TaxTMI 
TaxTMI 
2024 (4) TMI 1210
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....eration. 3.3. That the Ld. AO as well as Ld. CIT (A) has grossly erred in law and to the facts of the case in making lump sum addition on the basis of his presumptions and guess work, without the support of any material either collected or placed upon records. 4.4. That the Ld AO has formed the decision merely on the basis of figures without considering the facts of the case. This shows that the decision was made prima facie from the beginning of the proceedings. The justifications provided by the assessee were not even considered and no alternate view or proof was given by AO, 5.5. That in the case law of, ITO Vs Manasa Medicals (ITAT Bangalore) it was held that cash deposited on account of cash sales during demonetization period cannot be added as unexplained under section 68 of the Income Tax Act as AO didn't rejected the books of accounts nor brought anything contrary on records to show that cash sales is not the source for cash deposits. Keeping the above judgement in view, the same should be held for the case under dispute. It is also noted that the ld. AR of the assessee has filed vide application dated 15-02-2024 has filed following additio....
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....the appeal of the assessee by observing at para 6 to 7 as under:- ''6. Decision: I have carefully considered the facts of the case, submission made by the appellant and order passed by the A.O. u/s 143(3) of the 1. T. Act, 1961. In this case, the case was selected for scrutiny under CASS, and the main issue involved in this case, is the source of cash deposits amounting to Rs. 52,89,500/- during the demonetization period. During the assessment proceedings, the assessee had filed details before the AO, but did not offered any specific explanation in support of the source of the said cash deposits. 6.1 During the assessment proceedings, before the AO, the appellant has submitted the cash balance as on 01.11.2016, the details of which are as under:- Branch Opening cash balance as on 01-11-2016 Cash sales from 01-11-2016 to 08- 11-2016 Closing cash balance as on 08- 11-2016 Jaipur 34,80,471 15,86,000/- 50,63,931/- Mumbai 2,73,519/- 5,00,940/- 5,54,519/- Total 37,53,990/- 20,86,940/- 56,19,450/- From the above table it is seen that, the assessee had submitted the breakup of cash sales and details of cash dep....
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....r These facts show that the books of accounts are not genuine and claims made by assessee are required to be seen in the light of Human Probability laid down by the Hon'ble Supreme Court. 4. The assessee has made exaggerated claims of cash sales from 01.10.2016 to 08.11.2016. It is very important to discussing the prevailing situation on the day which had impacted the motives and guided the actions of the assessee on a substantive level. The FY 2016-17 is marked by a major policy initiative Le demonetization announcement on the night of 8th November 2016. With effect from midnight of 8th November 2016, the currency notes of denomination of Rs 500 and Rs 1000 seized to be legal tenders. After that, transactions in these notes were barred by law except few exceptions. The case of the assessee does not fall into those exceptions The intention behind the policy move was to unearth black money hoarded in the form of cash(currency notes of Rs 500 and Rs 1000). Once these notes were discontinued to be legal tenders, those hoarding cash in these notes had only one option which is to deposit the same into bank account otherwise the same will be rendered as mere piece o....
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....the assessee filed the following written submissions praying therein to quash the order of lower authorities. ''SUBMISSIONS 1. The assessee firm consisting of two partners mainly deals in precious and semi-precious stones and jewellery. The firm is running the family-owned business which is nearly more than a decade old and also sells personalized jewellery pieces tailored for film stars. 2. The assessee firm had the honour of designing a crown for the Miss World pageant. This achievement showcases the firm's expertise and creativity in crafting prestigious and beautiful pieces. 3. The assessee firm deals in both credit and cash sales. The nature of the business inherently involves cash sales. The head office of the assessee firm is located in Jaipur and branch at Mumbai at following address: Jaipur-Kailashpuri, 46, Sahapura Bagh, Near Trident Hotel, Amber Road, Jaipur, Rajasthan. Mumbai-Rizvi Mahal Chs Ltd, Shop No. 8/3, water field, 106 TPS, Mumbai, Maharashtra 4. Copy of GST certificates evidencing the above address of the assessee firm are enclosed [PB 51-56] 5. The assessee firm, during demonetiza....
