TaxTMI 
TaxTMI 
2024 (10) TMI 692
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....n deleting addition of Rs. 6,89,67,208/- made by the Assessing Officer in respect of cash deposited in bank account of the Assessee u/s 69A of the Act during the period of demonetization. 1(b) That the ld. CIT(A), Ludhiana erred in law, by relying on non-jurisdiction High court decisions even which is contrary to the facts and circumstances mentioned in the assessment order. 1(c) That the appellant craves leave to add or amend any ground or appeal before it is finally disposed off. 3. There is a Cross Objection, i.e., C.O. No. 09/Chd/2024 in this case filed by the Assessee, which we shall deal in latter part of this order after deciding the appeal of the Revenue. 4. The appeal of the Revenue on first ground is basically in respect of deletion of addition of Rs. 1,58,607/- made by the Assessing Officer of GP shown by the Assessee by increasing GP rate from 3.18% to 3.43% and the second ground is regarding deletion of addition of Rs. 6,89,67,208/- made by the Assessing Officer in respect of cash deposited in bank account of the Assessee u/s 69A of the Income Tax Act, 1961 (in short 'the Act'). 5. Brief facts of the case that the Assessee firm is eng....
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....0,000/- so as to obviate the mandator provision of quoting PAN above Rs. 2,00,000/-. 6 From the perusal of the cash book and ledger account of the sales was observed that the appellant is maintaining four series if bills, which are introduced at different time of the year with some bills having same invoice numbers though the series are different. 7. Despite being enough cash in hand, the unsecured Loans and Car loans are not set off. 8. Despite being enough cash in hand there is a withdrawal of cash in the month of October and November- 9. More cc Loan during 2016-17 despite having so much cash in hand. 10. The Appellant had manipulated his books of accounts and made back dated cash sales in order to adjust the demonetized cash. 11. There is a failure on the part of appellant to provide month-wise quantitative details in the said format. Farther no valuation and quantification of closing stock has been uploaded by the assessee. 12. There is no maintenance of stock register. 13. Further, it is clear that the Appellant is changing its stand again and again with respect to Kolkata Branch. It only leads to the con....
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.... return. Thus, the AO is directed to recalculate the addition on account of low GP based on the above discussion. Accordingly ground 2 is decided. 5.7. As regards the addition of Rs. 6,89,67,208/-I n respect of cash deposit by the Appellant, the reasons given by the AO is predominantly cash sales made by the Appellant at various occasions of the amount less than Rs. 2 Lakhs where the Appellant doesn't maintain the name and address of the purchaser. Thereby observing that the Assessee must have done bogus sales to increase turnover. Further, the doubts as to Kolkata operations and cash deposited at Kolkata led the AO to observe that the unaccounted money of M/s Balaji Processors find somewhere in Kolkata which the Assessee has deposited during the demonetization period. 5.8 While making the above observations, the AO failed It appreciate that all the purchases of the Appellant are properly vouched for which required details have been submitted. Further, the Appellant has given quantitative detail such as opening stock, purchased, sales and closing stock for the year under consideration. The closing stock as reflected in books of accounts has not been disturbed ....
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....e in bank, impugned revision at order was to be set aside." In view of the above and the fact that the total sales as per VAT return have been adopted as basis for estimating GP, no separate addition under section 69A of the Act in respect of cash deposited during the demonetization period which is represented by sales is required. In view of the facts quoted above, the addition made of Rs. 6,89,67,208/- u/s 69A of the Act is hereby deleted and accordingly ground 3 is allowed. 5.10. In ground 4, the appellant tends to challenge the computational errors committed by the AO. During the appellant proceedings, this ground is not pressed by the appellant and accordingly is dismissed. 5.11. In ground 5 the appellant craves for the right to add, delete or amend any ground of appeal before the disposal This option was not exercised by the appellant during the appellate proceedings hence this ground is dismissed." 6. During the proceedings before us, the ld. DR vehemently argued that the ld. CIT(A) considered the addition of Rs. 1,58,607/- on the basis of increase of GP rate from 3.18% to 3.43%. The ld. DR argued that the act of the Assessing Officer was based ....
