TaxTMI 
TaxTMI 
2024 (4) TMI 1263
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....eposits made by the assessee during the demonetisation period as explained based on the assessee's explanation that the source is from sales and admitted as revenue receipts? 2. The Ld. CIT(A) had failed to appreciate the fact that, apart from some exempted category of people, no other person was allowed to accept SBN (Specified Bank Notes) during the demonetization period. One of the reasons in the Notification No. 2652 dated 08.11.2016 is "2. SBNs being used for storage of unaccounted wealth". The Ld. CIT(A) should have appreciated the assessment order in the background of the idea of SBNs being used for storage of unaccounted wealth. 3. The Ld. CIT(A) had failed to appreciate the intention of the legislature which was to examine and verify the nature of cash deposit/ cash possession in the hands of any individuals. 4. The Ld CIT(A) had failed to appreciate the fact that, the assessee failed to produce the details of persons who paid in cash for sales during the demonetisation period with documentary evidences. The sales bill has few names which are repeated with same/different address in same or next day. Further, most of the address of the customers were outside Coimb....
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....fficer, however was not convinced with the explanation furnished by the assessee and according to the Assessing Officer, the assessee has booked exceptionally high cash sales during demonetization period, more particularly from 01.11.2016 to 08.11.2016. The Assessing Officer, further observed that the assessee could not furnish necessary PAN and address of the customers, even though the sales bill was issued with name of the customer. Therefore, rejected arguments of the assessee and made additions of Rs. 2,91,80,000/- towards cash deposits during demonetization period as unexplained money u/s. 69A of the Income-tax Act, 1961 (hereinafter referred to as "the Act") and brought to tax u/s. 115BBE of the Act. 4. Being aggrieved by the assessment order, the assessee preferred an appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee has reiterated its submissions made before the AO and also took support from certain judicial precedents, including the decision of ITAT Visakhapatnam Benches in the case of ACIT vs Hirapanna Jewellers 189 ITD 608. The sum and substances of the arguments of the assessee before the ld. CIT(A) are that, the assessee has explained source for cash d....
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.... The assessee had also explained the reasons for not accepting KYC details of customers in terms of Rule 114B of I.T. Rules, 1962. The ld. CIT(A), after considering relevant facts has rightly deleted additions made by the Assessing Officer and their order should be upheld. The ld. Counsel for the assessee further submitted that, out of total cash deposits of Rs. 2,91,80,000/-, the appellant was having opening cash in hand as on 01.01.2016 at Rs. 1.69 crores. If you exclude opening cash in hand, the remaining cash deposits into bank account is roughly about Rs. 1.10 crores and the same has been explained by the assessee out of cash sales made during 01.01.2016 to 08.11.2016. The Assessing Officer, without considering relevant facts simply made additions towards cash deposits u/s. 69A of the Act. The ld. CIT(A), after considering relevant facts rightly deleted additions made by the AO and their order should be upheld. 7. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The assessee has made cash deposits of Rs. 2,91,80,000/- into Axis bank account in specified bank notes during demonetization period. The assessee....
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....ales for the above period, it cannot be held that sales declared by the assessee is bogus in nature. Further, the Assessing Officer never disputed sales declared by the assessee which are supported by sales bills, corresponding purchase bills and stock details etc. In our considered view, when Assessing Officer has not pointed out any discrepancy in books of accounts, then merely for the reason of increase in sales, explanation offered by the assessee for source for cash deposits cannot be rejected. 8. As regards the observation of the ld. Assessing Officer with regard to KYC details of customers in term of Rule 114B of I.T. Rules, 1962, we find that as per said rules, if sales made to single customer is in excess of Rs. 2 lakhs, then the seller needs to obtain KYC details of customers. In the present case, there is no observation from the Assessing Officer with regard to sales declared by the assessee and violation of Rule 114B of I.T. Rules, 1962. Although, the ld. DR referred to certain cash receipts in cash book maintained by the assessee which was in excess of Rs. 2 lakhs, but the ld. DR failed to bring on record further evidences to prove that, said cash receipts was on acco....
