TaxTMI 
TaxTMI 
2025 (5) TMI 1573
X X X X Extracts X X X X
X X X X Extracts X X X X
....g additions by applying the GP rate of 3.32% on the total turnover declared by the assessee at Rs. 72,14,75,371/- and further made addition of Rs. 21,55,41,500/- u/s 69A of the Act on account of cash deposit during demonetization as undisclosed investment. 3. Against such order, assessee preferred an appeal before the ld. CIT(A) who vide order dated 24.11.2022 allowed the appeal of the assessee. Aggrieved by the said order, Revenue is in appeal before the Tribunal. 4. The Revenue has taken following grounds of appeal:- 1. "Whether in the facts and circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs. 21,55,41,500/- made on account of unexplained cash deposits u/s 69A of the Act ignoring the fact that the assessee failed to furnish majority of cash bills (1218) raised on 08.11.2016 during the proceedings? 2. Whether in the facts and circumstances of the case, Ld. CIT(A) was justified in deleting the addition of Rs. 21,55,41,500/- made on account of unexplained cash deposits u/s 69A of the Act ignoring the fact that details of stock for A.Y 2018-19 was not produced/submitted by the assessee during assessment proceedings? ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssee has maintained regular books of account which were duly audited and no defect whatsoever was pointed out by the AO except stating that the certain bills of cash sales made on 08.11.2016 were not produced. Ld. AR further submitted that even after invoking the provisions of section 145(3) of the Act, the AO has not doubted the sales declared thus the cash deposit out of the such cash sales could not be held as unexplained investment. Ld. AR argued that when sales have already been offered for tax, the cash generated out of such sales could not be doubted and if the such cash deposits out of such cash sales is taxed, it would tantamount to double taxation. The Ld. AR further submitted that the AO has rejected the explanation of the assessee without bringing on record any material to hold that the assessee has made cash deposit out of unexplained sources. Only allegation of the AO was that majority of cash sales was in the month of October and November, 2016. It was further submitted that there was no ban to accept the SBN upto the closing hours of 08/11/2016 and the assessee has duly declared such sales in the VAT return which were also duly accepted. Ld. AR further submitted tha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny adversity in the hands of assessee. 11. There is no allegation that no purchases have been made from the above party and even the statement of Sh. Raj Kumar of M/s Ram Lal Kimat Rai have been recorded at the back of assessee and no adverse view have been pointed out in the assessment order and, in fact, no statement was confronted to the assessee and, thus, the purchases stood confirmed. Even, the statement of Sh. Mangat Rai Jain, the main Director was also recorded and no adverse view has been drawn by the AO. 12. We have provided the detail of the parties from whom, the purchases have been made alongwith copies of accounts and no adverse conclusions has been drawn. 13. Even, the confirmed copy of account from whom, the purchases have been furnished to the Assessing officer and no adverse view has been drawn. 14. No defects pointed out in the books of accounts for rejection u/s 145(3) and on the other hand, the books are duly audited. All purchases and sales are vouched. 15. The G.P. rate is higher than the earlier year and the finding of the AO is contradictory in the sense that on one hand, he has rejected the sales and on the othe....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at page 46, there is summary of arguments. 24. Another submission have been reproduced at page 46 of the order of CIT(A), wherein again, we have relied upon certain judgment of 'Vaisakhapatnam Bench' of the ITAT on the similar issue of cash deposits during demonetization period and also again reliance was placed on the judgment of 'Delhi High Court' in the case of Akshit Kumar at pages 46 to 48 of the order. 25. Another submissions were made vide our submissions, dated 04.10.2022 and it was contended on the basis of various case laws at page 50 of the order of the Chandigarh Bench of the ITAT and there are other similar cases at pages 51 to 55 of the order and under such circumstances, no addition could be made of the unexplained deposits. 26. Further consolidated submissions on the same issues were made vide submissions, dated 27.10.2022 from pages 55 to 108 of the order, which are, in fact, repetition of earlier submissions. FINDING OF CIT (APPEALS) 27. The finding of CIT(A) starts from page 106 and at page 106 to 108, first paragraph, he has discussed the basis of addition by the AO and then from para 4.8, he has given....
