TaxTMI 
TaxTMI 
2025 (3) TMI 1431
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....at the assessee is a partnership engaged as consignment sales agent of M/s Dharam Pal Staya Pal Ltd. for selling Paan Masala under the brand name Rajnigandha and other tobacco products in retail. A survey action under Section 133A of the Act was carried out on 08.03.2017 by Investigation Wing at the business premises of the assessee. The assessee furnished return of income under Section 139(1) of the Act on 24.10.2017 declaring total income of Rs. 4,97,78,370/- for the AY 2017-18 in question. The return filed by the assessee was selected for scrutiny assessment under CASS. In the course of the scrutiny assessment, the Assessing Officer found that during the demonetization period, the assessee deposited cash of Rs. 109.41 Cr. in its two bank accounts as noted in para 4(i) of the order. It was further noted that on analysis of factual matrix as discussed in para 5 & 6 of the Assessment Order, the Assessing Officer concluded that cash deposited to the extent of Rs. 28,63,10,588/- in the bank account of the assessee during the demonetization period is unexplained cash credit under Section 68 r.w.s. 115BBE of the Act from its undisclosed source of income. The Assessing Officer according....
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....urrency w.e.f. 21.11.2016. 4. The appellant have deposited Total Cash amounting to Rs. 114,91,00,000/- in bank account from the period 08.11.2016 to 30.12.2016 out of which only Rs. 38,58,00,000/- is deposited in Specified banking Notes (SBN) and Balance of Rs. 76,33,00,000/- is deposited in Legal tender. This also shows that the cash sales in the appellant firm in not only for the specified period only but the same trends of cash sales continue later also in legal tender currency and that also over that period of time where there is huge crunch of cash in legal tender. 5. These sales for the month of November 2016 are duly recorded in the books of accounts. The Firm maintained proper Stock Register Item wise which shows that the firm has sufficient stock on each date of sale, there is no instance when the Stock becomes negative or there is a back dated purchases. The Cash Balance in the firm Head office and branch Office and in Totality shows that the firm has sufficient cash balance on each date which is subsequently deposited over a period of time. 6. Further the appellant submitted the reason for such huge cash deposited in SBN is that Banks were closed on 09.11.2016 & 10....
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....ssing Officer. Now making an addition of an amount, which has already been included in the sales figure would tantamount to a double addition. In fact, if it is presumed that the appellant had deposited some other cash and not the sales consideration then the appellant should be in possession of excess stock and the same should have been found during the survey. Moreover, no evidence of any out of books sales or purchases have been pointed out by the Assessing Officer. Further, the Assessing Officer has not highlighted any other source of income which could have resulted in receipts, which are required to be taxed u/s 68 of Income Tax Act. Moreover, lesser sale would mean lesser commission income, which is not the case of the Assessing Officer. 13. The appellant is a consignee in the case and had only earned commission income on these transactions. The commission income declared by the appellant in its Profit and loss account and Return of income has been duly accepted by the Assessing Officer. There is no adverse inference by the Assessing Officer regarding the commission income of the appellant. 14. The investigation wing had carried out a survey in this case and despite of t....
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....re cannot be disputed. 4.1.23 This is a case of a firm engaged in trading of Paan masala and other related tobacco products as consignment agent of M/s Dharmpal Satypal group. The appellant deposited sizeable amount of cash in SBNs in his bank account subsequent to the demonetization. Demonetization has been an extraordinary event which never happened in the recent past. The sales figures for the month of November 2016 prior to demonetization have been high and the cash deposited during the month of November/December in SBNs is higher than the average cash deposits in the Bank. This can be at best a reason for suspicion for further investigation but cannot be alone considered as sufficient evidence for making addition. The Assessing Officer could have examined and verified the sales made and pointed out specific anomalies in the sales records. He could have verified purchases to prove that adequate stock was not available with the appellant to be sold during demonetization. But the Assessing Officer did not carry out any enquiries to find anomalies in the purchase and sale records. He did not reject the books of accounts and therefore, considered them as correct and complete. The....
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....e that the sales during November 2016 prior to demonetization were credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, in these circumstances, the cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. Moreover, this is a case where a survey was carried out during the year i.e. on 08.03.2017. As a result of survey, several documents including the bills/invoices and books pertaining to purchase/sales/stock were found and impounded. The details of impounded documents are already mentioned above. On the date of survey, there was no anomaly in the stock of the appellant. The Assessing Officer in the assessment order did not point out any discrepancy in the stock or made any addition for shortage/excess stock. Therefore, the stock found on the date of search was as per the books of accounts of the appellant. Further there is no discrepancy either in the purchase bills or in the sales records found during the survey. There was no incriminating document, which could point out any discrepancy in the sale purchase and stock data/figures. All the details of bo....