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....its have decreased as compared to the preceding year. The only reason for doubt in the mind of ld. AO for cash deposits is the increase in the same during the period of demonetization. 13. Copy of ledgers of sales are placed at PB 74-83. However, for ready reference, the same are reproduced branch wise as under: Mumbai Branch: AY 201718 01.04.16 to 07.11.16 08.11.16 to 30.12.16 31.12.16 to 31.03.17 Total Cash sales 9,90,250 - 7,27,000 17,17,250 Credit sales 96,87,612 70,10,481 90,22,660 2,57,20,753 Total 1,06,77,862 70,10,481 97,49,660 2,74,38,003 Jaipur: AY 201718 01.04.16 to 07.11.16 08.11.16 to 30.12.16 31.12.16 to 31.03.17 Total Cash sales 48,06,100 11,75,000 - 59,81,100 Credit sales 1,15,22,119 7,00,000 10,00,000 1,32,22,119 Total 1,63,28,219 18,75,000 10,00,000 1,92,03,219 14. Comparative chart of cash deposits made by the assessee firm is as under: Particulars AY 2016-17 AY 2017-18 Turnover 4,32,77,865 4,66,41,222 Cash deposits 2,17,77,000 1,36,60,500 % of Sales 50.31% 29.28% ....
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....ing evidences, substantiating the transactions recorded in the books of accounts, w.r.t. cash sales, to be adequate and reasonable. 21. The details of party-wise purchases along with their PAN and address were submitted before ld. AO. Copy of reply is placed in paper-book[PB 57-58] The said fact is not in dispute. Ld. AO has not doubted the amount of purchases made by the assessee firm. Availability of stock for cash sales is not doubted by lower authorities. 22. It is submitted that details of stock records and sales register were uploaded on e-filing portal. Copy of replies reflecting the same are placed in paper-book at [PB 62-63] The said fact is undisputed. Screenshot of the relevant submission before ld. AO is as under: 23. It is further submitted that the cash book for following period were submitted before ld. AO[PB 61] Year Month 2015 November and December 2016 November and December 2017 November and December 24. It is worthwhile to note that ld. AO has also accepted the opening stock, purchase, as well as the closing stock at the year-end to be genuine and correct. Copy of ledgers of purchases are placed at PB67-....
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....f sales were provided, and made addition of Rs. 4.72 crores u/s 68 r.w.s. 115BBE. Hon'ble Bench held that where assessee has 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. The relevant para 9 is reproduced hereunder: "In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, we have no hesitation to hold that the cash receipts represent 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 Kailash Jewellery House (supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra), Hence, we do not see any reason to interfere with the order of the Ld. CIT (A) and the same is upheld." 31....
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....gh Court at Para 4 of the order finally held as under: "Since, having regard to the nature of the transaction and the manner in which they had been effected, there was no necessity whatsoever for the assessee to have maintained the addresses of cash customers, the failure to maintain the same or to supply them as and when called for cannot be regarded as a circumstance giving rise to a suspicion with regard to the genuineness of the transactions. The Tribunal, therefore, was not right, in our opinion, in setting aside the order of the Appellate Assistant Commissioner and restoring that of the Income-tax Officer. There are no circumstances disclosed in the case nor is there any evidence or material on record which would justify the rejection of the book results." 33. Attention is drawn towards the judgment of the Hon'ble Jurisdictional High Court in the case of Smt. Harshila Chordia v. ITO (2008) 298 ITR 349[CLC 82-88]wherein the Hon'ble High Court held as under: "So far as question No. 2 is concerned, apparently when the Tribunal has found as a fact that the assessee was receiving money from the customers in hands against the payment on delivery of t....
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....that, when books of account of the assessee were R.S. Diamonds India Private Limited 3 accepted by the revenue as genuine and cash balance shown therein was sufficient to cover high denomination notes held by the assessee, then the assessee was not required to prove source of receipt of said high denomination notes which were legal tender at that time. In the case of M/s. Hirapanna Jewellers (ITA No. 253/Viz/2020 dated 12.5.2021), it was held that when the cash receipts represented the sales which has been duly offered for taxation, there is no scope for making any addition under section 68 of the Act in respect of deposits made into the bank account". 35. Ld. AO without bringing any evidence on record mentioned that "assessee created vouchers of the cash sales on 8th November and created source for the cash deposited." [Page-5 of AO order]It is submitted that allegation made by ld. AO is totally baseless as the same is a presumption. No evidence is brought on record by lower authorities in support of their allegation. 36. Apart from disbelieving the explanation of the assessee, ld. AO has not collected or placed on record an iota of evidence which could sugg....