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....f accounts and there is sufficient stocks available in the books of accounts, out of purchases and sale transactions. 3. It was further argued that the sales have been made at the retail counter at Kolkata, and such sales have also been out of the available stock in the audited books of accounts and no doubt, have been raised on account of opening stocks, the purchases of raw material, closing stocks. The detail of cash sales were there at the 'Ludhiana Unit' during financial year 2015-16 and though, retail outlet at Kolkata was new during the year under consideration and such sales were out of available stocks and the only doubt of Assessing Officer was about the names and addresses of the parties to whom the cash sales have been made by the assessee and, thus, no adverse view can be drawn. 4 It was vehemently argued that the commodity wise details of opening and closing stock and quantitative details of all types of finished goods and raw material month wise in quantity and value have been furnished and confirmed copies of accounts of majority of the creditors have also been filed and regarding the cash sales, reliance was placed upon the judgment of dif....
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....;, reported in 134 taxman.com 256. Judgement of Chandigarh Bench of the ITAT in the case of 'Fashion Zone' in ITA No. 331/Chd/2023. In all such judgements, it has been held that, where there is availability of stocks, and the stock has been sold on cash basis and then such cash so realized, if deposited during the period of demonetization, cannot be doubted at all. The relevant para of the judgement in the case of Fashion Zone Vs JCIT in ITA No. 331/Chd/2023 is being reproduced:- "We have heard the rival submissions and perused the material available on record. The assessee has deposited a sum of Rs 48 lacs on 13/11/2016 and a sum of Rs. 2 lacs on 22/02117 in its bank account maintained with Axis Bank. The source of such cash deposits has been explained by the assessee as out of its cash sales so undertaken and it has also been explained that such cash sales are subject to VAT where VAT has been collected and deposited with the government treasury. In support of its explanation, the assessee has furnished the cash book containing the entries towards the cash sales, bank statement for the relevant period, VAT returns, copy of trading nid profit I loss account and ba....
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....the assessee that each and every point as mentioned at page 3 & 4 of the order of CIT(A regarding the rejection of books of accounts u/s 145(3) have been dealt by way of detailed submissions made vide letter, dated 21.03.2023 before CIT(A) and our attention was drawn to page 2 to page 32 of the Paper Book submitted before us. wherein all such issues have been explained at length and it was pointed that there is no basis o rejection of books of accounts and, thereby, making the enhancement of G.P. rate by the Assessing Officer. It was brought to our notice that each and every allegation as made by the Assessing Officer for rejection of books of accounts u/s 145(3) have been extensively dealt in the written submissions, dated 21.03.2023 and for the sake of brevity, the same is being reproduced as under:- i) So called high cash sales in October and November At the outset it is submitted that the assessee has been regularly making cash sales of the Blankets and knitted cloth in the normal course of its business. The assessee has been making such retail cash sales from the past many years and the details of the same has also been filed during the course of the assessme....
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....ee's normal business. Thus, rejecting the cash proceeds of the sales which are deposited during the demonetization period and accepting the purchases, the sales made in the other part of the year is just blowing hot and cold air at the same time and the same merely shows the mindset of the AO to tax the cash deposit of the demonetization period without going through the facts of the case. Therefore, there is no iota of doubt left regarding the fact that the cash deposited is actually the proceeds of the sale made by the assessee. iv). It is also submitted herewith that the case of the assessee was also selected for scrutiny by the VAT department also and the books of accounts including the cash sales made by the assessee. Further, the assessee has also filed the quantity wise details of the purchases made by the assessee and the said details also stands accepted by the AO. Apart from the same, the assessee has filed the confirmed copies of accounts of the majority of the creditors further substantiating our claim that when the purchases made by the assessee has been accepted, the quantity purchased have been accepted, no adverse inference against the confirmed copies o....
