AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (3) TMI 593
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....produced the details of the persons including PAN and address either before the assessing officer or before the Ld. CIT(A) 3. On the facts and circumstances of the case, the learned CIT(A) erred in deleting the above mentioned addition as the assessee was not able to produce the confirmation of sales from third party either before the assessing officer or before the Ld. CIT(A). 4. On the facts and circumstances of the case, the learned CIT(A) erred in deleting the above mentioned addition as section 68 of IT Act, 1961 states that in failure of satisfactory explanation of the nature and source of cash credits in the bank account, the assessing officer can invoke section 68 of the IT Act, 1961. In this case, the assessee failed to discharge the onus of proving the nature and source of cash credits made during the month of 'Nov. 16 and thereby unexplained cash credits were added as Income by the assessing officer by invoking the section 68 of the IT Act, 1961. Hence. Ld. CIT(A) ought not to have deleted the addition made under section 68 of the IT Act, 1961." 3. The interconnected issue raised by the revenue is that the Learned CIT-A erred in deleting the addi....
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....Volume: The AO found that the assessee's average monthly cash sales from April 2016 to October 2016 were only Rs. 61.64 lakh, whereas, during the short period of November 1 to November 8, 2016, cash sales amounted to Rs. 6.85 crores, including Rs. 6.72 crores on a single day (November 8, 2016). The AO considered this volume abnormally high and commercially unfeasible. 2. Lack of Credible Evidence: The invoices issued for cash sales did not contain the proper names and addresses of customers, which was against the statutory requirements under the Karnataka State Value Added Tax Rules, 2005. The AO also noted that the failure to furnish customer details amounts to non-compliance with the onus for the provisions under section 68 of the Income Tax Act. Additionally, the assessee did not provide confirmation from all creditors, and the purchase bills submitted lacked itemized details. 8. Based on the above observations, the AO concluded that out of the total cash sales of Rs. 7.23 crores recorded in November 2016, only Rs. 61.64 lakh (the average monthly cash sales) could be considered genuine. Consequently, the AO treated the excess cash sales of Rs. 6.61 crores (Rs. 7.23 c....
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....2016, the assessee contended that it complied with Rule 29 of the Karnataka VAT Act except for the requirement to mention the buyer's address. The failure to record customer addresses was attributed to the fact that, after the demonetization announcement, a large number of customers rushed to purchase jewellery in exchange for their cash and were unwilling to disclose their addresses. Given these circumstances, the assessee argued that it was practically impossible to obtain customer details and, therefore, it should not be penalized for a situation beyond its control. 16. The Ld. CIT-A, after considering the facts in totality deleted the addition made by the AO by observing as under: "6.3 The assessee is into retail trade business of purchase and sale of jewellery. During the assessment proceeding, the AO has observed that the assessee has declared gross receipts of Rs. 21.99 Crores. During the assessment proceedings, the Assessee was specifically required to submit the sources of cash deposits made in his bank account. It is also noticed that the assessee has made total sales of Rs. 21.99 crores during the year out of which cash sales have been made to the extent of R....
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....ot furnish the names of thers, to whom the cash sales have beecu..made. The aforesaid finding is perverse, as the Appellant vide its letter dated-12.12.2019 furnished copies of the tax invoices, which contained names of the buyers. All the tax invoices are supported by barcode. The existence of barcode in the tax invoice raised by the Appellant would mean that there was sufficient inventory for making huge sales on 08.11.2016. 6.6 The Assessing Officer has stated in the assessment order that the provisions of Karnataka VAT rules, 2005 clearly illustrate that a person doing business needs to maintain bills/invoices containing of the person to whom sales are being made. In the instant case, in respect of sales, the assessee failed to furnish the name and address of the persons to whom sales have been made in respect of sales exceeding Rs. 100. However the details of the persons to whom sales have been made have not been provided in this case. In this regard, the appellant has stated that the Appellant except mentioning the address of the buyer as required under Rule 29(1)(d) has complied with all the requirements of the aforesaid Rule. The Appellant could not mention the add....