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.... bring out any specific facts and evidences to negate the genuineness of the figure of purchase, sales and stock. If the figure of sales has been considered as correct then there is no justification for making an addition of the same sales as unexplained cash credit u/s 68 of Income Tax Act. In view of the foregoing discussion and taking into consideration of all the facts and the circumstances of the case, it is clear that the cash receipts represent the sales which the assessee has rightly offered for taxation. Even the commission income on these sales has been rightly offered for taxation and the Assessing Officer did not dispute the same. As per the books of accounts there was sufficient stock to affect the sales and adequate stock was available during 1st to 8th November 2016. Since the appellant has already included the amount of SBNs deposited in bank in sales figures in P&L Account; there is no case for making the addition u/s 68 r.w.s. 115B8E of income Tax Act again. Therefore, the addition made by the Assessing Officer u/s 68 r.w.s. 1158BE of Income Tax Act amounting to Rs 28,63,10,588/- cannot be considered as correct and the same is not found to be sustainable. Accordin....
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....he principal and the assessee has no authority of pricing of sale of goods. This way, the purchase and sales prices of the goods sold by the assessee are same as evident from the audited financial statement and reflected in profit and loss account of Financial Year 2017-18 in question. Similarly, the audited account of subsequent Financial Year 2017-18 will also reflect the position that the assessee sales the product at the price fixed by the principal and the assessee is merely an agent/conduit to sale the goods for which the assessee derives income by way of commission charges on sales. The stock lying with the assessee at any point of time is also held on behalf of the principal. All the sales made by the assessee are for and on behalf of the principal. The income of the assessee thus is from commission income and not from sales. All the commission income has been received through banking channel after deduction of tax as per law. The AO has accepted the commission income of the assessee and no discrepancy has been found by the AO in the commission income. In such business set up, where goods are received on consignment purchases and sold at the price fixed by the principal and....
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....ecord. Continuing further, the ld. Counsel referred to a certificate dated 11.11.2016 from its banker (Federal Bank) appearing at page no. 112 of the paper book to submit that average deposits in both bank accounts on daily basis is around Rs. 12 Cr. cash. However, due to sudden emergency situation arising due to demonetization and because of public rush in the branch and consequently operation, the bank had confirmed its inability to receive three days cash collection of both accounts which led to accumulation of approximately Rs. 40 Cr. cash and assured the assessee that they will receive the cash in due course as situation stabilizes. This confirmation from the bank also reinforces the stand of the assessee on source of cash deposit. 7.4. Complete details of cash deposits along with the documentary evidences were provided to the AO in the course of assessment. The documentary evidences include sales invoice; purchases invoice; chart showing details (quantity wise and amount wise) of opening stock, purchase, sales and closing stock; confirmation of parties; VAT returns and stock register. The AO has not pointed out any discrepancy in such self-explanatory evidences but choose to....
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.... before the AO. The action of the AO is completely arbitrary and based on pre-conceived notions entertained by the AO and clearly unsustainable in law. 7.9. To repeat the peculiarity existing in the present case, the assessee is merely consignment agent and has no say in the purchase or sale of the product. The assessee merely earns income by way of commission towards rendering services as sales on behalf of the principal. The cash deposits are not made only during the demonetization period but a continuous feature day after day and month after month before and after demonetization. Without prejudice, invocation of Section 115BBE of the Act further reflects a clear non-application of mind where the cash deposits are out of sales arising in the course of business. There are numerous decisions of different benches of the Tribunal which have held in chorus that Section 115BBE is not applicable in the additions arising from business transactions. 7.10. The ld. Counsel thus submitted that when the facts are seen in totality, the cash deposits in question are self-explanatory and corroborated by both direct and circumstantial evidence, the source of cash deposits are backed clinching e....
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....IT(A). The pattern of cash sales and cash deposits are consistent and same trend of cash sales and deposits thereof in bank account continues in the later period as well. There is no remarkable difference in the pattern of business in pre-demonetization period or in the post demonetization period. 8.3. The survey operation carried out by the Revenue as a surprise check also confirms the fact that assessee carried out cash sales and makes deposits thereof in the wake of absence of any discrepancy in the closing stock, cash in hand etc. The books of accounts are audited and not rejected by the AO which further gives an assurance towards bonafide of cash sales. The receipts against cash sales have found its way in the bank account in the ordinary course of business. The consignment sale agreement and working of commission and service tax returns etc. yet again provide sound basis to the submissions propounded on behalf of the assessee. 8.4. In the absence of any anomaly detected either in the course of survey or in the books of account, the source of cash deposit during demonetization recorded to be out of cash sales of tobacco products in ordinary course could not have been treated....