TaxTMI 
TaxTMI 
2025 (8) TMI 1435
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....ct dated 04.09.2019 asking the assessee to explain the source of cash deposit made by the assessee during demonetization period commencing from 09.11.2016 to 30.12.2016 in his bank account. Specific queries were also raised to explain the genuineness and the source of such cash deposit made by the assessee. The assessee in fact deposited cash of Rs. 3,54,70,000/- into its 3 bank accounts namely HDFC Bank, Punjab National Bank & Yes Bank Limited from 09.11.2016 to 30.12.2016. It was further contented by the assessee that the source of cash deposit was the cash sales made by the assessee on 08.11.2016 as well as advance received by it on 08.11.2016 from various customers. The copy of the cash book for Assessment Year 2016-17 were duly furnished by the assessee which has been reproduced by the AO in its order of assessment. According to the AO November 2016 is the only month of Financial Year 2016-17 when the assessee company has reported astronomical and extraordinary cash sales/receipt of cash advances exceeding to Rs. 2 crores. The assessee claimed to have made 206 number of sales on 08.11.2016 and the total proceeds of sale of that particular date was shown at Rs. 206,55,451/-. Ac....
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....ccounts in disguise of cash sales and cash of Rs. 1,29,19,190/- and thus is not explained and from undisclosed sources and thus, proceeded to make addition of said amount under section 68 of the Act. In the written submissions filed by the appellant, it has been contended that the aforesaid addition is patently erroneous, legally flawed and unsustainable in law in so far as the cash was deposited out of: (i) cash in hand available with the appellant on account of regular cash sales effected during the period upto October 2016; and ii) cash sales made during the pre-demonetization period i.e., on 08.11.2016. In support of the above, the appellant has placed on record the following evidences/ documents: 1. Income tax return of relevant assessment year 2. Month-wise sales and purchase details of the relevant financial years 2014-15 to 2016-17 3. Extracts of Cash Book for the entire financial year 2016-17 4. Bank statements of the relevant financial year 5. VAT returns of sales made by the appellant during the relevant financial year 6. Assessment order for the year in support of VAT paid and confirmation of acceptance of a....
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....ry as alleged by the assessing office, but was in fact in line with the trend of earlier years) as demonstrated above. It was also submitted that items such as jewellery, ornaments, etc., are volatile commodities and the business of trading in such goods/ items is cash centric business with numerous transactions involving huge sum of money coupled with heavy investment and dealing with several customers on day-today basis running into thousands or lakhs of rupees. The following explanation has been provided by the appellant in the written submission in respect of cash sales: "In this regard, it is pertinent to mention that the appellant had achieved higher level of sales effected during the period of November, due to long period of festival occasions of Diwali, Dhanteras, etc., followed by the period of wedding preparations, when people at large tend to buy gold/ jewellery, considered as customary and auspicious. It is well known fact of Indian tradition that these festivals are considered most auspicious period for purchase of bullion, jewellery, ornaments etc., on account of which there were increased sales of the appellant corresponding to inc....
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....57) and the cash deposited in bank in the month of November, after demonetization, it would be appreciated, is attributable to the aforesaid cash proceeds. Further, the appellant also received cash advance aggregating to Rs. 1,66, 13,814 during the relevant assessment year (out of which advance of Rs. 1,29,19,190 was received on 08.11.2016), on account of certain schemes that were being run by the appellant. The cash deposited in bank in the month of November, it would be appreciated, is attributable to the cash proceeds realized from sale of aforesaid jewellery, ornaments, etc items and advances received under certain schemes which was subsequently deposited in the bank account maintained by the appellant. The assessing officer, however, disregarding the submission of the appellant and the circumstances which lead to the cash sales, in the assessment order, has, on mere conjectures and surmises, made addition of Rs. 3,72,69,265 under section 68 of the Act in respect of cash deposited during demonetization period and other cash advances received by the appellant as under: * Cash sale on 08.11.2016 - Rs. 2,06,55,451 * Cash Advance receive....