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....e ITAT in the case of Shree Sanand Textiles Industries Ltd., in ITA No. 995/Ahd/2014 and CO No. 167/Ahd/2014, in which, the issue was with regard to the fact that the assessee had received the sale consideration from certain parties to the tune of Rs. 3,76,44,053/- and which have been reflected in the trading account and which facts were not doubted by the authorities. However, the existence of the party was not proved on the basis of documentary evidence and he Assessing Officer has treated the same amount received from the party as unexplained cash credit u/s 68 of the Income Tax Act. This addition was confirmed by the Ld. CIT(A). The matter was carried by the assessee before the Hon'ble ITAT and the Hon'ble ITAT deleted the addition vii). Further, it is submitted that whatever cash deposits were made by the assessee during the year under consideration and during the demonetization period were made out of the regular cash sales of the assessee which were duly recorded in the books of accounts including cash book and corresponding entries on account of deposit of cash were reflecting in the bank statement. The copy of cash book along with connected bank statements....
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.... that the assessee is not duty bound to obtain the names and addresses of every client who buys goods on retail basis and moreover, the department cannot challenge the cash sales made by the Assessee, as it is part and parcel of every business. Moreover, the CBDT has not put any bar on making any cash sales. The Assessee has not done any transaction outside the purview of the Income Tax Act. The Assessee cannot say no to any of its customer to give cash against the sales made by if unless, it is not allowed as per the laws of the land. x) Even it has been held by various Hon'ble Courts that the person is not bound to give details of its customers in case of cash sales. Reliance in this regard is being placed upon the following case laws: a) The judgment of Hon'ble High Court of Bombay in the case of R.B. Jessaram Fatehchand (Sugar Dept.) v. CIT reported at [1970] 75 ITR 33 (BOM.) "There is no necessity for assessee to maintain the addresses of customers and failure to maintain the same or to supply them as and when called for cannot give rise to suspicion with regard to genuineness of transactions" b) The Hon'ble High Court of Kerala ....
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....in hand. Moreover, the AO has also alleged that the assessee has made self-withdrawals even when it had enough cash in hand. With regard to the same it is submitted that the cash in hand has been generated out of the regular business sales and it is very much rational and common that the said sales proceeds are utilized to pay the normal business creditors and the same has been done by the assessee also which is clear from the details of the creditors along with the ledger accounts filed by the assessee during the course of the assessment proceedings. The said details depict that the assessee has been regularly making payment to the said creditors and due to which the business cycle of the assessee has been running. Furthermore, it is also submitted that the unsecured loans are majorly taken from relatives and close friends and there is no compulsion of repayment of the same and thus, the assessee can very well utilize the said funds without any adverse effect on its CIBIL or any other ratings. Therefore, the cash in hand has been utilized to make the payments in the regular course of the assessee's business. Further it is also submitted that a business concern takes o....
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.... considering the scale and nature of the business of the assessee. The details filed by the assessee during the assessment proceedings in respect of the stock are as under:- a. The assessee vide reply dated 24.07.2019 has duly filed the Quantity wise details of the raw materials depicting the name of the item, opening stock, purchases made, consumed during the year, closing quantity and the valuation of the closing stock of the raw materials. b. Similarly, the assessee vide reply dated 24.07.2019 has also filed the Quantity wise details of all types of finished goods depicting the name of the item, opening stock, manufactured during the year, sold during the year, closing quantity and the valuation of the closing stock of the Finished Goods. c. Apart from the same the assessee has also filed the month-wise details of the raw materials depicting the quantity purchased, its value and the value of the closing stock and the same has been filed vide reply dated 23.10.2019. d. Apart from the same the assessee has also filed the quantitative details of the purchases made during the year and the same has also been accepted by the A.O. during the assessme....
