TaxTMI 
TaxTMI 
TaxTMI 
2024 (8) TMI 741
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....fore the Tribunal was on or before 20.05.2023. The appellant has filed appeal on 03.10.2023 with a delay of 136 days and reasons of such delay was due to technical glitch in ITBA portal, the order passed by the ld. CIT(A) did not appear till 31.03.2023 and because of this, the order could not be downloaded. Further, the Assessing Officer was busy with time barring assessments and in the process missed his attention to the order passed by the ld. CIT(A), which resulted in delay of 136 days. But, said delay is neither intentional nor for wanton of any benefit. Therefore, in the interest of justice, delay may be condoned. 4. The Ld. Counsel for the assessee, on the other hand fairly agreed that the delay in filing of appeal may be condoned. 5. We have heard both the parties and considered relevant reasons given by the Assessing Officer for delay in filing of appeal and after considering the reasons given by the Assessing Officer, we are of the considered view that said reasons come under reasonable cause for not filing the appeal and thus, in the interest of advancement of substantial justice, the delay in filing of appeal by the Assessing Officer is condoned. 6. The brief facts of....
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....verted into sale during financial year 2016-17. The assessee has also furnished list of customers from whom trade advances has been collected towards gold scheme. 7. During the course of assessment proceedings, in order to verify the claim of the assessee, the Assessing Officer issued summons u/s. 131(1) of the Act, to 28 persons. The Assessing Officer, had also called for information u/s. 133(6) of the Act, from 37 persons. The Assessing Officer, further noted that the summons issued to various persons u/s. 131(1) of the Act, were returned unserved with a reason, insufficient address, address cannot be located, no such address etc. The notices issued u/s. 133(6) of the Act also returned unserved with similar remarks. Further, in response to summons issued u/s. 131(1) of the Act, few persons appeared and deposed before the Assessing Officer and stated that they did not know any gold scheme promoted by the assessee and also not paid advance to the assessee. Further, one or two persons came and deposed before the Assessing Officer and admitted to have subscribed to gold scheme and payment of advances. The Assessing Officer, on the basis of enquiries conducted during the course of as....
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....has discussed the issue at length in light of evidences filed by the assessee, enquiry conducted during the course of assessment proceedings, no response from various persons in response to summons u/s. 131(1) of the Act or notices issued u/s. 133(6) of the Act and also the assessee reluctance to avail opportunity to cross examine the witness before coming to the conclusion that the appellant could not establish source for cash deposits into bank account during demonetization period. Thus, rejected arguments and made additions u/s. 68 of the Act, for Rs. 90,86,86,500/- towards cash deposits to bank. 9. 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 at Para 4 of Pages 4 to 33 of ld. CIT(A) order. The appellant has also furnished certain additional evidences before the ld. CIT(A). During the appellate proceedings, the ld. CIT(A) furnished additional evidences filed by the assessee to the Assessing Officer for his comments and remand report. The Assessing Officer has submitted his remand report dated 03.06.2022 and reject....
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....and as on 08.11.2016 as per cash books maintained for the assessment year 2017-18. The Ld. CIT(A) further observed that, the Assessing Officer tries to build up a case on the presumption that the so-called advances claims to have been received by the assessee as cash credits which needs to be examined in light of provisions of Sec. 68 of the Act, ignoring the legal position settled by various courts, including the Hon'ble Supreme Court that trade advances which has been subsequently accounted as 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 Assessing Officer 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 Assessing Officer failed to make out any irregular movement of stock in trade or deficit stock in trade when the assessee has declared sales for the rel....
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....t gold product. The gold products were delivered after a certain period at a discounted price. All the trade advance have been transferred to Sales Account and formed part of the profit and loss account and offered for taxation. The moment they were shown as sales and offered as income, onus part is completely discharged. The appellant has further submitted that the total gold advances received before demonetization and which were converted into gold sales a sum of Rs. 32,43,85,989/- was deposited as cash into the Bank. Further there were cash sales of Rs. 19,08,45,846/- before the demonetization date whch was deposited into Bank. Also a sum of Rs. 39,33,30,165/- was withdrawn from the Bank and re deposited and net balance was available in the hands and the total aggregating to Rs. 90,85,62.000/- was deposited after 08/11/2016 into the Bank. The /Assessing Officer not only brought to tax the advance received under the gold scheme whiCT were subsequently converted into gold sales but also the cash sales made before the demonetisation and also the net withdrawals of the cash from the Bank and brought the entire cash deposits of Rs. 90,80,86,500/- as addition u/s 68 of the Act. The en....
