TaxTMI 
TaxTMI 
2024 (6) TMI 95
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.... of the case that during the month of October and November, 2016 huge amount of cash sales running into crores of rupees has been shown by the assessee in the book of accounts in contrast to the fact that during the month of April to September 2016, there was no cash sales. iii. The Ld. CIT(A) has erred on facts and in law in deleting the addition overlooking the facts of the case that the assessee has claimed to deposit the cash in the demonetized currency of Rs. 2,43,37,500/- out of cash balance as on 09.11.2016 which was dramatically increased from the average cash balance during last six months of about 10-15 lacs only. iv. The Ld. CIT(A) was not justify in law in overlooking the modus operandi adopted by the assessee to take benefit of the situation and circumstances arised due to demonetization wherein the assessee just managed artificial entries of cash sales which is nothing but part of a colorable device, as held by Hon'ble Supreme Court in the case of Mc Dowell & Co. Ltd. Vs CTO 154 ITR 148(SC), to bring the unaccounted cash into the books of account." 3. The assessee is in the business of trading of Gold/silver jewellery, Gold/Silver bullion and ....
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....597 036 557402 24 46700 000 May 3291692 89 2280724 20 2277500 00 1684489 44 923077 89 723000 00 1094263 82 - - 431730 53 868924 75 95249 000 June 3716437 99 2970523 13 2811500 00 1848361 59 965748 83 1162000 00 1632514 89 - - 302110 158 718260 61 65750 000 July 385306 97 197606 50 356000 00 2300488 87 1405884 42 1398000 00 513270 76 - - 154234 822 188780 69400 00 August 1340111 80 1129961 28 1116500 00 1492025 83 840714 12 790000 00 534454 37 - - 182824 20 - - Sept 4484634 41 2112959 75 2124502 00 1695635 93 572061 71 608500 00 540917 68 ....
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....deposited by the appellant company. The VAT original returns for the quarters up to 30.9.2016 had been filed before demonetization and for the period 1.10.2016 to 31.12.2016 it had been filed on 22.01.2017 and these returns for the period up to 31.12.2016 have not been revised by the appellant and held that the cash sales made during these periods were bonafide and has a nexus with sales effected by the assessee. 11. The details of cash sales and cash deposits in the month of Oct/Nov 2016 are as under: Cash Book Day wise 1.10.2016 to 31.10.2016 (all figs in Rs) Date Opening Balance Cash Sale Cash receipt (others) Cash Deposited in Bank Cash Expenses Closing Balance 1.10.2016 1178665 - - - 940.00 1177725 2.10.2016 1177725 - - - - 1177725 3.10.2016 1177725 - - - 498.00 1177227 4.10.2016 1177227 - - - - 1177227 5.10.2016 1177227 7028549 - - 250.00 8205526 6.10.2016 8205526 6094139 - 7000000 - 7299665 7.10.2016 7299665 11358589 - 5000000 - 13658254 8.10.2016 13658254 6145987 - - 1020.00 1980322....
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....0 24792500 24792500 10842500 13950000 13950000 950 13949050 13949050 8995000 4954050 4954050 4500000 454050 42203791 45587500 Comparative purchase and stock data FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 Purchase stock at end of month Purchase stock at end of month Purchase stock at end of month Purchase stock at end of month April 388284121 10948092.27 243663131 6548331.62 145757285 56258829.15 578734793.00 1597910.58 May 340485555 22600971.67 161647403 224003.47 60413679 7834729.27 450920031.00 21787283.83 June 37....
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....ositing all these cash sales in its regular bank accounts only. In some years, the cash deposits are more than the cash sales, which may be due to opening cash in hand and other cash receipts (as is evident from the data of Oct/Nov2016 reproduced above). iii) The figures of cash sales of the appellant for the month of Nov. for FYs 2014-15 to 2016-17 do not show any abnormal trend. It is observed that the appellant had made cash sales in the month of Nov 2016 upto 8.11.2016 only and the figures of cash sales corresponding to the preceding year are @ 45.6% (Rs. 42203791*100/92470893) only. It is observed from the various media news that there was great rush in the markets to convert the demonetized SBN's into some tangible assets, therefore there was spurt in sales in the evening of 8th Nov 2016 till late night after the announcement was made. Considering these facts and figures, there appears to be no comparative abnormality in the cash sales of the appellant in the month of Nov 2016. Infact the cash sales are at much lower figures compared to corresponding figures of Nov. 2015 or even Oct. 2016, coupled with extraordinary event leading to spike in sales on 8.11.2016. ....
