AI Drafter 
TaxTMI 
TaxTMI 
2024 (11) TMI 1190
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....gh online. 3. The assessee is engaged in the business of trading of Dilbagh Pan Masala and tobacco. During assessment proceedings, Assessing Officer observed that assessee has deposited huge cash during demonetization period and observed that assessee has deposited Rs. 21,00,000/- in Central Bank of India, Rs. 7,49,50,000/- in HDFC Bank and Rs. 4,85,00,000/- in Axis Bank Ltd. The assessee was asked to submit details of source and details of cash deposited in SBN during the demonetization period with documentary evidences, total income of the assessee along with percentage of cash deposits to gross total income and also details of cash deposits month-wise during the period including specific period of cash deposits i.e. 01.11.2016 to 08.11.2016, 09.11.2016 to 30.11.2016, 01.12.2016 to 30.12.2016, for 31.12.2016 and 01.12.2016 to 31.12.2016. In response, assessee submitted detailed submissions during assessment proceedings. For the sake of clarity, the same is reproduced below :- Table-1 Amount in Crore Month Cash sale in FY 2017-18 CASH DEPOSITED IN BANK in FY 2017- 18 Cash sale in FY 2016-17 CASH DEPOSITED IN BANK in FY 2016- 17 Cash sale in FY 2015-16 ....
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....nder :- * "From the above Table-1, it is apparent that cash sale during demonetization period was increase from Rs. 5.88 cr. to Rs. 6.56 cr. during 09.11.2016 to 30.11.2016 however cash deposit was surged from Rs. 5.75 cr. to Rs. 11.35 cr. The total cash deposit out of total cash sale is 173% of total cash sale where as in the F.Y. 2015-16, there was 98% of total cash sale which raise suspicion about the genuineness of business transaction. * Similarly from table-1, the cash sale during 01.12.2016 to 31.12.2016 decrease from Rs. 8.99 Cr. to Rs. 5.39 cr. however cash deposit in bank account was escalated from 8.17 cr to 17.82 cr. The cash deposit in bank account is 111 % of total cash sale of the month. But, the assessee failed to substantiate the increased cash deposit in bank account. * On further perusal of the Table-2, it has been noticed that cash sale during the demonetized was decreased to the lowest level i.e. 3% to 4%. In contrast the cash sale was increased at the highest level during the F.Y. 2016-17. * The assessee company failed to justify the cause / reason to keep huge cash of Rs. 7,11,53,135/- in hand on 09.11.2016 whereas its aver....
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....ch the books of accounts and other records were examined in detail. However no discrepancy has been observed by the survey team which has been brought into record by the A.O in his order. This proves that the assessee had maintained his books of accounts in proper fashion and the entries were duly substantiated with evidence. No error was also found in the stock maintained at the premises of the assessee, which proves that the assessee maintained the proper stock records and the high sales during demonetization period was duly supported by the stock available with assessee. (b) The books of account have not been rejected by the A.O. This proves that the A.O. has relied on the entries given in the books of account. Without rejecting the books of account, it was wrong on the part of assessing officer to add an amount of Rs. 12,55,50,000/- which was already declared by the assessee as cash sales. Thus, it tantamounted to double addition. (c) The A.O. failed to appreciate that the assessee is in the business of trading of Pan masala in which almost 100% turnover of the assessee is in cash. The same is reflected in the table given below:- AY Cash sales including ....
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....rce of cash deposit of Rs. 16,70,50,000/- during the period of 09.11.2016 to 30.12.2016 has been explained by the assessee as under:- Particulars Amount Opening cash in hand as on 08.11.2016- Delhi Branch 6,09,83,486 Opening cash in hand as on 08.11.2016- Gzb. Branch 2,97,777 Add:- Cash sales made on 08.11.16 - Combined 1,48,76,601 Add:- Cash Sales made during 09.11.16 to 30.12.2016 (Combined) 11,20,81,344 Less: Cash Expenses on 08.11.2016 4,790 Less: Cash Expenses During 09.11.16 to 30.12.16 3,46,900 Less:- Cash Deposited on 08.11.16 (in Day time before announcement of Demonetization in evening 50,00,000 Net Cash Balance Available for Deposit During 09.11.16 to 30.12.16 18,28,87,518 These figures being taken from the audited books of account in which no discrepancy has been found either during course of survey under section 133A of the act or during the assessment proceedings, fully explain the source of cash deposit during the demonetization period. (h) The A.O. failed to appreciate that complete purchases are made by assessee through banking channels fro....