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....ing of gossip or of hearsay; it means judgment or belief, that is, a belief or a conviction resulting from what one thinks on a particular question. iii. In S.R. Bommai v. Union of India AIR 1994 SC 1918 while construing the expression "if the President...is satisfied" under Article 356(1) the Court at para 74 held that it is not the personal whim, wish, view or opinion or the ipse dixit of the President dehors the material but a legitimate inference drawn from the material placed before him which is relevant for the purpose. iv. The Apex Court in the Lal Chand Bhagat Ambica Ram v. CIT (supra) approvingly noted the decision of the Hon'ble Allahabad High Court in the case of Kanpur Steel Co. Ltd. vs CIT (1957) 32 ITR 56 and summarised the findings in the following words: "(i) that the burden of proof lay upon the Department to prove that the sum of Rs. 32,000 represented suppressed income of the assessee from undisclosed sources, and the burden was not on the assessee to prove how it had received these high denomination currency notes; for, until the Demonetisation Ordinance came into force high denomination currency notes could be used as freely as n....
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....In fact, the AO neither found any concrete and conclusive evidence of back dating of the entries of sales, evidence of bogus sales, evidence of bogus purchases, and non-existing cash balance in the books of account. The AO did not even reject the books of accounts of the appellant under the provision of section 145(3) of the Act. Therefore, the contention of the revenue on the facts and circumstances of the case is not accepted and we see no reason to interfere in the order of the ld. CIT(A). Thus, we sustain the order of the ld. CIT (A) with the observations above. The appeal of the revenue stands dismissed 43. Ld. AO at Page 8-10 of his order has relied upon certain judicial pronouncements. The said decisions are on different set of facts and are clearly distinguished as under: a. It was held in CIT vs. Sun Engineering Works [1992] 64 Taxman 442 (SC)that each case has its own distinct set of facts. Before equating any other preceding decision of any court, the facts have to be meticulously matched. Variation in facts would render the judgment inapplicable even if there is may be broad similarity in facts. b. Durga Prasad More [1971] 82 ITR 540 (SC) [Pag....
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....e no doubt at all that the explanation offered by the assessee in each case has been arbitrarily and unreasonably rejected. All the reasons we have no doubt at all, are in realm of surmises, conjectures and suspicions, which approach stands totally prohibited by the decided case laws referred to above." ii. It is important to note that decisions of Hon'ble Supreme Court in the case of Durga Prasad More [1971] 82 ITR 540 (SC) and Sumati Dayal [1995] 80 Taxmann 89 (SC)have also been referred in the said case. However, Hon'ble Court has held that such decisions have been delivered in different set of facts and circumstances and are not applicable to the present case. iii. In the light of the above, above decision does not apply to the present case of the assessee firm. e. Major Metals Ltd. vs. Union of India [2012] 251 CTR 385 [Page 9, AO Order] i. In the above decision, Settlement Commission has confirmed additions u/s 68 on nonfurnishing of documents by the company. The decision of Sumati Dayal [1995] 80 Taxmann 89 (SC) has also been referred in the said case. ii. The set of facts referred in the above case and instant case of the assesse....
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....p Kumar Loyalka [1997] 63 ITD 87 (Pat.)[Page 9, AO Order] The above decision was pronounced in different set of facts. The facts are that the assessee received certain amount of gifts, for which no returns of gift were filed. In the present case, the sales are added as income u/s 68. It is important to note that sales are already offered for taxation and such sales are not disturbed. i. R.S. Rathore [1996] 86 taxman 20 (Raj.)[Page 10, AO Order] The above decision of Jurisdictional High Court is totally based on different facts. The said decision was delivered in respect of certain investments made in a company and the money was borrowed for the said investment. In the present case, the set of facts are totally different. Sales which are already offered for taxation are doubted and that too without bringing on record any iota of evidence which could establish that the sales made by the assessee are not genuine. Therefore, the decision does not apply to the present case. In view of the above, application of Section 68, read with Section 115BBE, by the ld. AO, to the amount of Rs. 25,86,000 accounted for as sales by the assessee firm, is illega....