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....pects the sales then AO has to show that either assessee should not have the sufficient stock in their possession or there must be defect in the stock register/stock. Once there is no defect in purchase and sales and the same are matching with in-flow and out-flow stock, there is no reason to disbelief the same. The assessing officer accepted the sales and the stocks. He has not disturbed the closing stock which has direct nexus with the sales. There is no requirement / compulsion as per Rule 114B to submit the PAN and address of the sales or purchase by any person below Rs. 2 lakhs. AO has also not doubted the purchases made which were duly recorded in the books of accounts. The main thrust of the AO is that notices sent to creditors were returned. However when the sales are below Rs 2 lakh the appellant is not expected to keep complete addresses of the buyers. Suspicion howsoever strong cannot become the basis for addition to income. Though certain suspicious features were noticed by the AO but he did not find any defect in the books of accounts and financial statement. Assessee had sufficient stock in hand. AO has not questioned the same. AO could not find any discrepancy in the....
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....e, which has already been taxed. The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again." 6.10 The assessee has submitted that cash sales and corresponding cash deposits into bank Account have been a regular feature of the appellant's business since its inception. Considering the nature of business, turnover happened in the relevant assessment year and previous year comparisons will prove that cash turnover is in fact reduced as % of total turnover. It was also submitted that the same trend has also continued during the relevant Assessment Year both before and after the demonetization period. This implies that there was no unusual trend in the cash sales or cash deposited in the banks by the appellant during demonetization. Details are as under: Description AY 2016-17 (in Crore) AY 2017-18 (in Crore) Total Turnover 78.38 227.53 Cash Turnover 40.53 99.16 Percentage Total sales/Cash 51. 71% 43.58% 6.11 The increase in the total turnover in the assessment year 2017-18 over the assessment year 2016-17 was due to advance scheme promulgated to avail interest free sale advance f....
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....icer to make enquiry regarding cash credit. If he is satisfied that these entries are not genuine he has every right to add these as income from other sources. But before rejecting the assessee's explanation AO must make proper enquiries and In the absence of proper enquiries, addition cannot be sustained, As far as the creditworthiness or financial strength of the creditor/subscriber is concerned, element of credit worthiness and satisfaction of AO is subjective and requires more efforts/inquiry on the part of the AO to give a finding in the order. 6.14 Power of the AO u/s 68 of the Income Tax, Act is not absolute - It is legally well settled that the power of the Assessing Officer under section 68 is not an absolute one. Its subject to his satisfaction where an explanation is offered. The power is absolute where the assessee offers no explanation. The satisfaction with regard to the explanation is in effect an in-built safeguard in section 68 protecting the interest of the assessee. It provides /or an opportunity to the assessee explain the nature and source of the fund. Once it is explained, it is incumbent on the Assessing Officer to consider the same and form an opinion ....
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....hich is reasonable and just [Khandelwal Constructions v. CIT, (1997) 227 ITR 900, 904 (Gauh)]. In the facts of that case, it has been held that the amount of cash credits could not be included in the total income of the assessee because the enquiry was not properly made. 6.16. The provisions of Sec. 68 can be invoked only in cases of receipts shown as cash credits, which are not explainable in terms of requirement of Under Sec. 68 of the Act, a legal fiction is created in order to assess certain receipts shown as cash credits and not as income, i.e., when a taxable receipt is camouflaged as cash credit (non-taxable item of receipt), then the AO could invoke the provisions of Sec. 68 of the Act. In the instant case, the assessee has declared cash sales as its income in its profit and loss account and hence, it is not a case of showing receipts as cash credits and camouflaging the said receipt not as income, which would attract the provisions of Sec. 68 of the Act. The assessment order could not disprove the appellant's claim as per books of accounts and other documentary evidences that the advances from Gold deposit scheme were not converted into sales. In fact, one of the dir....
