TaxTMI 
TaxTMI 
2024 (1) TMI 112
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....that the assessee has not furnished the details fully viz. Purchase Bills, Sale Bills etc. as called for by the AO which were required for finalizing the assessment. 4. The Ld. CIT(A) failed to appreciate the fact that the assessee has not furnished any details with supporting evidence, except the name and address of the persons, in respect of the cash credit entries made in the books of accounts. 5. The Ld. CIT(A) failed to appreciate the fact that the assessee, without any reasonable cause, has deposited the cash said to be received as "Trade Advance" since April, 2016 into the bank accounts only after the announcement of "Demonetization". 6. The Ld. CIT(A) failed to appreciate the fact that the assessee has not substantiated its claim that the "Trade Advances" received were converted into sales and brought into Profit & Loss Account thereby giving the character of income, with supporting evidence. 7. The Ld. CIT(A) failed to appreciate the fact that in the absence of any submission with supporting evidence, the AO has no other option but to treat the credits as appearing in the books of the accounts of the assessee, which remain unexplained, as the income of the assessee....
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....in total amounting to Rs. 48,80,73,000/- during demonetization period. The AO called upon the assessee to furnish books of accounts, including cash book and also explain source for cash deposits during the demonetization period. In response, the assessee vide letter dated 11.12.2019 submitted that source for cash deposits is out of advance received from customers for gold scheme and the same has been recorded in the books of accounts of the assessee. The assessee further claimed that as on the date of demonetization i.e. 08.11.2016, cash in hand as per cash book maintained by the assessee was at Rs. 48,82,75,750/-. The assessee claimed that source for cash deposits is out of sales declared prior to the date of demonetization and argued that it has sufficient cash in hand to explain cash deposits during the demonetization period. In order to verify the claim of the assessee, the AO issued summons u/s. 131(1) of the Act dated 19-12-2019 to 50 persons. Out of 50 persons, 46 summons issued were returned by postal authorities citing 'addressee cannot be located' or 'no such person' or 'no such addressee at the above address'. However, remaining three persons have responded to summons is....
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....ven single person. Substantial number of summons issued u/s. 131(1) of the Act, were returned back by the postal authorities by citing 'no such person' or 'insufficient address'. Therefore, opined that assessee could not discharge the initial onus to establish three things necessary to obviate the mischief of sec.68 of the Act i.e. identity of the investors, about their creditworthiness and genuineness of the transactions. Since, the assessee has failed to prove the credits found in his bank account to the satisfaction of the AO, the total cash receipts amounting to Rs. 51,39,39,100/- has been treated as unexplained cash credit and brought to tax u/s. 68 of the Act r.w.s.115BBE of the Act. 5. Being aggrieved by the assessment order, the assessee preferred an appeal before the Ld.CIT(A). Before the Ld.CIT(A), the assessee has filed detailed written submissions on the issue which has been reproduced in Para No.2.2 on Page Nos.10-16 of the order of the Ld.CIT(A). The sum and substance of the arguments of the assessee before the Ld.CIT(A) are that source for cash deposits is out of sales achieved before the demonetization period and also substantial amount of cash withdrawal from very....
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....tion settled by various courts, including the Hon'ble Supreme Court that trade advances which has been subsequently accounted sales in the books of accounts of the assessee, cannot be treated as cash credits in light of provisions of Sec.68 of the Act. The Ld.CIT(A) has discussed the issue at length in light of various evidences filed by the assessee, including books of accounts, purchase bills, sale bills, and stock registers maintained by the assessee for the business, and opined that the AO has not pointed out any discrepancy in books of accounts maintained by the assessee with regard to purchase and sales declared for the relevant period. The AO failed to make out any of such irregular movement of stock in trade or deficit stock in trade when the assessee has declared sales for the relevant period. In fact, there is no iota of evidence in the order passed by the AO with regard to discrepancy in books of accounts and stock details maintained by the assessee. In fact, the assessee has declared purchase and sales to GST authorities and the same has been accepted without any deviation. In absence of any findings with respect to incorrectness in books of accounts maintained by the a....
