of the appellant, the appellant has submitted a certificate from the Bank at Paper Book page no. 37. Date wise details of cash deposits of Rs. 2,08,87,500/- have been reproduced in Table No. 5 & 6 above. In view of these facts, the amount of deposit made by the appellant in SBNs is considered at Rs. 2,08,87,500/- and not Rs. 2,16,87,500/-, as considered by the AO. It is further observed that the appellant had deposited all the SBNs between 10.11.2016 to 12.11.2016. 10. The appellant had built up cash in hand from Rs. 98.69 lakhs as on 31.10.2016 to Rs. 234.82 lacs as on 07.11.2016. The appellant had deposited only Rs. 4.5 lakhs between 01.11.2016 to 06.11.2016. The appellant has shown cash deposit of Rs. 59.62 lakhs on 07.11.2016 and cash in hand on 07.11.2016 was at Rs. 194.19 lacs. The appellant had shown sales of Rs. 47.55 lacs on 08.11.2016 had not deposit....
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....Chartered accountant. The cash sales on 08.11.2016 was quite higher because of the fact that after the announcement of demonetization the general public made a lot of purchases in cash due to the reason that such prohibited currency will be of no use from next day and there was panic and uncertainty of availability of new legal tender on the very next day and also the people were not certainty of availability of such new currency. Furthermore it is also again submitted that the assessee company is dealing in basic household products such as wheat, flour, Maida, breads and other such dailyhousehold need consumable items which are essential goods needed on daily basis. 2. It has been observed that the details of cash sales for first seven days and the balance period given on page 6-7 Chart -2 under point no 3 - Detail of Cash sales during first 7 days as percentage of total Sales of our submission filed online which was prepared by our junior accountant have some clerical accounting errors may not be considered. 12. That the cash book for the period 01.11.2016 to 08.11.2016 has also been furnished in this regard it is also submitted that the assessee had de....
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....about 2.4 times the avg. cash sales of Oct, 2016. Flowever higher cash sales on 08.11.2016 can be accepted within the limited range, due to the extraordinary facts stated above. In these facts & circumstances, it is estimated that the appellant had inflated its cash sales as well as the cash in hand at least by Rs. 38.25 lakhs (Rs. 4.25 lakhs per day * 7 + 2 * Rs 4.25 Lakhs for 8th considering the double day = 38.25 lakhs) in between 1st to 8th Nov, 2016 to introduce its unaccounted SBNs in the books under the garb of cash sales. The source of this Rs. 38.25 lakhs of SBNs held as cash in hand and subsequetly deposited in the bank account is held to be unexplained. 11.2 It appears the appellant had deposited the cash of SBNs received from the undisclosed sources and to cover it, it had shown equivalent sales on/before 08.11.2016 to create excessive cash in hand. There can be possibility that the appellant might have booked these sales in books by 08.11.2016 to deposit the SBNs, but actually made sales thereafter, to keep the stock as per books. 11.3 In view of the discussion made on analysis of data and facts in the above para, it is held that the appellant had not....