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....e cash deposited in demonetized currency merely on the pretext that the same was deposited in demonetized currency and hence, was suspicious in nature. Thus, the AO is blowing hot and cold in same stream accepting and rejecting the explanations offered by the assessee with respect to the transactions of identical nature. In the instant case, sale of jewellery in cash is explained and it is not an unusual activity. Further, the said sales are duly supported by the stock register. The books of accounts and stock registers were verified twice over during the inquiry conducted under Section 131 (1A) of the Act and the enquiry teams did not find any deficiency therein. The auditors, who audited the accounts also did not find any fault therein. 6.19 The real question that arises in this case is whether the cash deposits made by the assessee into its bank account have been properly explained or not. The assessee has claimed the trade advances received as sources to be cash sales effected by it and the sales have been duly recorded in the books of accounts and stock register. The AO did not consider such submission and documents in right perspective and by brushing aside all the submissi....
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....m. The delivery of goods have been reflected in the stock register. When trade advances are converted into sales, the provisions of section 68 cannot be invoked - CIT vs Devi Prasad Vishwnath Prasad (Supreme Court) ( 1969) 72 ITR 194. Reliance is further placed on the decision of Hon'ble Rajasthan High Court in the case of Smt. Harshila Chordia Vs. ITO 298 ITR 349 in which it was held that addition u/s. 68 could not be made in respect of the amount which was found to be cash received from the customers against which delivery of goods was made to them. The provisions of Sec. 68 can be invoked only in cases of cash credits, which were not offered as income, i.e., a legal fiction has been created in Sec. 68 of the Act to assess certain cash credits, which were not otherwise shown as income. In the instant case, the assessee has declared the cash sales as its income in the profit and loss account. Hence it is not a case of cash credits, which were not shown as income, in order to attract the provisions of Sec. 68 of the Act. 6.22 In the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC), the Hon'ble Apex Court decided the matter in favour of assessee of the grou....
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.... stock was sold in this year and remained with the assessee will be difficult proposition: thirdly, inquiry and inspection by the AO done such 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 in the trading account, nor gross profit has been rejected, then one part of credit side of the trading account. that is, sales cannot be discarded completely so as to hold that it is unexplained money." 6.24 The appellant has submitted NFAC decision of sister concern/ Associated entity M/s Sahana Jewelry Private Limited pertaining to the same Assessment Year , wherein on similar issues, the Hon'ble CIT(A) has decided in favour of the appellant. The relevant part of the decision are as under: As can be seen the facts discussed in the above order of the /TAT Vishakhapatnam are same in the case of the assessee. Assessee is engaged in the business of jewellery trading. Assessee has deposited the sum of Rs. 8,97,50,000/- in high denominations bank notes (SBNs) post demonetisation bank notes (SBNs) post demonetization. The assessee has explained the sources of cash deposits as cash sales....
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.... the nature and source thereof or the explanation offered by him is not, in the opinion of the [Assessing} Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year: From the perusal of section 68, the sum found credited in the books of accounts for which the assessee offers no explanation, the said sum is deemed to be income of the assessee. In the instant case the assessee had explained the source as sales, produced the sale bills and admitted the same as revenue receipt. The assessee is engaged in the jewellery business and maintaining the regular stock registers. Both the 00/T (Inv.) and the AO have conducted the surveys on different dates, independently and no difference was found in the stock register or the stocks of the assessee. Purchases, sales and the Stock are interlinked and inseparable. Every purchase increases the stock and every sale decreases the stock. To disbelieve the sales either the assessee should not have the sufficient stocks in their possession or there must be defects in the stock registers/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow an....
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....ccounts according to the mercantile system and there was sufficient cash balance in its cash books and the books of account of the assessee were not challenged by the Assessing officer. If the entries in the books of accounts are genuine and the balance in cash is matching with the books, it can be said that the assessee has explained the nature and source of such deposit. In the case of Lakshmi Rice Mills v. CIT [1974] 97 ITR 258 (Pat.) Hon'ble Patna High court held as under: "It is, in my view, a fundamental principle governing the taxation of any undisclosed income or secreted profits that the income or the profits as such must find sufficient explanation at the hands of the assessee. If the balance at hand on the relevant date is sufficient to cover the value of the high denomination notes subsequently demonetised and even more, in the absence of any finding that the books of account of the assessee were not genuine, the source of income is well disclosed and it cannot amount to any secreted profits within the meaning of the law." All the decisions cited supra suggest that once, the assessing officer accepts the books of accounts and the entries in the books of accoun....