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....sits into his bank account after demonetization and to cover up source for said cash deposit, introduced cash into its books of accounts in the form of cash receipts from various persons. But, fact remains that when the AO conducted necessary enquiries by issuing summons u/s. 131(1) of the Act, except three persons, no other persons has responded to summons issued by the AO. In fact, summons issued to various persons have been returned un-served with a remark 'no such person' or 'insufficient addresses. The AO called upon the assessee to furnish confirmation letter from the persons from whom the assessee claims to have been received trade advances, but the assessee neither submitted any confirmation nor complete name and address of the persons with their PAN to discharge onus cast upon the assessee as per the provisions of Sec.68 of the Act. Although, the assessee could not justify source for cash deposits made during demonetization period, but the Ld.CIT(A) simply accepted the submissions of the assessee and directed the AO to delete additions made u/s. 68 of the Act. 8. The Ld. DR further submitted that the Ld.CIT(A) failed to appreciate the fact that the assessee initially stat....
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.... confirmation letter from various parties without understanding the law that as per Rule 114B of Income Tax Rules, 1962, there is no need for assessee to collect the PAN details of the buyers, if the sale value is less that Rs. 2 lakhs. Further, threshold limit under PMLA was reduced to Rs. 50,000/- only w.e.f.04.05.2023, for which, the KYC norms were prescribed to collect the identity of such customers. Since, the assessee was not required to maintain KYC of its customers, in case, the sales do not exceed the prescribed limit, the assessee has simply taken name and address of the persons who purchased gold jewellery without there being any PAN. Although, the assessee has furnished the list of persons from whom it has collected trade advances, but many have not responded for the reasons best known to them. But, fact remains that for someone's mistakes the assessee cannot be held response. The only obligation of the assessee is to file details of sales and purchases and name and address of the persons to whom sales were made. In the present case, the assessee has discharged its onus and filed necessary details. 10. The Ld. Counsel for the assessee further submitted that the AO made....
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....int of verification of source for cash deposits into bank account during demonetization period amounting to Rs. 48,73,80,000/-. In fact, the assessee has made cash deposits of Rs. 48,73,80,000/- to Oriental Bank of Commerce, Coimbatore, State Bank of India, SME Branch, Coimbatore, and State Bank of India, Main Branch, Coimbatore, in aggregating Rs. 48,73,80,000/-. The assessee has explained source for cash deposits out of trade advances received from various persons and same has been subsequently converted into sale of jewellery. The assessee has accounted sales made before 08.11.2016 in its books of accounts and cash balance available as on 08.11.2016 as per cash book maintained by the assessee was at Rs. 48,82,75,750/-. 12. During the course of assessment proceedings, the AO called upon the assessee to file details of name and address of the persons from whom it has received trade advances for sale of jewellery. The assessee has filed a list of persons from whom it has received trade advances for sale of jewellery. Out of list submitted by the assessee, the AO has issued summons u/s. 131(1) of the Act, to 50 persons to verify the genuineness of the assessee claim of receipt of c....
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....oks of accounts, including cashbook, sales register, sale bills, purchase details along with bills and stock details to prove that there is no discrepancy in books of accounts and also the assessee has reported sales made before the date of demonetization to GST authorities. 13. In light of above factual matrix, if one examines the issue, the AO has rejected the contention of the assessee on two grounds. The first and foremost reasons given by the AO to reject the explanation of the assessee is that persons from whom assessee claims to have been received advance are not responded to summons issued u/s. 131(1) of the Act, and in few cases, they have denied any kind of transactions with the assessee. According to the AO, the assessee could not discharge its onus cast upon as per the provisions of Sec.68 of the Act, in respect of cash receipts, and thus, opined that cash receipts claimed to have been received by the assessee from various persons is unexplained cash credits taxable u/s. 68 of the Act. The second reason given by the AO was that there is a contradiction in the claim of the assessee in so far as source for cash deposits are concerned in as much as initially, the assessee....
