TaxTMI 
TaxTMI 
2024 (8) TMI 741
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....3 and last date for filing of further appeal before 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 As....
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....17 and trade advances received from customers and converted 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 t....
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....ht to tax u/s. 115BBE of the Act. The Assessing Officer, 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 ....
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....during demonetization period out of opening cash balance in hand 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 st....
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....ngs, the appellant has submitted that appellant had received advance against 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 entir....
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....ister. The stock register have been twice verified by the income tax officials. If AO suspects 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 sufficien....
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.... is for the assessee to prove that even if the cash credit represents income, it is income from a source, 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....
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....efore making any addition u/s 68. In Khandelwal Constructions,. CIT 227 ITR 900 (Gau.) it has been held that section 68 of Income Tax, Act, 1961 empowers the assessing officer 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 ....
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....erived from relevant factors on the basis of proper enquiry [Rajshree Synthetics Pvt. Ltd. v. CIT, (2002) 256 ITR 331, 335 (Raj)]. The enquiry envisaged under section 68 is an enquiry which 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 n....
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....in banks during the impugned F.Y. 2016- 17 in the pre demonetization period and cash deposited in banks from the sales made after 08.11.2016. The AO did not accept the same modus operandi with respect to the 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 sale....
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....x act. The moment they were shown as sales and offered as income, onus on our part is completely discharged. All the advances have been only trade advances in nature. Only the sales have been effected and goods delivered to them. 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 a....
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....ny proceedings, therefore, non existence of stock or business c:e,;not be upheld; secondly, the sale 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 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 ....
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....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 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 pur....
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.... of the assessee and consequently imposition of penalty was also not justified in this case." In the case of Lalchand BhagatAmbica Ram v. CIT {1959] 37 /TR 288 (SC), the Hon'ble Apex Court decided the matter in favour of assessee of the ground that it was clear on the record that the assessee maintained the books of accounts 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, i....
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....making sales of 270 bills in the span of 4 hours, non availability of KYC documents for sales, non writing of tag of the jewellery to the sale bills, non-availability of CCTV footage for huge rush of public etc. The contention of the assessee that due to demonetization, the public became panic and the cash available with them in old denomination notes becomes illegal 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 rel....
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....ent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in the stock as well as the sales. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 68 or tax the same u/s 115BBE again. 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 demo....
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....h sales made [a copy of which is placed in paper book] and it contains the details namely the date of sale, the voucher number, the name of the party, the amount of sales. It is also an undisputed fact that on the aforesaid sales, VAT as per the applicable rates has been paid by the assessee and the payment of VAT is a/so reflected in the VAT returns filed by the assessee with the Department of Trade and Tax, 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....
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....urchase bills, sales bills, etc., which is evident from the observations of the Assessing Officer in his assessment order, where the Assessing Officer records categorical findings that the assessee has failed to file necessary evidences. The Ld. CIT DR, further submitted that the assessee has made huge deposits 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 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 ....
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....nd taxable u/s. 68 of the Act, is fundamental mistake committed by the Assessing Officer in understanding difference between trade advances and cash credits. It is a well settled principle of law by the decision of various courts that trade advances are outside the scope of provisions of Sec. 68 of the Act, and those advances cannot be examined in light of provisions of Sec. 68 of the Act. Further, the Assessing Officer 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....
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.... 15. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have also carefully considered various reasons given by the ld. CIT(A) to delete additions made by the Assessing Officer towards cash deposits amounting to Rs. 90,80,86,500/- during demonetization period u/s. 68 of the Act. The Assessing Officer, has made additions towards cash deposits into bank 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 o....
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.... The assessee claims source of Rs. 32,43,85,989/- out of advances received from customers towards gold scheme and subsequent conversion into sales and accounted in the books of accounts and once again this is supported by necessary sales bills and ledger extracts. From the above, it is undisputedly clear that the assessee is having sufficient cash in hand as on 08.11.2016 to explain source for cash deposits into bank account 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 sub....
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....ssessee towards gold scheme in light of provisions of section 68 of the Act. 18. Be that as it may. The fact remains that, the assessee has furnished name and address of the customers from whom it has received advances for sale of jewellery. The assessee need not obtain confirmation and submit to the Assessing Officer, because, the law does not mandate colleting PAN details of the persons, if sale value of jewellery does not 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 assesse....
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....d reasonable. 20. Coming back to second observation of the Assessing Officer in rejecting explanation of the assessee with regard to source for cash deposits. In addition to trade advances received in cash from various persons, the assessee explained that, it has sufficient cash withdrawal aggregating to Rs. 39.33 crores from very same bank account on various dates before the date of demonetization and after utilization of the cash 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. Furthe....
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....ore 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 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 Asses....
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.... 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 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,....
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....d 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 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 mon....
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....s 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 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 reco....
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....al 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 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 ....
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....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 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....
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....e 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 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,....
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....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 he 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 strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence. Provisions or section 68 are applicable in case or unexplained cash credit. Looking at the discussion at the foregoing 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 ....
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....ail of the money received from various entities in the form of share capital/share application money, concluded that the assessee had been able to place before the Assessing Officer sufficient documentary evidence which established that the money which the assessee had paid to the investor entities was routed back to it in the form of share capital/share premium. [Para 11.4] * That being the position, the Tribunal concluded that the assessee had been able to prove the identity of the investors, their creditworthiness and genuineness, which are the ingredients of section 68. [Para 11.5] * In instant 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....
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....h the aforementioned value was lying at the assessee's warehouse, something which was completely ignored. This position, was fortified by the fact that no addition in respect of any excess or shortage of stock had been made in the assessment orders of any of the years. In effect, according to the Tribunal, the stock found in the books reconciled with the stock which was found physically. [Para 15.3] * It appears, that the Commissioner (Appeals) did not call for the books of account i.e., to examine the same. Furthermore, the Tribunal records that the Assessing Officer, in the remand report, did not advert to the fact that the books of account 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 (App....
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....Para 16.2] * The assessee. in support of its plea that cash deposits were made by the assessee in respect of sales which were duly accounted for, reliance was placed on the following material:- audited books of account; bank-wise summary of cash deposits; copies of bank statements; and details of monthly cash sales and cash deposits made in earlier financial years. [Para 16.2] * In this context, the Tribunal analyzed the data pertaining to cash sales and cash deposits made in the financial year in issue. The analysis made by the Tribunal showed that, in the three financial years, the total cash deposits more or less corresponded with the cash sales. [Para 16.6] * Based on the 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 les....