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....returns were not revised, therefore, the same cannot be considered as fabricated or manipulated transactions. The appellant maintained the proper books of account in regular course of business which was duly audited by the independent Chartered Accountant under section 44AB of the Act. All the sales, purchases and stocks were recorded in the books of account which had not been doubted by the AO. The sales shown by the appellant had been accepted by Sales Tax/VAT Department. 6.9 The AO has neither disputed the books of accounts nor pointed out any discrepancy in the sales register and stock. The cash sales made by the assessee has been credited in the books of account and reduction in the stock has not been doubted by the AO. If the reduction of stock position is matching with the sales, it proves that the cash received/deposited represents the sales. The AO has not rejected the books of accounts. lt is also true that no businessmen can refuse to make sale to any customer when stock is available and if it is within the four corners of law, especially when price of the gold was high and there is demand for gold at that time of the day. If minimum details of the customers are....
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....ard in section 68 protecting the interest of the assessee. It provides for an opportunity to the assessee to explain the nature and source of the fund. Once it is explained, it is incumbent on the Assessing Officer to consider the same and form an opinion whether the explanation is satisfactory or not. The expression used in the section clearly lays the burden on the assessee to explain the nature anc source of the fund. Unless an explanation is offered, the Assessing Officer is free to treat the fund as income of the assessee from undisclosed sources chargeable to tax. Once an explanation is offered by the assessee, the assessing Officer is bound to consider the same. Such consideration is guided by sound principles of law. The opinion so formed must be reasonable and based on materials and shall not be perverse. The extent of the power of the Assessing Officer while considering the materials produced by the Assessee is very wide. It is a question of examining as to whether the apparent is real. The Assessing Officer is empoweredtoliftthecorporateveilandexaminetherealnatureofthetransaction. In the process, he may exercise his power of examining the materials. He may require the as....
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....provisions of sec.68 of the Act. The assessment order could not disprove the appellant's claim as per books of accounts and other documentary evidences. Further, the cash deposited in the demonetized currency added as income of the assessee by applying the provisions of section 68 of the Act while the provisions of 68 as such are not applicable on the sale transactions recorded in the books of accounts because the sale transaction are already part of the income which is already credited in statement of profit & loss, therefore there is no occasion to again consider the same as income of the assessee by applying the provisions of section 68 of the Act. It is further relevant to mention here that if the intention of the legislature would be to apply the provisions of section 68 of the Act on the sale transactions also, then in such case as per law it would be mandatory to have the identity, genuineness and creditworthiness of each buyer. But the law is not so and in case of sale below to certain limit, the assessee was not required to prove all these ingredients of section 68 of the Act and even also in case of sale exceeding to certain limit the assessee is not required tc prove....
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....h the nature and source of the cash deposits being proceeds arising out of cash sales etc. is patently evident from the entries in the audited books of account of the Assessee. It is not the case of the Department that the cash deposited in the banks during the demonetization period was in excess of what was available in the cashbooks. The cash sales & receipts are duly supported by relevant bills, which were produced before the AO in course of the assessment proceedings, and nothing adverse in connection therewith was noted by the A.O. The fact that cash sales and corresponding cash deposits in banks have been regular feature of the assessee's business over the past several years has not been denied by the A.O. The provisions of sec.68 can be invoked only in cases of cash credits, which were not offered as income, i.e., a legal fiction has been created in sec.68 of the Act to assess certain cash credits, which were not otherwise shown as income. In the instant case, the assessee has declared the cash sales as its income in the profit and loss account. Hence it is not a case of cash credits, which were not shown as income, in order to attract the provisions of sec.68 of the Act....
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....ndly, 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 bee disturbed, then to hold that no stock was sold in this year and remained with th assessee will be difficult proposition; thirdly, inquiry and inspection by the AO don much after the closure of business may not be persuasive for the past event 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 unexplained money." 6.17 Identical issue was also decided by the Hon'ble Visakhapatnam bench of ITAT in the case of Hirapanna Jewellersin favour of the assessee. Vide I.T.A. No.253/Viz/2020 and C No.2/Viz/2021 dated 12.05.2021. The relevant part of the decision are as under: 7. We have heard both the parties and perused the material placed on record. In tl instant case, the assessee has admitted the receipts as sales and offered for taxation. T1 assessing officer made the addition u/s 68 as unexplained cash credit of the same amo....
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.... statements and failed to disprove the condition of the assessee. Suspicion however strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence. 7.1 In the case of CIT v. Associated Transport (P.) Ltd. [1996] 84 Taxman 146/(1995] 212 ITR 417 (Cal.) the Tribunal found that the assessee had sufficient cash in hand in the books of account of the assessee, therefore, held that there was no reason to treat this amount as income from undisclosed sources and it was not a fit case for treating the said amount as concealed income of the assessee. The revenue moved to Calcutta High Court against the order of the tribunal and the Hon'ble High Court has confirmed the order of the Tribunal while deleting the penalty, Hon'ble Calcutta high court held as under: "8. The Tribunal was of the view that the assessee had sufficient cash in hand. In the books of account of the assessee, cash balance was usually more than Rs. 81,000. There is no reason to treat this amount as income from undisclosed sources. It is not a fit case for tr amount of Rs. 81,000 as concealed income of the assessee and consequently imposition of p....