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.... 2433750 18.22 21060615 11.56 The cash deposited by the appellant after demonetization is just 18.22% of the cash deposited before demonetization. The appellant had made cash sales even after demonetization and deposited huge cash in new currency of Rs 5.94 Cr in the month of March 2016. The cash deposited in demonetized currency during the year is just 11.56% of total regular cash deposited by the appellant. It also proves that cash sales is regular business affairs of the appellant and the cash in hand deposited of demonetized currency is as per the cash book of the appellant and it does not represent an abnormal figure observing the complete business affairs of the appellant. Objections raised by the assessee are as under: a) There was nothing wrong in making cash sales and the appellant had been regularly doing it. However the appellant had reduced trend of cash sales from FY 2014-15 onwards. b) Cash sales are supported by the audited books of account, invoices, suffered from VAT, VAT returns, Quantitative Stock tally and therefore, cannot be disregarded. c) Treatment of sales as unexplained cash credit tantamount to disr....
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....s needs to be brought on record to substantiate the allegation. The appellant had filed original VAT returns till the quarter ending on 31.12.2016 and had not revised these returns. Thus this observation of the AO, based just on suspicion, has no consequences. 6.2.2 The other observation of the AO that were no cash sales till the month of Sept 2016 but there were cash sales of Rs. 10.85 Cr. in Oct 2016 & Rs. 4.22 cr. in Nov 2016 ( till 8th Nov) is factually correct. However, the AO had not mentioned in the assessment order the cash sales made of Rs. 3.82 lakhs in Feb 2017 & of Rs. 5.95 cr. in March 2017 of the year under consideration. It is further observed that the cash sales of the appellant are not consistent in pattern over the years (which have been accepted in for other periods than Nov 2016). * In the FY 2014-15 the cash sales varied from minimum Rs. 1.97 Cr. in the month of July 2014 to maximum of Rs. 29.70 cr. in the month of June 2014. * In the FY 2015-16 the cash sales varied from minimum Rs Nil in the month of March 2016 to maximum of Rs. 14.05 cr. in the month of July 2014. * In the FY 2016-17 the cash sales varied from minimum Rs N....
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...., a substantial portion had been deposited on 8.11.2016 only, which had been accepted by the AO. The appellant could get chance to deposit the part sales proceeds of 7.11.2016 and sales proceeds of 8.11.2016 only on (next bank working day) and the appellant had deposited substantial amount of Rs. 1.84 Cr. on that day. The appellant had contended that the banks were not accepting huge cash due to heavy rush of cash after demonetization, so it had to deposit the cash in hand of Rs. 2.43 Cr. of demonetized SCB's in three installments. The contention of the appellant appears to be correct and even many leading newspaper reported such reports of huge rush in banks after demonetization. It is further observed that there is no substantial lag in deposits made by the appellant after demonetization. It had made all the deposits on three occasions within 5 days of opening of banks after demonetization, which further dilutes the suspicion of manipulation of cash sales on 7th/8th Nov 2016. Out of total sales of Rs. 1.75 Cr. made on 7.11.2016, the AO had accepted part sales corresponding to the bank deposits of Rs. 1.19 Cr made on 8.11.2016. There is no difference in billing pattern of bill....
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.....24 Cr. on 12th Oct 2016, of Rs. 1.44 Cr. on 13th Oct 2016 and of Rs. 1.10 cr. on 28th Oct 2016, whereas the opening & closing balances of Oct 2016 were at Rs. 11.77 lakhs & Rs. 38.41 lakhs respectively. The average monthly closing cash in hand commented by the AO is not true reflection of daily cash in hand and cannot be used as benchmark in these facts & circumstances of the case. There may be compelling circumstances for huge variations of cash in hand on various dates. The specific defects should be brought on record to challenge the cash in hand of the appellant as per the books of accounts. The appellant had huge cash in hand due to spurt in sales on two consecutive dates of 7th & 8th Nov 2016. The appellant had explained that it had cash in hand as on 8th of Rs. 1.9 cr. out of which Rs. 1.19 Cr. was deposited on 8^th Nov 2016 and cash in hand of Rs 69 lakhs was maintained on 8^th Nov 2016, which was comparable to the available cash in hand on 5th& 6th Nov 2016 ( Rs. 75 lakhs). However, on 8th Nov 2016, after A.Y. 2017-18 the demonetization of SBN's was announced, there was great rush of cash sales. Thus, the ash in hand on 9th Nov 2016 was more, which included opening ca....