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....al from 9-11-2016 and made the investment in jewellery, thereby thronged the jewellery shops appear to be reasonable and supported by the newspaper clippings such as The Tribune, The Hindu etc. It is observed from the newspaper clippings that there was undue rush in various jewellery shops immediately after announcement of demonetization through the country. 8. The Ld.DR placed reliance on various decisions. In the case of SumatiDayal (supra), Durga Prasad More (supra), Durga Prasad More (supra) both the cases are related to the circumstantial evidences in the absence of direct evidence. In the instant case, the facts clearly support that the assessee has made the sales and there were sufficient stocks to meet the sales. Thus, the facts of the assessee's case are clearly distinguishable. The Ld.DR further relied on the decisions of Kale Khan Mohammad Hanif (supra), wherein, the Hon'ble Supreme Court held that the AO is permitted to make addition of unexplained cash credits even though the income is estimated on sales. In the instant case, the AO had accepted the sales and no unexplained cash credits were found, thus, the case law relied upon by the Ld.DR is also distingui....
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....gain. This view is also supported by the decision of Hon'ble Delhi High Court in the case of KailashJewellery House (ITA No.613/20109) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (/TA 2471 of 2009), Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld." 6.26 The Hon'ble Bang/ore /TAT in ITA No 541/BANG/2021 dt. 13.12.2021 in the matter of Anantpur Kalpana has decided similar issue in the favour of the assessee wherein it was held as under: "9. I have carefully considered the rival submissions. Both the AO and CIT(A) accepted the fact that the cash receipts are nothing but sale proceeds in the business of the assessee. The addition has been made only on the basis that after demonetization, the demonetized notes could not have been accepted as valid tender. Since the sale proceeds for which cash was received from the customers was already admitted as income and if the cash deposits are added under section 68 of the Act that will amount to double taxation once as sales and again as unexplained cash credit which is against the principles of taxation. It is also on record that the assessee....
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....ax, Government of Delhi. Before me, Revenue has not placed any material on record to demonstrate that the details of cash sales filed by the assessee are fictitious or bogus. Further, the Revenue has also not placed any material on record to demonstrate that the VAT return filed by the assessee before the Appropriate Authorities have been rejected by the Authorities. It is also a fact that the assessee is having only one source of income which is also not in dispute. Further the purchase of goods from which the alleged sales have been made by the assessee has also not been rejected by the Revenue. I find that the Bangalore Bench of the Tribunal, on similar facts, in the case of Anantpur Ka/pana, Gangavathi, Karnataka vs., /TO, Ward- 1, Koppal in ITA.No.541/Bang/2021 order dated 13.12.2021 and after considering the decision of Ko/kata Bench of the Tribunal and Visakhapatnam Bench of the Tribunal in the case of ACIT vs., M/s. Hirapanna Jewellers, Visakhapatnam in ITA.No.253Nizagl 2020 order dated 12.05.2021 has held that when the sales have been accepted as revenue receipt, the same could not have been again added as income. I find the issue in the present case is also covered by the....
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....into its books of accounts in the form of cash receipts from various persons. But, fact remains that when the Assessing Officer 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 Assessing Officer. In fact, summons issued to various persons have been returned un-served with a remark 'no such person' or 'insufficient addresses'. The Assessing Officer 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 Assessing Officer to delete additions made u/s. 68 of the Act. 12. The Ld. DR, further submitted that the Ld. CIT(A) failed to appreciate the fact that, the assessee initially stated that source for cash deposits is out of ....
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....r rest their findings solely on the basis of non-submission of 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 and the assessee should 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 necessa....
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.... account during demonetization period u/s. 68 r.w.s. 115BBE of the Act, on the ground that the assessee could not able to explain nature and source for cash deposits into bank account and further, explanation offered by the assessee with regard to source for cash deposits is not genuine. According to the Assessing Officer, although the appellant claims to have received advances from customers towards gold scheme, but on enquiry during the course of assessment proceedings it was observed that there is no evidence with the assessee to prove that gold scheme was promoted during that period and also receipt of advance from various persons. The enquiry conducted during the course of assessment proceedings clearly establishes the fact that nobody was aware of any kind of gold scheme promoted by the appellant and publicity given to said scheme and further, there is no evidence with the appellant to substantiate its claim with regard to the said gold scheme. Although, the appellant has submitted list of customers from whom advances was received, but such list has been changed many time with different names and addresses and from the above, it is undisputedly clear that the assessee is not ....