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....existence of stock of business cannot 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 much after the closure of business may not be persuasive for the past event of specially 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." 7.2 In the instant case the assessee has established the sales with the bills and representing outgo of stocks. The sales were duly accounted for in the books of accounts and there were no abnormal profits. In spite of conducting the survey the AO did not find any defects in sales and the stock. Therefore we do not find any reason to suspect the sales merely because of some routine observation of suspicious nature such as making sales of 270 bills in the span of ....
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.... on the decision of J.M.J. it Company (supra) in the cited case, the assessee effected large sales in one month of each year continuously for two years and the assessee is eligible for deduction u/s 80/C and the AO observed that the assessee was inflating the sales and claiming tf huge deductions. No such cash inflow is involved due to demonetization. Whereas in tF assessee's case there were no such deduction or the exempt income and the profits we, also not abnormal. The assessee explained the reason for huge sales with evidence ar thus the case law relied up on by the DR is distinguishable. The Ld.DR relied on varioL case laws and all the case laws more or less are related to the additions made u/s 68 is unexplained cash credit and in none of the cases the assessee's have admitted the sarr as income. Therefore, we find that the case laws relied up on by the Ld.DR has r application in the instant case and the same are distinguishable. 9. In view of the foregoing discussion and taking into consideration of all the fact and the circumstances of the case, we have no hesitation to hold that the cash receipt represent the sales which the assessee has rightly offered for ta....
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....nd when trading account shows sufficient stock to effect the sales and when no defects are pointed out in the books of account, it was held that when Assessee 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. I am of the view that in the light of the facts and circumstances of the present case, the addition made is not sustainable and the same is directed to be deleted." 6.19 Recently, the Hon'ble Delhi ITAT in ITA No 171/DEL/2022dt.26.04.2022 in the matter of Ramesh Kochar has decided identical issue in the favour of the assessee wherein it was held as under: I have heard the rival submissions made by both the parties and perused the material on record. The dispute before the Tribunal is with respect to addition at Rs. 34,99,500% made on account of cash deposits during the demonetization period. It is an admitted fact that assessee is engaged in the business of trading of electrical wires and trading in electrical equipments, products etc. find assessee has placed on record the details of cash sales made [a copy of which is placed in paper book] and it contains the details....
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....books of accounts. There was sufficient stock to effect the sales an no defect has been found in the stock as well as the sales and purchases. Therefore, I do not find any reason to suspect the sales. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case and considering the decision on similar issue by various Courts. I have no hesitation to hold that the cash receipt represent the sales which the assessee has rightly offered for taxation. 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. Therefore, the action of the Assessing Officer is not justified. Hence, the addition u/s 68 cannot be upheld. Accordingly the Assessing Officer is directed to delete the addition of Rs. 6,61,00,000/-. The ground appeal no. 6 and 7 raised by the assessee are allowed. 17. Being Aggrieved by the order of the learned CIT(A), The revenue is in appeal before us. 18. The Ld. DR before us has filed the return submissions along with the citation addition of case laws and vehemently supported the findings contained in the assessment order....
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....raised by the assessee as genuine without any dispute. Therefore, in our considered opinion, solely for the reason that the buyers addresses were not mentioned on invoices, the sales made by the assessee cannot be held bogus or sham transaction. 20.5 We further note that the invoices issued by the assessee contained a barcode. A barcode on a tax invoice serves as a verification mechanism, ensuring that the sale is recorded in the system and adds a layer of authenticity. Tax authorities or businesses can scan the barcode to verify transaction details, reducing the chances of tampering or post issuance alteration. While the presence of a barcode does not automatically validate every sale, it does enhance transparency and accuracy in accounting and tax records. However, the AO, without verifying this aspect or pointing out any specific defects, mechanically treated the sales as bogus and sham transactions which in our considered opinion is unjustified. 20.6 We further note that the AO, without considering the extraordinary event of demonetization, concluded that the cash sales on November 8, 2016, were bogus solely due to their unusually high volume compared to average monthly c....