X X X X Extracts X X X X
X X X X Extracts X X X X
....icient stocks in their possession or there must be defects in the stock register/stocks. Once there is no defect in the purchases and sales and the same are matching with inflow and the outflow of the stock, there is no reason to disbelieve the sales. The Assessing Officer accepted the sales and the stock. He has not disturbed the closing stock which has direct nexus with the sales. The movement of stock is directly linked to the purchases and the sales." 35. Then again at page 113 of the order of CIT(A), the following finding has been given:- "10.13 In the present case also the cash deposited post demonetization by the assessee was out of the cash sales which had been accepted by the Sales Tax/VAT Department and not doubted by the AO, there was sufficient stock available with the assessee to make cash sales and there was festive season in the month of October 2016 prior to the making of the cash deposit in the bank account out of the sales. So, respectfully following the aforesaid referred orders by the various Hon'ble High Courts and the Coordinate Benches of the ITAT, we are of the view that the impugned addition made by the AO And sustained by the Ld. CIT(....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tatements were also recorded but nothing contrary was found nor it is the allegation of the revenue that the purchases declared by the assessee was not genuine. The assessee has also filed the copies of VAT return which were accepted by the VAT authorities who are independent Government agency and found no error in the VAT returns filed by the assessee. It is a known fact that after the announcement of demonetization, people rushed to the market and bought many items in exchange of old currency. Assessee has raised 1218 invoices on 08.11.2016 is not an exception under these circumstances. The Assessing Officer failed to find any error in the details and evidences filed by the assessee. 11. The assessee has deposited cash during the demonetization out of the cash available as on the closing hours of 08.11.2016 i.e. the date when the demonetization was announced by the Hon'ble Prime Minister and was the last day upto which the SBN could be accepted as valid currency. The AO is required to consider the records of the assessee such as stock register, bank statement, monthly sales summary, possibility of back-dating of cash sales or fictitious sales etc. before making any allegation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....why the explanation furnished by Appellant is not acceptable. 15. In the instant case, it is not the allegation of the AO that the assessee has not maintained any books of account or the cash deposited in SBN in bank was not recorded in the books of account maintained. He rather accepted the turnover declared by the assessee which is inclusive of the amount of cash sales which was made in SBN and deposited into bank. Further it is seen that the assessee not only offered explanation regarding nature and source of deposits but also substantiated the same with documentary evidences in the shape of Audited Financial Statements, Sale Register, Purchase Register, Stock Register and Cash book. It is not understood as to how the AO could invoke the provisions of section 69A for making addition when the source of such cash deposits, being cash sales, was duly recorded in the books maintained in regular course. Even no discrepancy was pointed out by the VAT department in respect of purchases and sales made by the assessee. Therefore, addition so made u/s 69A of the Act is unjustified and be deleted. 16. The Co-ordinate Bench of ITAT, Mumbai in the case of ACIT v. Ramlal Jewellers (P.) ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon'ble High Court dismissed the appeal filed by the Department." 18. The Co-ordinate Bench of ITAT, Delhi in the case of S. Balaji Mech- Tech Private Ltd Vs. ITO in ITA No. 556/Del/2024 vide order dt. 25.09.2024 has observed as under: 18. Coming to the issue of stock movement and excess sales, we observed that the assessee has submitted relevant stock reconciliation and auditors report of stock movements and there is no negative stock movement which will indicate that the assessee has booked excess sales without there being proper purchases. 19. In our considered view, there are chances that during the demonetization period the regular customers may have choose to buy the spare parts and bearing by making payment by cash so that their excess SBN is transferred. We noticed that the credit sales has come down during this period and the sales of the assessee is more or less maintained during this period. Therefore, it shows that the changes in the patterns record....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se for rice, sugar, chana dal and wheat flour before the Assessing Officer. All these facts clearly go to prove the genuineness claim made by the assessee that cash deposits of Rs.52.60 lakhs has been made out of cash balance available with the assessee and, hence, there is absolutely no case made out by the revenue for making addition under section 68." 