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.... during demonetization period amounting to Rs. 90,80,86,500/-. 17. Having said so, let us come back whether the explanation offered by the assessee is bonafied and supported by necessary evidences. The assessee has furnished a list of customers from whom advances was received for gold scheme. Further, said advance has been recorded in the cash book of the appellant before the date of demonetization. Further, said advances has been converted into sales and accounted in the books of accounts and also reported to GST authorities. The assessee has filed all details in support of their arguments including sale bills, cash book, sale register, stock register etc. The Assessing Officer, has not pointed out any discrepancy in books of accounts including cash book submitted by the assessee and relevant sale bills in support of sales declared in the books of accounts. The Assessing Officer, neither pointed out any discrepancy in purchases reported by the assessee nor any kind of deficit or excess stock. If the claim of the Assessing Officer is assumed to be correct, that the assessee has booked artificial sales to cover up source for cash deposits into bank account during demonetization per....
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....exceed Rs. 2 lakhs as per Rule 114B of Income Tax Rules, 1962. In so far as compliance of KYC norms, it is mandatory under Prevention of Money Laundering Act, 2002, w.e.f. 04.05.2023 onwards and not applicable for the impugned assessment year. Therefore, in our considered view, when the assessee has furnished name and address of the persons from whom it has received trade advances for sale of jewellery, the assessee has satisfactorily discharged onus cast upon to furnish name and address of the persons. Therefore, the observation of the Assessing Officer in light of provisions of Sec. 68 of the Act, that the assessee has not satisfactorily explained cash receipts is unwarranted and devoid of merits. 19. Having said so, let us come back whether the assessee could able to explain source for cash deposits made during 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. 90,75,10,005/- and said cash balance is backed by cash receipts recorded in the books of accounts before the date of demonetization.....
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....sh for the purpose, for which, it has been drawn the balance was available with assessee as cash in hand. The assessee was carrying cash balance in books and once demonetization was announced, the available cash balance in Specified Bank Notes, has been deposited into bank account. We have 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, 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 cas....
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....f 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 cash from them. Out the above 50, summons issued to 40 persons returned by the Postal Authorities citing 'addressee cannot be located' or 'no such person' or 'no such address' or 'insufficient address' or 'no such address at the above place'. In response to summons, three persons were responded and out of three, two persons namely, Shri N.Armugam and Smt.B.Deepa denied having any kind of transactions with the assessee. Further, one person namely Shri A.M.Vargies confirmed having paid advance to the assessee company and also purchased jewellery from them. The Assessing Officer, on the basis of enquiry conducted u/s. 131(1) of the Act, came to the conclusion that the assessee could not substantiate cash receipts received from various persons towards sale of jewellery before the date of demonetization. Therefore, vide letter dated 24.12.2019 called upon the assessee to file confirmation from all the parties and also called upon the assessee to show cause 'as to why' the credits should not be considered as unex....
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....econd 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 claims to have explained cash deposits out of cash receipts from various persons towards sale of jewellery and subsequently changed its stand and argued that source for cash deposits is out of cash withdrawals from very same bank account. In so far as the first and foremost reason given by the AO to assess cash receipts u/s. 68 of the Act, we find that there is a distinction between cash credits and cash receipts towards sales. If assessee claims certain cash credits in his books of accounts and not able to explain credits to the satisfaction of the AO, then, such cash credits need to be examined in light of provisions of Sec. 68 of the Act. In case, the assessee claims that it has received trade advances in cash and the same has been subsequently converted into sales by issuing sale bills, then, said trade advance cannot be examined in light of provisions of Sec. 68 of the Act, because, trade advances have been subsequently converted into sales and sales has been accounted in the books of accounts of t....
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....onth 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 backed by corresponding purchases, and is supported by necessary purchase bills. The AO could not point out any discrepancy in stock register maintained by the assessee nor made out a case that the assessee has declared sales without there being any stock in hand. Therefore, in absence of any contrary findings to the effect that the sales declared by the assessee is not backed by any corresponding purchase or supported by stock in hand, in our considered view, simply sales cannot be rejected on the ground that sale for the particular month or period is higher when compared to corresponding previous period. In our considered view, there cannot be any reason for uniform sales in all days or month or year. There may be various reasons for increase or decrease in sales which depends upon various factors, including festival sales, clearing sales, yearend sales, etc. Therefore, in our considered view, the explanation of the assessee that it has received cash from various customers towards sale of jewellery ....