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....the scope of Section 68. Section 68 is not for the purpose of allowability or disallowability of any deduction and moreover, the question of disallowance may arise in respect of any expenditure or allowance claimed by the assessee. In respect of a sale consideration, there cannot be any question of any disallowance. In the second paragraph above, the Assessing Officer has alternatively applied Section 69C. Section 69C is also for unexplained expenditure. Admittedly, there is no question of any unexplained expenditure in the case under appeal before us and therefore, Section 69C is also not applicable. 9. 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 ....
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....o far as sales effected in cash is concerned. In these circumstances, addition of these amounts cannot be made u/s 68 of the IT act 1961. 6.3.2 In the case of Kishore Bhai Kanhaiya (ITA No. 1220/Del/2011), the Hon'ble ITAT Delhi was examining the issue of cash sales had held as under: "5. It is further relevant to note that the assessee was maintaining stock register in respect of the items dealt with by him. A copy of the relevant parts of the stock register is available on pages 44 to 49 of the paper book. This stock tally was admittedly before the Assessing Officer, who has not pointed out any deficiency in them. There is no law which prohibits a trader or a manufacturer in making cash sales. The Hon'ble Bombay High Court in R.B. Jessaram Fatehchand (Sugar Deptt.) Vs. CIT (1970) 75 ITR 33 (Bom.) has held that sales can be in cash and it is hardly necessary for the seller to bother about the name and address of the purchaser. We find that so long as the availability of stock is there and there is nothing adverse against the cash memos issued by the assessee, such cash safes cannot be doubted. Here it is pertinent to note that the volume of such cash sale....
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....ome-tax Appellate Tribunal returned findings of fact to the contrary. 4. 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 observed that the cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. 5. The findings of the Commissioner of Income-tax (Appeals) and the Tribunal, which are purely in the nature of the factual findings, do not require any interference and, in any event, no substantial question of law arises for our consideration. The appeal is dismissed." 6.3.4 The Hon'ble Gujarat High Court had approved the ITAT order in the case of Vishal Exports Overseas Ltd. ITA No. 2471/2009 holding that where the A.O has accepted the sales realization as income, addition on t....
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....7/Del/2017] has held that neither any item in the trading account, nor gross profit has been rejected, sales cannot be discarded completely to hold that is unexplained money. In a similar case pertaining to CIT vs. Jindal Dyechem Industries Pvt. Ltd. it was held that the AO has not proved that the assessee received something over and above what was entered in the books of accounts maintained. No specific defect was pointed out in the audited accounts. In such circumstances, it was not upto him to add back assessee is return of fictional income. 6.3.5 The Hon'ble IT AT, Delhi in the case of Agson Global Pvt. Ltd. vs. ACIT [ITA No. 3741 to 3746/Del/2019] and [ITA No. 5264 to 5269/Del/2019], in its order dated 31.10.2019 have allowed the appeal of the appellant, which was based on an issue emerging out of demonetization event. The principles laid down also have a bearing on the facts of the present case. The assessee (Agson Global) was engaged in the trading of dry fruits and kirana items. The cash received against sales is subsequently deposited into banks from time to time. Cash sales and corresponding cash deposits into the bank accounts of the assessee have been a reg....
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.... *......Thus, on reading of these proceedings it, it is amply clear that the AO did not make any enquiry on the material submitted by the assessee. He merely proceeded on statistical analysis, which is also partial as stated by us in earlier paragraph, to make the addition on account of cash deposits. He neither found any back dating of the entries, evidence of bogus sales, evidence of bogus purchases, and non-existing cash in the books of account. *......With respect to the deposit of the cash on hand with the various bank, the explanation of the assessee that no such bank was accepting such a huge cash at one go and therefore assessee had to deposit the cash in various banks. The assessee also submitted that that in the same bank assessee has deposited cash in its 2 different branches which itself proves that the banks were not accepting such a huge deposit. Even otherwise, it was submitted correctly that merely because the cash holding as on 8/11/2016 was not deposited immediately cannot lead to conclusion that assessee did not have that cash. It can merely lead to a suspicion but based on this addition cannot be made without making further enquiry and conclusiv....
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....rs have stepped into their show room in large numbers. Since large number of customers have stepped into the showroom within a short span of time of 4 to 5 hours, the assessee made necessary arrangements in cannot but conditions for attending the customers for sale of gold jewellery, however, could not take the details which were not mandatory in respect of the sales below Rs. 2 lakhs. In support of the argument that there was huge rush for sales, the assessee placed certain newspaper clippings before the CIT(A). 4.1. The Ld.CIT(A) after having considered the submissions of the Ld. A.R found merit in the arguments of the assessee and agreed with the assessee's argument that due to unexpected announcement of demonetization on the night of 08.11.2016 the public largely purchased the jewellery as alternative for exchange of currency, and held since, the sales were credited in the assessee's books of accounts as revenue receipt and offered for taxation, the same amount cannot be taxed again u/s 68 of the Act as unexplained cash credit. The Ld. CIT(A) relied on the decisions of Vishal Exports Overseas Ltd (supra) of Hon'ble Gujarat High Court. The Ld.CIT(A) further ....