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....e Department in the ITR filed on several instances, was unexplained. It is further submitted that the sales were not only fully recorded in books but also corroborated with VAT returns which have been accepted by the sales tax/ VAT authorities, with VAT/ sales tax having been paid thereon. It is also pertinent to mention that assessment has been completed of said returns wherein sales declared by the appellant have been accepted and no variation/ deviation/ adjustment has been proposed. Copy of the assessment order is enclosed in the paper book. In the aforesaid circumstances, the appellant, it is submitted, fails to appreciate how could the cash deposits, out of the cash sales effected, at all be disputed in the assessment order, that too, despite cash sales, quantitative stock and books of account being accepted as such by the assessing officer. However, disregarding the submissions/ documents filed by the appellant, the assessing officer, on mere conjectures and surmises, has treated the cash deposited during the demonetization period to be the income from undisclosed sources as per section 68 of the Act." 6.5 It is also stated in the submissi....
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....t of scheme of demonetization, is the sale proceeds of the sales made by the assessee company in its showroom on 08.11.2016. To defend this stand of making of sales, defence line of the assessee is submission of 'cash book' for the period 01.04.16 to 31.03.2017 wherein purported sales of Rs. 2,06,55,451/-claimed to be made on 08.11.2016 by way of making / raising 206 sales invoices. However, this shield of defence of the assessee automatically stands pierced / demolished once the theory of 'affecting sales' of such a huge magnitude fails to survive the basic test of normal human behaviour. The evidences put-forth also fails to qualify the test of 'probabilities' as to whether such a large number of sale bills can be raised in a single day of 24 hours when the working hours of any normal business unit including that assessee are that not more than of 9 to 11 hours daily. Neither in the FY 2016-17 except on 08.11.2016 nor in the immediate preceding financial year 2015-16, the assessee has ever reported a single day cash sales exceeding Rs. 2,00,00,000/- or more in a single day. 7.1 Assessee is claiming which is not real, which cannot be genuine. It is....
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....9;, logic' and cannot be called 'real' and 'genuine. At best this arrangement is nothing but an arrangement of avoidance /evasion of tax. ....................... 7.9 Thus taking support in this settled legal position it is evident that the circumstances as noted in this case hold evidentiary value supporting the conclusion derived that the entire claim of single day cash sales of Rs. 2,06,55,451/- coupled with the receipt of Rs. 1,29,19,190/- as receipt of single day 'cash advance declared' by the assessee on 08.11.2016 is not genuine. 7.10 This entire edifice through which the assessee claimed to have made cash sales of such huge magnitude on 08.11. 16 fails the tests of both genuineness and human probabilities. In the case of Sumati Dayal Vs CIT (214 /TR 801) the apex court propounded the principle of human probabilities and applying it in that case held that whether apparent is real is to be decided on the basis of incriminating circumstances. The apex court concluded that "There is no dispute that the amounts were received by the appellant from various race clubs on the basis of winning tickets presented by her. What is dispute....
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....favour of revenue. 7.17 In the present case, the assessee has not been able to the existence of running any such schemes with corroborative evidences. It has simple chosen to state that the cash deposited by it during the period of demonetization consists of not only the sale proceeds of 08.11.2016 but also consist of cash advances received on 08.11.2016 alone. However, both the contentions remains unproved and it is found that the theory of cash sales and cash advance is a cooked storey and is just a creation of paper trail of sham transactions which did not happen at all. As mentioned above, no prudent businessman would allow its business operations to be used, to defeat any scheme of the Government and to help unlawful individuals to adjust their unaccounted money. It is clear that the assessee has introduced its own unaccounted money in the books of accounts in the disguise of cash sales and cash advance. Since, the assessee has failed to establish their nature and source, these cash credits are clearly unexplained as per the provisions of section 68 of the Income Tax Act. Hence, the entire cash of Rs 3,35,74,641/- (comprising purported cash sales of Rs. 2,06,55,451/- ....
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..../-) and the cash deposited in bank in the month of November, after demonetization, is attributable to the aforesaid cash proceeds a very large proportion of which was made on 08.11.2016. It is the contention of the appellant that 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 that the sale are bogus sale and are only to give color to non-genuine transaction as genuine transaction. The evidence brought on record by the Assessing Officer are not enough to hold that sales were not genuine. More so, the VAT returns were filed regularly. Accordingly, the issue is squarely covered in favor of the appellant by the decision of the Delhi Tribunal in the case of Fine Gujaranwala Jewellers vs. ITO: 151 taxmann.com 340 and ACIT vs. Hirapanna Jewellers 128 taxmann.com 291 (Visakhapatnam - Trib.). There is contradiction in the assessment order in as much as on one side, the assessing officer accepted the cash sales as genuine by accepting/ not disputing the trading results ....