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.... (A) allowed the grounds raised by the assessee with the following observations :- "Even otherwise, it is seen that justification of salary payments to Sh. Satya Prakash Sharma and Smt. Sunita Sharma was submitted to the Assessing officer on 19.09.2019 by the parties themselves in response to notice u/s. 133(6) issued by the A.O. Thus it is incorrect on the part of A.O. to say that he was not aware about the nature of services rendered by the related parties. Sh. S.P. Sharma, as submitted by the assessee, is the backbone of his business and has been getting high salary in previous years which was accepted by the department. Further, Sh. S. P. Sharma disclosed his income of Rs. 5.02 crores in A.Y. 2017-18, thus falling in highest possible tax bracket. Thus it cannot be a case of. diversion of income. The assessee is well within his right to pay salaries according to the benefit he gets in return. Smt. Sunita Sharma and Smt. Anita Sharma are both old employees of the company. Smt. Sunita Sharma is a post graduate and looks after account section. Sh. Anita Sharma is a graduate who looks after office and administrative works of the assessee. Considering all these factors and s....
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....ted that assessee has deposited cash during the period of demonetization. He submitted that assessee has a regular cash sales during the whole year and submitted that a detailed cash sales during the demonetization period i.e. 09.11.2016 to 30.12.2016 along with summary of cash sales during the same period in Delhi Branch and U.P. Branch. He further submitted that assessee also submitted detailed cash sales and deposits in the current year as well as past two years before the Assessing Officer. He submitted that assessee has regular cash sales to support the cash deposits and specifically mentioned that all the sales of the assessee are only in cash. He relied on the various decisions of Hon'ble Delhi High Court as under :- (i) PCIT vs. Agson Global (P.) Ltd. (2022) 134 taxmann.com 256 (Delhi HC); (ii) Hirapanna Jewellers vs. ACIT (2021) 128 taxmann.com 291 (Visakhapatnam - Trib.); (iii) Charu Aggarwal vs. DCIT (2022) 140 taxmann.com 58 (Chandigarh - Trib.); (iv) Narendra G. Goradia vs. CIT (1998) 234 ITR 571 (Bombay HC); (v) Lakshmi Rice Mills vs. CIT (1974) 97 ITR 258 (Pat.)(HC); (vi) Lakhmichand Baijnath vs. CIT (1959) 35 ITR....
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....h is reproduced by us elsewhere in this order. Considering the detailed findings of the ld. CIT (A) and also we observed that Assessing Officer has rejected the cash sales during demonetization period and also observed that SBN was banned from 08.11.2016 and technically rejected the sales from 09.11.2016 with the observation that the assessee should not have accepted the SBN after 08.11.2016. The abovesaid observation of the Assessing Officer is not proper considering the fact that as per the Ordinance No.10/2016 dated 30.12.2016 the prohibition of holding SBN was after 31.12.2016 as per Section 5 of the Ordinance not 08.11.2016. This is supported by RBI Circular on demonetization 2016. Therefore, considering the detailed and reasoned findings of the ld. CIT (A), we are inclined to dismiss ground no.1 raised by the Revenue. 14. Coming to the next issue, we observed that the Assessing Officer has disallowed the salary expenditure claimed by the assessee of Satya Prakash Sharma who is brother of the Director and received the salary of Rs. 90,00,000/- during the year. It is a fact on record that assessee has not submitted any detail before the Assessing Officer. However, assessee h....