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....f 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. 7.1. In the case of CIT v. Associated Transport (P.) Ltd. [1996] 84 Taxman 146 (Cal.) the Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, therefore, held that there was no reason to treat this amount as income from undisclosed sour....
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....mann.com 123 (Delhi),and upheld the order of the ITAT in deleting the addition related to sales. The Hon'ble High Court has extracted the relevant part of the order of the ITAT which reads as under: "17. Thus, in our opinion the sale made by the assessee out of his opening stock cannot be treated as unexplained income to be taxed as 'income from other sources'; firstly, the stock was available with the assessee in his books of account and trading in such stock including purchase, sale, opening and dosing stock (quantity wise and value wise) has been accepted by the department year after year and in some years under scrutiny proceedings, therefore, non existence of stock or business cannot be upheld; secondly, the safe of stock in the earlier years and the sale of balance left out stock in subsequent years has been accepted or has not been disturbed, then to hold that no stock was sold in this year and remained with the assessee will be difficult proposition; thirdly, inquiry and inspection by the AO done much after the closure of business may not be persuasive for the past events especially in wake of facts as discussed above; and lastly, once neither any item ....
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....tion and conclusions can be drawn: i) The AO had accepted the sales figures, quantitative stock, cash book, purchases and books of accounts. The appellant has filed VAT returns, which matches with turnover shown in Income Tax Return and the appellant has established existence of adequate stock to effect sales. There is no adverse finding by the AO on any of these facts. (ii) The appellant maintains regular books of account, which are audited by independent Auditor. The cash sales and the corresponding cash deposits in banks are duly reflected in books of the appellant in the respective years. The books of account and the entries pertaining to cash sales and cash deposits have been accepted by the Department in the assessments framed in the past years. The audited financial statements form part of the regular returns filed by the appellant. (iii) The fact that cash sales and cash deposits in banks are regular features of the appellant's business (in the pre-demonetization, demonetization and post demonetization period) has not been controverter by the AO and is clearly explicit from the data on record. (iv) There is no mandatory requirement of....
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....vernment of India on 08.11.2016, the RBI stipulated that the demonetized old currency notes of □ 1000 & □ 500 could be deposited into the banks only between 10th November 2016 until the closing of banking hours on 30th December 2016. The appellant claimed that it advised by the banks to deposit the said amount in tranches. In consonance with the advice received from the banks, the appellant had deposited the said amount in 3 trenches within a period of 5 days (10.11.2016 to 15.11.2016). Hence, it cannot be inferred against the appellant for backdating the sales bills. (vii) It is also not the case of the AO that the cash deposited in the banks during the demonetization period was in excess of what was available in the cashbook duly audited by the auditor. The AO had disregarded the fact that there would have been cash sales on 8^th Nov, even before the demonetization was announced at 8 PM on 8th Nov 2016 and there would have been cash in hand from cash sales of earlier days of cash sales also. The AO had considered whole of cash deposits made by the appellant between 10.11.2016 to 15.11.2016 on account of bogus cash sales without even identifying any specific b....
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....in hand as per the cash book of the appellant. The cash represented mainly the cash in hand available on 8.11.2016 (after making cash deposit of Rs. 1.19 Cr on 8.11.2016) and cash sales effected on 8.11.2016. There is no abnormality observed in the cash sales effected in Nov 2016 (particularly on 7th/8th Nov 2016) vis-a-vis other proceeding month of Oct 2016 or preceding years cash sales data. The cash deposits of Rs. 2,43,37,500/- made by the appellant between the period 10.11.2016 to 15.11.2016 are out of regular cash in hand of the business of the appellant. Thus, the appellant had explained satisfactorily the source of cash deposits of Rs. 2,43,37,500/- made by it, in its bank account after demonetization. Accordingly, the addition of Rs. 2,43,37,500/- made by the AO u/s 68 r.w.s. 115BBE is not sustainable and is hereby deleted. These grounds of appeal are allowed." 13. The ld. CIT(A) has duly analyzed the sales & purchases, stock, cash and compared it with F.Y. 2014-15, F.Y. 2015-16 and also F.Y. 2016-17. The day wise cash book has been examined, the same have been incorporated in this order. The comparative data of purchase and stock for four years to determine the regular....