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....24 ITR 95 (Del HC) c) Ashoke Refractories (P) Ltd. v. CIT 279 ITR 457 (Cal HC) d) Neeraj jain vs. ITO 33 CCH 436 (Del Trib) e). Teletronics Dealing Systems (P) Ltd. vs. Additional CIT 31 CCH 037 (Mum Trib) f). ACIT vs. Ramesh Kumar Siwach in ITA No. 3269/Der/2013 g) [2016] 73 taxmann.com 195 (Gujarat) HIGH COURT OF GUJARAT Jaytick Intermediates (P.) Ltd. v. Assistant Commissioner of Income-tax h) [2020] 117 taxmann.com 802 (Chandigarh - Trib.U[2020] 183 IN THE ITAT CHANDIGARH BENCH 'B' in the case of Paramount Impex vs. Assistant Commissioner of Income-tax, Circle-J, Ludhiana i) [2016] 73 taxmann.com 195 (Gujarat) of Hon'ble HIGH COURT OF GUJARAT in the case of Jaytick Intermediates (P.) Ltd. vs. Assistant Commissioner of Income-tax j) The Dy. Commissioner Of Income Tax vs M/S Sifti Rice Mills, Amritsar in ITA No. ITA No.764/(Asr)/2014, Assessment Year 2011-12, PAN: AAPFS6697G dated 26/05/2017 Therefore, the rejection of books of accounts on the basis of the allegations made by the Ld. AO is invalid as per the above explanation. xvii). Non-maintenance of bills regarding purchase of....
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.... and rejecting the books of accounts on the basis of this reason. xx) Allegation regarding the office at Kolkata In this allegation of the AO, he stated that the assessee has not been able to clarify its stand regarding the sales made in Kolkata Branch. With regard to the same, it is submitted that the assessee has very well clarified its stand regarding the cash sales being made at Kolkata Branch. The counsel of the assessee has already submitted that the assessee proposed to open the Branch at Kolkata and due to which, they took a premises on rent there and opened a bank account there mentioning the due details of the Branch. The assessee has also submitted that immediately opening that branch the management realized that it is not possible for them to administer the affairs of that branch directly. So, due to this situation, the assessee appointed a person namely Ashish Kumar Kundu to administer the affairs of the branch as the assessee could not run the Kolkata Branch directly, so the whole operations of Kolkata Branch was handed over to the above mentioned person. It was agreed between the assessee and the said person that the assessee would sell the goods to....
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....s of which has been given by the assessee during the course of assessment proceedings and against which the AO has not drawn any adverse inference. xxii). The AO also alleged that in order to carry out the said transactions the person Mr. Ashish Kumar Kundu should not be employee of the assesses as no employee can bear the loss. With regard to the same, it is submitted that this allegation of the AO is totally misplaced and irrelevant as under which logical reasons or logical circumstances, would an employee miss an opportunity of running the operation of whole branch when there is an opportunity of earning huge amount of profits there and that too without employing even a single amount of capital. It is submitted that the said person was earning a meager salary of Rs. 5 to 6 thousand and the assessee gave that person a very good opportunity of earning huge amount of profits by selling the goods at his own will. It is also clear and also admitted by the AO himself that said persons generates his profit and said loss and the same also has been disclosed by the said person in his return of income wherein he has shown income from business of Rs. 2,55,420/-. Therefore, apart f....
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....ve reading of the said details and the detail of the cash realized from debtors at Kolkata Branch, it is clear that the person appointed there has been regularly depositing the cash in the bank maintained at Kolkata which depicts that the receipt of cash and depositing the same in the bank account is a regular modus operandi and moreover, the same has been accepted even by the Investigation Wing itself. The assessee has also filed the copy of account of the Ludhiana Branch, in the books of Kolkata Office. The said copy of account reflects the sales made by the assessee to the Kolkata Office and against which either the assessee has received cash or payment has been received via banking channel. From a perusal of the said copy of account, it is clear that the cash is being regularly deposited every month starting from April, 2016 and the fact which is very pertinent to be seen here is that the amount being deposited in cash is far more than the amount received through banking channels. Therefore, there is no iota of doubt left that the assessee has been regularly receiving the cash from the Kolkata Office and the same is being regularly deposited in the bank account of the assessee.....