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.... demonetization period or not. It is an admitted fact that the assessee was having sufficient cash balance as per cash book maintained for the relevant period. In fact, cash in hand as on the date of demonetization i.e. 08.11.2016 was at Rs. 48,84,03,169/- and said cash balance is backed by cash receipts recorded in the books of accounts before the date of demonetization. Further, cash receipts from various persons have been further substantiated with sales made to them before the date of demonetization. In fact, the assessee has filed various evidences, including sales bills to support its arguments. The AO never disputed sales declared by the assessee nor pointed out any discrepancy in purchase or stock in trade held in the business of the assessee before the date of demonetization. In fact, the assessee has filed comparative sales for the month of April, 2016 to November, 2016 and corresponding April-15 to November, 2015 and we find that there is no abnormal deviation in sales declared for the month of November, 2016 when compared to earlier periods. It is not a case of the AO that the assessee has declared sales without purchases. In fact, a sale declared by the assessee is bac....
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.... perused relevant cash book and bank statements which are available in paper book and after considering relevant materials, we find force in the arguments of the assessee for simple reason that as per the details furnished by the assessee like bank statements, cash book, it is undoubtedly clear that assessee was having sufficient withdrawals from very same bank accounts before the date of demonetization which was recorded in the books of accounts of the assessee. Further, the cash balance maintained by the assessee as per books of accounts as on 08.11.2016 was much higher than the amount of cash deposited to bank account during demonetization period. Therefore, in our considered view, when the assessee is able to file necessary evidences to prove that there was sufficient cash withdrawal from very same bank account which is further backed by bank statements, where it has been clearly evident that there are sufficient cash withdrawals, in our considered view, there is no reason for the AO to reject explanation of the assessee that cash deposits are out of cash withdrawals from very same bank account. 17. At this stage, it is necessary to consider certain judicial precedents on this....
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....nt case, insofar as the assessee is concerned, it placed the evidence on record, which established the trail of the money, the mode through which the money had travelled from the assessee to the investor entities and back to the assessee, and the fact that each of the investor entities was in existence. Therefore, once the assessee claimed (and it was found as a fact) that it was its own money which was routed back to it in the form of share capital/share premium, the traditional test which is sought to be applied by the revenue, for triggering the provisions of section 68, which is, that the assessee had to establish the creditworthiness, genuineness and identity of the transactions would have to adapt to the circumstances obtaining in the instant case. [Para 12.1] * Therefore the addition made under section 68 needed to be sustained as untenable, in view of the finding recorded by the Tribunal. [Para 14.4] * The entire purchase and sales had been duly recorded in the regular books of account of all parties; the transactions were routed through regular banking channels; the purchase and sales were duly supported by quantitative details; copies of bank statements showing sales ....
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.... were either incorrect or incomplete. According to the Tribunal, the books of account could not have been rejected till such time the revenue found "patent, latent and glaring defects in the books of account". The revenue, according to the Tribunal, made no such attempt and simply relied upon the statement of the managing director, which was retracted and in any event, did not relate to the booking of bogus expenditure'. Therefore, insofar as the Tribunal was concerned, the rejection of books of account by the Commissioner (Appeals) did not meet the legal standards. [Para 15.6] * Thus, in effect, the Tribunal held that the books of account were rejected without crystalizing the defect in the books of account, which could have been done only after examining the same. Furthermore, according to the Tribunal, even if it is assumed that the books of account could be rejected, the profit had to be estimated based on proper material. As noted above, the Tribunal recorded the inconsistent approach adopted by the Commissioner (Appeals) in applying the gross profit ratio concerning non-related parties to purported bogus transactions i.e., those involving related parties, resulting in u....
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....data, the Tribunal concluded that, in the year in which demonetization kicked in i.e., financial year 2016-17, the increase in sales in percentage terms was less than the earlier year. The Tribunal, thus, held that it could not be said that the assessee had booked non-existing sales in its books post-demonetization. [Para 16.6] * In sum, it was the Tribunal's assessment of the material placed on record that cash deposits made by the assessee with its bankers, more or less compared with the cash sale transactions entered into by it with its - customers. The Tribunal's view was that given the fact that there was no allegation made by the revenue that the assessee had backdated its entries to enhance its cash sale figures, one could only conclude that there was a growth in the assessee's business. [Para 16.9] * Having regard to the extensive material which has been examined by the Tribunal, in particular, the trend of cash sales and corresponding cash deposited by the assessee with earlier years, it is opined that there was nothing placed on record-which could have persuaded the Tribunal to conclude that the assessee had, in fact, earned unaccounted income i.e., made c....