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.... was at Rs. 48,82,75,750/-. 12. During the course of assessment proceedings, the AO called upon the assessee to file details of name and address of the persons from whom it has received trade advances for sale of jewellery. The assessee has filed a list of persons from whom it has received trade advances for sale of jewellery. Out of list submitted by the assessee, the AO has issued summons u/s. 131(1) of the Act, to 50 persons to verify the genuineness of the assessee claim of receipt of cash from them. Out the above 50, summons issued to 40 persons returned by the Postal Authorities citing 'addressee cannot be located' or 'no such person' or 'no such address' or 'insufficient address' or 'no such address at the above place'. In response to summons, three persons were responded and out of three, two persons namely, Shri N.Armugam and Smt.B.Deepa denied having any kind of transactions with the assessee. Further, one person namely Shri A.M.Vargies confirmed having paid advance to the assessee company and also purchased jewellery from them. The Assessing Officer, on the basis of enquiry conducted u/s. 131(1) of the Act, came to the conclusion that the assessee could not substantiat....
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....essee. According to the AO, the assessee could not discharge its onus cast upon as per the provisions of Sec.68 of the Act, in respect of cash receipts, and thus, opined that cash receipts claimed to have been received by the assessee from various persons is unexplained cash credits taxable u/s. 68 of the Act. The second reason given by the AO was that there is a contradiction in the claim of the assessee in so far as source for cash deposits are concerned in as much as initially, the assessee claims to have explained cash deposits out of cash receipts from various persons towards sale of jewellery and subsequently changed its stand and argued that source for cash deposits is out of cash withdrawals from very same bank account. In so far as the first and foremost reason given by the AO to assess cash receipts u/s. 68 of the Act, we find that there is a distinction between cash credits and cash receipts towards sales. If assessee claims certain cash credits in his books of accounts and not able to explain credits to the satisfaction of the AO, then, such cash credits need to be examined in light of provisions of Sec.68 of the Act. In case, the assessee claims that it has received tr....
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....hase or stock in trade held in the business of the assessee before the date of demonetization. In fact, the assessee has filed comparative sales for the month of April, 2016 to November, 2016 and corresponding April-15 to November, 2015 and we find that there is no abnormal deviation in sales declared for the month of November, 2016 when compared to earlier periods. It is not a case of the AO that the assessee has declared sales without purchases. In fact, a sale declared by the assessee is backed by corresponding purchases, and is supported by necessary purchase bills. The AO could not point out any discrepancy in stock register maintained by the assessee nor made out a case that the assessee has declared sales without there being any stock in hand. Therefore, in absence of any contrary findings to the effect that the sales declared by the assessee is not backed by any corresponding purchase or supported by stock in hand, in our considered view, simply sales cannot be rejected on the ground that sale for the particular month or period is higher when compared to corresponding previous period. In our considered view, there cannot be any reason for uniform sales in all days or month ....
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....he assessee is able to file necessary evidences to prove that there was sufficient cash withdrawal from very same bank account which is further backed by bank statements, where it has been clearly evident that there are sufficient cash withdrawals, in our considered view, there is no reason for the AO to reject explanation of the assessee that cash deposits are out of cash withdrawals from very same bank account. 17. At this stage, it is necessary to consider certain judicial precedents on this issue. The assessee has relied upon the decision of the Hon'ble Delhi High Court in the case of PCIT v. Agson Global (P) Ltd., reported in [2022] 441 ITR 550 (Delhi) (19-01-2022). The Hon'ble Delhi High Court under identical set of facts, has deleted the additions made by the AO towards cash deposits during demonetization u/s. 68 of the Act. The relevant findings of the Hon'ble Delhi High Court are as under: * A careful perusal of the extract of the statement made by managing director of the assessee (as recorded in " the assessment orders in-issue) would show that all that he had stated was that it was the assessee's own money, given in the form of loan and/or bogus sales or purchas....