19. Further, in the case of Fine Gujaranwala Jewellers Vs. ITO (ITA No. 1540/Del/2022 dated 27.03.2023, wherein it was held as under: 22. "In the case in hand the reason for disbelieving the cash deposit is that the assessee has been deposited below Rs. 2 lakh in every transactions that lead to the conclusion of the Assessing Officer that the same has been done to avoid the application of provision of section 285BA read with Rule 114E of the Act. The said observation made by the Assessing Officer without any material in his hand. There is no prohibition under law to make sale transaction below Rs. 2 lakhs as such the assessee had at liberty to manage his own affairs. From the action of the assessee in raising the sales bill below Rs. 2 lakhs the Assessing Officer cannot interpret as the sale are bogus only to give colou....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aised by the assessee with the observation that the AO/CIT(A) cannot invoke the provisions of section 68 or 69A when the assessee is already declared the source for cash deposits in the books of accounts and the lower authorities without their being any material to support on their contrary view, the provisions of section 68 or 69A cannot be invoked. 24. In the result, appeal filed by the assessee is allowed." 20. The Co-ordinate Benches of ITAT, in the following case laws has held as under: [i] M/S Godwin Tourism Pvt. Ltd. V. DCIT 2024 (8) TMI 1173 (ITAT, Delhi), dated- August 21, 2024, held that- 19. "Considered the rival submissions and material placed on record, we observed that the assessee has submitted cash book in the Paper Book wherein assessee has received share application money on various dates and received the same by way of cash on verification of the cash book submitted before us. We observed that on various dates, the assessee has maintained sufficient cash which are out of share k withdrawals and it is substantiated that sufficient source application money and some bank of cash available with the assessee to make the bank deposit of Rs....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to the sales and we do not find any defect in ccoun effect 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 Vishel 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." 22. Thus, by respectfully following the ratio laid down in above cases and also looking to the facts that Assessing Officer has tried to support his finding merely on the basis of incorrect comparison of daily cash sales and cash deposits in the bank accounts in the year before us as well as in preceding year and such observations have already been answered by the assessee and not controverted by Revenue. In view of these facts, we find no infirmity in the order of ld. CIT(A) deleting the addition of Rs.21....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to hold that the books of accounts maintained by the assessee in regular course of business are incorrect so as to invoke the provisions of section 145(3) of the Act. He further submits that the assessee has declared progressive results where the turnover has increased from Rs. 49 crores in AY 2015-16 to Rs.72 crores in AY 2017-18 with an increase in G.P. percentage from 2.91 % to 3.24 %. He further submits that in immediately preceding year i.e. in AY 2016-17, the G.P. rate was 3.32% on a turnover of Rs.45 crores however, in the year under appeal, turnover has increased by Rs.72.14 crores with G.P.5 of 3.24%. According to Ld.AR, it is accepted business principal that every increase in turnover would be a result of compromise in the profits margins. As is evident from the results, the turnover has increased by more than 150 % however, the reduction in G.P. rate is very insignificant. In the last, the Ld.AR for the assessee submits that the Ld.CIT(A) has appreciated these facts and thereafter, rejected the action of the AO invoking the provision of section 145(3) of the Act and further deleting the additions made which order deserves to be accepted. 26. After considering the arg....
X X X X Extracts X X X X
X X X X Extracts X X X X
....red for taxation. I have gone through the trading account and find that there was sufficient stock to affect the sales and 1 do not find any defect in the stock as well as the sales. AO has also not spotted any specific defects in the books of account, sales, purchase and stock. Only the AO doubted and presumed and accordingly made addition. Since, the assessee has already admitted the sales as revenue receipt, there is no case for making the addition u/s 69A 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, I do not get any reason for not accepting the result of audited books of accounts of the assessee. Hence, the action of the Assessing Officer in rejecting the books of accounts u/s 145(3), applying the gross average rate and addition of Rs. 21,55,41,500/- is not justified and same is therefore deleted." 27. Before us, the Revenue has failed to controvert the findings given by the Ld.CIT(A) and reiterated the observations made by the AO in the assessment order. 28. On th....