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....ve been issued at one time and moreover, when the transporter itself has confirmed the same. Further the AO also alleged that the assessee has not maintained the copy of account of Khamkhya Transport, however, with regard to the same it is submitted that the said goods sent through the said transport was "to pay" basis and no payment has been paid by the assessee itself and the same is evident from the copies of the bilties filed during the assessment proceedings wherein "Kolkata" has been mentioned against "To Pay", therefore, when no payment has been paid by the assessee then no ledger would exist in the books of the assessee. It is submitted that the AO has merely done cherry picking and that too has been done incorrectly and without any application of mind. The AO has not given any remarks against the documents which have actually been filed by the assessee and neither any opinion has been given in respect of the sufficiency of the said documents, rather the AO was mainly focused on what has not been filed by the assessee which shows the specific mindset of the AO and his fixation on ejecting the books of accounts of the assessee. It is reiterated that the documents fi....
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.... p aced on the following judgments: - (a) YFC Projects (P) Ltd. Vs. DCIT (Del) 134 TTJ 167 (b) ACIT vs. Han Singar Gutkha (P) Ltd. (2008) 9 DTR 604(Trib.) (c) Continental Carbon India Ltd. Income-tax Officer. ITA Nos. 5269. 5270 & 5271/Del/2010. ITAT Delhi. xxx). Further, it is also submitted that the parties namely M/s Upvan Syntex, M/s Payal Fashions and M/s Gaurang Knit Fab Corporation has filed their confirmations, even then the AO alleged that they have not filed the their ITR along with the confirmation and that confirmation without ITR has not legal value. With regard to the same it is submitted that time and time again the AO has made such allegations which has no legal or factual standing and which is not even relevant to the case of the assessee. The confirmation filed by the above parties are more than sufficient evidence to substantiate the sales made by the assessee to the above parties and there is no requirement to file the ITR and moreover it is not the case of unsecured loan rather the assessee has only made sales in the normal course of business to the said parties and against which no adverse remarks have been given by the AO. ....
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....e set aside by the Court". xxxii). The Hon'ble Supreme Court also stated in the case of Umacharan Shaw 8t Bros. v. CIT (1959) [1959] 37 ITR 271 (SC) held that suspicion however strong, cannot take the place of evidence. xxxiii). The Hon'ble Supreme Court way back in the case of Lalchand Bhagat Ambica Ram v. CIT [1959] 37 ITR 288 (SC) held that assessment could not be based on background of suspicion and in absence of any evidence to support the same. The Hon'ble Court held: "The mere possibility of the appellant earning considerable amounts in the year under consideration was a pure conjecture on the part of the ITO and the fact that the appellant indulged in speculation (in Kalai account) could not legitimately lead to the inference that the profit in a single transaction or in a chain of transactions could exceed the amounts, involved in the high denomination notes,-this also was a pure conjecture or surmise on the part of the ITO." 13. It was argued that in para 5.4, the Ld. CIT(A) has acknowledged that detailed reply was submitted but in summary manner has upheld the rejection of books of accounts without assigning any reason, whatsoeve....
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....nue's appeal on this Ground is dismissed. 13. Appeal on Ground No. 2 filed by the Revenue is against the deletion of Rs. 6,89,67,208/-. The ld. CIT(A) in his order has given his findings as under:- 5.7. As regards the addition of Rs. 6,89,67,208/-I n respect of cash deposit by the Appellant, the reasons given by the AO is predominantly cash sales made by the Appellant at various occasions of the amount less than Rs. 2 Lakhs where the Appellant doesn't maintain the name and address of the purchaser. Thereby observing that the Assessee must have done bogus sales to increase turnover. Further, the doubts as to Kolkata operations and cash deposited at Kolkata led the AO to observe that the unaccounted money of M/s Balaji Processors find somewhere in Kolkata which the Assessee has deposited during the demonetization period. 5.8 While making the above observations, the AO failed It appreciate that all the purchases of the Appellant are properly vouched for which required details have been submitted. Further, the Appellant has given quantitative detail such as opening stock, purchased, sales and closing stock for the year under consideration. The closing stock as ....