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.... on the one hand observed that "the assessee has not been able to the existence of receiving any such schemes with corroborative evidences" but at the same time accepted such receipts by not disputing the trading results as disclosed by the assessee and without any further enquiry. Further, it is stated by the appellant that the aforesaid advances received by the appellant have been duly reported as sales and offered to tax in the subsequent assessment years). The appellant has also referred to the decision of the Hon'ble jurisdictional ITAT, Delhi Bench 'E', Delhi in the case of DCIT, Central Circle- 1, New Delhi vs. Manuvel Malabar Jewellers Pvt. Ltd. The Hon'ble ITAT in a similar issue observed that: - ".......Whereas in the return of income filed by the assessee on 30.10.2017 itself, the assessee had disclosed cash sales made on 8th November 2016 and included the same in the cash book and the entire cash book was duly placed before the statutory and tax auditors of the assessee company and return filed after due conduct of audit thereon. As stated earlier, no discrepancies whatsoever were found by the Id. AO in the cash book, stock registers, s....
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....i vs. Manuvel Malabar Jewellers Pvt. Ltd. as well as the discussion made above, addition of Rs. 3,72,69,265.00/- on account of cash deposited in bank made by the assessing officer is not sustainable and hence the Ld. AO is directed to delete the addition. Therefore, Ground No. 2 taken by the appellant stands allowed." 5. Upon perusal of the records placed before us, it is found that the assessee made total sales of Rs. 5,61,36,583/- out of which credit sales was of Rs. 1,26,27,059/- and cash sales was made of Rs. 4,35,09,524/- out of which the assessee made cash sales on 08.11.2026 of an amount of Rs. 2,06,55,451/-. The assessee also received advance aggregating to Rs. 1,29,19,190/- in cash on the said date; the entire amount of cash of Rs. 3,54,70,000/- was deposited in the bank from 09.11.2016 to 31.12.2016. It is the case of the assessee that cash in hand was available with the assessee on account of regular cash sales effected during the period up to October, 2016 and further cash sales made during pre-demonetization period i.e. on 08.11.2016 in support of which Income tax return for the relevant assessment year, month wise sales and purchase for Assessment Years 2015-16 to ....
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....ted in 151 taxmann.com 340 (Del Trib) dated 27.03.2023 in support of the case made out by the assessee. Apart from that the case of DCIT Vs. Manuvel Malabar Jewellers Pvt. Ltd. was also taken care of by the Ld. CIT(A). Thus, having regard to the entire aspect of the matter in the absence of concrete evidence in the hands of the Revenue in support of such sales made by the assessee being bogus particularly when the books of accounts was not rejected and further that VAT return clearly corroborates the impugned sales made out by the assessee the order passed by the Ld. CIT(A)in deleting such addition made in the hands of the assessee is found to be just and proper so as not to warrant interference. 6. This ground of appeal preferred by the Revenue is, thus, dismissed. 2nd Ground: 7. The disallowance of Rs. 28,50,886/- under Section 40A(3) of the Act was under challenge before the Ld. CIT(A) wherein cash payment was made in lieu of certain gold jewellery purchased from customer who insisted on cash payments and such payments were made on Sunday being a holiday. 8. We have heard the Ld. Counsels appearing for the respective parties and we have also perused the relevant mate....
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....t allowable u/s 40A(3) of the Income Tax Act. Thus, it is seen that the assessee has suppressed these fact. Therefore, penalty u/s 270A of Act for under-reporting of income which is in consequence of misreporting, i.e. on account of suppression of facts, is initiated separately for addition made u/s 40A(3) of the Act." 6.9 The assessing officer has proceeded to disallow cash payments aggregating to Rs. 28,50,886/-, by placing reliance on the provisions of section 40A(3) of the Act. The appellant has submitted that the aforesaid cash payments were made by the appellant in lieu of certain gold jewellery purchased from customers who insisted on cash payments and such payments were made on Sunday/holidays. Section 40A(3) of the Act is subject to exception provided in Rule 6DD of the Income Tax Rules, 1962 ('the Rules'). Clause i) of Rule 6DD, provides for exception on payment in cash in case payments are made on Sundays and Holidays. The appellant also submitted that the Courts and Tribunal have held that proviso to section 40A(3) have been diluted by way amendment in Rule 6DD of the Rules and circumstances prescribed in Rule 6DD as amended are not exhaustive ....