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....above. It is also noted that AO accepted the cash deposited of Rs 2,32,500 shown in respect of Mumbai Branch. However, he doubted the remaining cash deposits of Rs 50,57,000 (52,89,500-2,32,500) in respect of Jaipur office and eventually added a sum of Rs 25,86,000 out of cash deposit of Rs 50,57,000 at Jaipur by disbelieving the cash sales of equivalent amount. The assessee firm explained the source of entire cash deposits as the cash received out of the cash sales during the period under consideration. However, ld. AO disbelieved the explanation of the assessee for the following reasons: 1. Identity of the customers not provided 2. Non-production of books of accounts, sales invoices and name and address of persons to whom sales have been made 3. Non-production of cash book and sales register 4. Non-mentioning of maintenance of stock register in Audit Report It is seen that the cash sales are one of the common practices in jewellery sector. The assessee has been selling jewellery in cash in past also. The cash sales of the previous months, previous years and next month or years was also made on the same trend with same set of particulars. The....
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....g the sales. No other credible reason is given by lower authorities to doubt the sales. No deficiency is pointed out in duly maintained books and adequately supported business transactions. It is submitted by the ld. AR of the assessee that law nowhere prohibits cash sales. The assessee firm by selling the jewellery in cash did not violate any of the provisions of the Income Tax Act, 1961. It is submitted that ld. AO has not mentioned any provisions of the Act/ Rules having been violated by the assessee firm while undertaking such cash sales. It is noted that AO disbelieved the cash sales for the reason that name and address of the buyers were not maintained by the assessee firm for which the ld. AR of the assessee submitted that it is not mandatory under the Income Tax Act, 1961 to collect the information related to full name, address, contact details of the customers to whom goods are sold below the prescribed limit. It is voluntary on the customers to provide their personal information to the assessee. The assessee cannot force or compel the customers to give the information. If the assessee made such attempts, it could adversely affect the business of the assessee. Therefore, d....
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....he fact that trading results of the assessee firm are in increasing trend. The following details were submitted before AO by the assessee which are undisputed[PB 61,84]: DETAIL OF G.P. & N.P. CHART FOR LAST THREE YEARS FINANCIAL YEAR TURN OVER GROSS PROFIT NET PROFIT G.P. RATE 2014-15 43,349,255.01 10,146,305.13 (5,535,714.14) 23.41% 2015-16 43,277,885.98 11,234,298.31 (1,089,591.92) 25.96% 2016-17 46,641,222 41 12,308,060.28 (1,068,144.16) 26.39% The sales and profit figures in absolute terms are in rising pattern and the cash so deposited out of the cash sales are already included in the turnover of the year under consideration. It is also noted that AO emphasized on non-submission of party wise details of sales but ignored the fact that the assessee firm had submitted complete details of cash and credit sales undertaken by the assessee firm. No adverse inference has been drawn on the purchases and stock-register submitted by the assessee. Assessee firm was a registered VAT dealer and all such sales had been reflected in the VAT returns (Rajasthan and Maharashtra) of the assessee. The assessee submitted the same du....
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....amount, there cannot be any applicability of Section 115BBE. Thus the additional ground raised by the assessee is allowed. 4.0 In the result, the appeal of the assessee is allowed Order pronounced in the open court on 10/04/2024. ============= Document 1 1. The total cash deposited by assessee in the F.Y. 2015-16 was Rs. 2,17,77,000/- which was Rs. 1,36,60,500/- in the F.Y. 2016-17. Thus, the cash deposited by the assessee for the whole year got reduced substantially in the F.Y. 2016-17 as compare to preceding year. However the cash deposit during demonetization period Rs. 52,89,500/- which was Rs. 25,50,000/- in the the cash deposit during corresponding period of the preceding year. demonetization period increased substantially. DUS S. 25,50,000/- in the Document 2 Head Office stock PARTICULARS Precious/Semi Precious/18k Gold Kundan MeenaJadu Jewellery with Precious/Semi Precious Victorian and Silver and Precious/Semi Precious Silver with Studds Jewellery Loose Stone &beeds Total (A) Op.Stock Wt.in Gms Purchase Sales Cl.Stock Value in gms gms Wt.in Gms 4154.722 2025.670 89.000 6091.....