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.... also books of account showing entries of deposits made in bank, impugned revision at order was to be set aside." In view of the above and the fact that the total sales as per VAT return have been adopted as basis for estimating GP, no separate addition under section 69A of the Act in respect of cash deposited during the demonetization period which is represented by sales is required. In view of the facts quoted above, the addition made of Rs. 6,89,67,208/- u/s 69A of the Act is hereby deleted and accordingly ground 3 is allowed. 14. We have considered the arguments of the ld. DR who has argued against the said deletion on the basis that the ld. CIT(A) has followed the decisions of non-jurisdictional High Courts on this issue. Here we want to make it clear that in the absence of an order of the jurisdictional High Court, relevant orders on the same issue of even non-jurisdictional High Court are also accepted. It is a normal practice and thus there is nothing wrong in it. We have also considered the arguments of the Counsel of the Assessee and the findings given by the ld. CIT(A) in his order. We find that it is a matter on record that regarding allegation of bogus sale....
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....fore - 12.10.2023 iii). The appeal was filed on - 06.03.2024 Delay in filing the appeal /C.O. - 145 days. 2. It is submitted that we have a full time Accountant namely Sh. Raman Changotra, who had been looking after our Accounts and legal matters viz-a-viz Income Tax. 3. That we had received the memo of appeal by post on 13.09.2023 and the same was handed over to our Accountant, Sh. Raman Changotra for taking an appropriate action in the month of September 2023. 4. That however, later on when the date was fixed for hearing on 11.03.2024, he was asked to engage Sh. Sudhir Sehgal as our counsel and when he approached the counsel concerned, he (the counsel) enquired from him, whether any cross objections had been filed or not and then it came to know that the cross objections had to be filed within 30 days and, accordingly, we then advised him to take immediate step to file the Cross objections/ appeal immediately, which was filed by our counsel, Sh. Sudhir Sehgal on 06.03.2024. We told him to be careful in future and this default has occurred only on account of the above said reason, it is, therefore, very humbly requested that delay of 145 days ma....
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....unt. The ld. CIT(A) in his order has discussed this issue as under: - "5.3. As regards to the 1 ground of appeal, I have carefully perused the assessment order passed u/s 143(3) of the Act dated 29/12/2019. In the assessment order the AO has narrated various facts for the rejection of the books of accounts under section 145(3) of the Act. The observation and discrepancies in nutshell as observed by the AO are as under: 1. Cash sale of October and November 2016 shows sudden high as compared to preceding month and again drop to almost NIL in the month of December 2016. 2. The Appellant has not uploaded cash book of Kolkata branch for whole of the year. 3. There is a huge difference in closing cash in hand which was submitted to the investigation wing vis a vis submitted during the assessment proceedings. 4. There are no name/PAN/complete address details of the persons with whom the appellant had cash sale transactions. 5 Majority of the bills in the month of October and November are generally of amount of Rs. 1,0.000/- to Rs. 1,95,000/-. All the sales-bills are below Rs. 2,00,000/- so as to obviate the mandator provision of quotin....
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....dingly, the issue raised vide Ground Nos. 1 & 2 of the Cross objection is dismissed. 23. Ground No. 3 of Assessee's Cross objection is against the calculation of GPA @ 3.27% against the GP shown by the Assessee @ 3.18%. In the written submissions filed, the ld. Counsel has submitted that they had submitted the detailed reply on this issue before the ld. CIT(A) but in his order, the ld. CIT(A) has although acknowledged that detailed reply was submitted but in summarily manner has upheld the rejection of books of account and in para 5.5 of the order, the CIT(A) has given his findings rejecting the GP ratio adopted at the rate of 3.43% by the Assessing Officer and bringing in down at the rate of 3.27%. On this issue, a detailed discussion has already been done in the former part of this Order in the appeal filed by the Department in ITA No.499/Chd/2023. However, at the cost of repetition, it is to again brought on record the findings of the ld. CIT(A) on this issue, which is as under: - "5.6. The AO has without any base or comparable case simply increases the GP by 0.25% which in my opinion is not correct. At the most GP should have been estimated at 3.27% which is logical....