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.... 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 issue. The assessee has relied upon the decision of the Hon'ble Delhi High Court in the case of PCIT v. Agson Global (P) Ltd., reported in [2022] 441 ITR 550 (Delhi) (19-01-2022). The Hon'ble Delhi High Court under identical set of facts, has deleted the additions made by the AO towards cash deposits during demonetization u/s. 68 of the Act. The relevant findings of the Hon'ble Delhi High Court are as under: * A careful perusal of the extract of the statement made by managing director of the assessee (as recorded in " the assessment orders in-issue) would show that all that he had stated was that it was the assessee's own money, given in the form of loan and/or bogus sales or purchases, that had been routed back to the assessee in the form of share capital/share premium, albeit, through banking channels. [Para 10.3] * The Tribunal, in this context, records a finding of fact that "no unaccounted income of the assessee" had been introduced in its books of account in the form of share capit....
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....t 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 and purchases were placed before the Assessing Officer, and no incriminating documents concerning sales and purchases were found in the course of search and seizure actions. [Para 15.1] * Tribunal also found that in respect of assessment years 2012-13, 2013-14 and 2014-15, sale and purchase transactions were verified and assessment orders were framed under section 143(3). The books of account were duly audited, both, under the Companies Act, 2013 and the Income-tax Act; no defects concerning books were found either by the Assessing Officer or the Commissioner (Appeals). Thus, according to it, no incriminating evidence was found. [Para 15.1] * Insofar as the abated assessment years were concerned i.e., assessment years 2015-16, 2016-17 and 2017-18, it was, apparent that the assessee had purchased goods, which were in value less than the sum for which they were sold. Therefore, as held by the Assessing Officer, in the deviation report, if the purported bogus purchases were to be disallowed then....
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....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 unsustainable conclusions. [Para 15.7] * Accordingly, the observations made by the Tribunal are pure findings of fact, which cannot be interdicted by the Court in appeal. The inconsistency in the approach adopted by the Assessing Officer, while preparing the deviation report and framing the assessment order with regard to purported bogus purchases is an aspect, which cannot be ignored and has been correctly highlighted by the Tribunal. [Para 15.8] * If the revenue chooses to disallow bogus purchases, it would necessarily have to ignore the corresponding sales recorded against the very same parties. As pointed out by the Tribunal, the Commissioner (Appeals) could have rejected the books of account only, after it had examined and come to the conclusion that he was not satisfied as regards their correctness or completeness. The finding of fact returned by the Tribunal is that books of account were not examined by the Commissioner (Appeals). If that be so. then, section 145(3) could not have been ....
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....arlier 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 cash deposits which were not represented by cash sales. Therefore, in the Tribunal correctly found in favour of the assessee and deleted the addition made under section 68. [Para 17.6] 18. The assessee had also relied upon the decision of the ITAT Visakhapatnam Bench in the case of M/s.Hirapanna Jewellers, Visakhapatnam, in ITA No.253A/Viz/2020 and CO No.02/Viz/2021, AY 2017-18, wherein, the ITAT Visakhapatnam Bench, under identical set of facts has held as under: "We have heard both the parties and perused the material placed on record. In the instant case, the assessee has admitted the receipts as sales and offered for taxation. The assessing officer made the addition u/s 68 as unexplained cash credit of the same amount which was accounted in the books as sales. In this regard, it is worthwhile to look into section 68 which reads as under: 68. Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the natur....
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....regoing paragraphs and the Judicial Precedents presented, I find that with sufficient stock in record for which excise duty was paid and vat taxes were paid, the sales could not be treated as unexplained cash credit u/s. 68 of the Income Tax Act. It must be appreciated that an unexplained credit would imply credit which has unexplained source which is not so. The addition made on account of bogus sale thus failed that test of being unexplained as envisaged u/s 68 of the Income Tax Act. In view these of the addition of Rs. 51,39,39,100/- stands deleted. 19. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the AO is erred in making additions towards cash receipts received for sale of jewellery, which has been subsequently converted into sales, for the impugned assessment year as unexplained cash credits taxable u/s. 68 of the Act. The Ld.CIT(A) after considering relevant facts has rightly deleted the additions made by the AO, and thus, we are inclined to uphold the findings of the Ld.CIT(A) and dismiss the appeal filed by the Revenue." 22. The appellant has also relied upon the decision of Hon'ble Delhi High Cou....
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....il 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 and purchases were placed before the Assessing Officer, and no incriminating documents concerning sales an....
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....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 unsustainable conclusions. [Para 15.7] * Accordingly, the observations made by the Tribunal are pure find....