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....have to adapt to the circumstances obtaining in the instant case. [Para 12.1] * Therefore the addition made under section 68 needed to be sustained as untenable, in view of the finding recorded by the Tribunal. [Para 14.4] * The entire purchase and sales had been duly recorded in the regular books of account of all parties; the transactions were routed through regular banking channels; the purchase and sales were duly supported by quantitative details; copies of bank statements showing sales and purchases were placed before the Assessing Officer, and no incriminating documents concerning sales and purchases were found in the course of search and seizure actions. [Para 15.1] * Tribunal also found that in respect of assessment years 2012-13, 2013-14 and 2014-15, sale and purchase transactions were verified and assessment orders were framed under section 143(3). The books of account were duly audited, both, under the Companies Act, 2013 and the Income-tax Act; no defects concerning books were found either by the Assessing Officer or the Commissioner (Appeals). Thus, according to it, no incriminating evidence was found. [Para 15.1] * Insofar as the abated assessment years were ....
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.... in the books of account, which could have been done only after examining the same. Furthermore, according to the Tribunal, even if it is assumed that the books of account could be rejected, the profit had to be estimated based on proper material. As noted above, the Tribunal recorded the inconsistent approach adopted by the Commissioner (Appeals) in applying the gross profit ratio concerning non-related parties to purported bogus transactions i.e., those involving related parties, resulting in unsustainable conclusions. [Para 15.7] * Accordingly, the observations made by the Tribunal are pure findings of fact, which cannot be interdicted by the Court in appeal. The inconsistency in the approach adopted by the Assessing Officer, while preparing the deviation report and framing the assessment order with regard to purported bogus purchases is an aspect, which cannot be ignored and has been correctly highlighted by the Tribunal. [Para 15.8] * If the revenue chooses to disallow bogus purchases, it would necessarily have to ignore the corresponding sales recorded against the very same parties. As pointed out by the Tribunal, the Commissioner (Appeals) could have rejected the books o....
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....ries to enhance its cash sale figures, one could only conclude that there was a growth in the assessee's business. [Para 16.9] * Having regard to the extensive material which has been examined by the Tribunal, in particular, the trend of cash sales and corresponding cash deposited by the assessee with earlier years, it is opined that there was nothing placed on record-which could have persuaded the Tribunal to conclude that the assessee had, in fact, earned unaccounted income i.e., made cash deposits which were not represented by cash sales. Therefore, in the Tribunal correctly found in favour of the assessee and deleted the addition made under section 68. [Para 17.6] 18. The assessee had also relied upon the decision of the ITAT Visakhapatnam Bench in the case of M/s.Hirapanna Jewellers, Visakhapatnam, in ITA No. 253A/Viz/2020 and CO No. 02/Viz/2021, AY2017-18, wherein, the ITAT Visakhapatnam Bench, under identical set of facts has held as under: "We have heard both the parties and perused the material placed on record. In the instant case, the assessee has admitted the receipts as sales and offered for taxation. The assessing officer made the addition u/s 68 as unexplai....
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.... account and the financial statements and failed to disprove the condition of the strong it may be, it should not be decided against the assessee without disproving the sales with tangible evidence. Provisions or section 68 are applicable in case or unexplained cash credit. Looking at the discussion at the foregoing paragraphs and the Judicial Precedents presented, I find that with sufficient stock in record for which excise duty was paid and vat taxes were paid, the sales could not be treated as unexplained cash credit u/s. 68 of the Income Tax Act. It must be appreciated that an unexplained credit would imply credit which has unexplained source which is not so. The addition made on account of bogus sale thus failed that test of being unexplained as envisaged u/s 68 of the Income Tax Act. In view these of the addition of Rs. 51,39,39,100/- stands deleted. 19. In this view of the matter and considering the facts and circumstances of the case, we are of the considered view that the AO is erred in making additions towards cash receipts received for sale of jewellery, which has been subsequently converted into sales, for the impugned assessment year as unexplained cash credits tax....