TaxTMI 
TaxTMI 
TaxTMI 
2025 (8) TMI 1435
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....ain 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/-. According to the Ld. AO the theory of cash sales ....
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....us 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 account books turnover and copy of challan paid for 31.03.2017 7. Detailed working of opening stock month wise and clo....
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....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 increase in amount of cash balance with the appellant in November. Another important event which happens immediately after Diwali festivals is wedding preparations, which usually starts immediately after the festivals, and starts peaking in Nov....
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....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 received on 08.11.2016 - Rs. 1,29, 19, 790 * Other cash advances - Rs. 36,94,624 It is submitted that the aforesaid addition is patently erroneous and clearly not sustainable in law as explained hereunder: It is emphatically reiterated that cash deposited during demonetization was pursuant to cash sales of....
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....n 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 submission that the issue is squarely covered in favor of the appellant by the decision of various Tribunals, wherein it has been consistently held that where cash deposited post-demonetization by assessee was out of cash sales which had been accepted by Sales Tax/VAT Department and not doubted by assessing officer and there was sufficient stock available with assessee to make cash....
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....emolished 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 claimed that out of the total cash sales of the November 2016, it had made 96.72% of such total cash sales on 08.11.2016 alone. In turn, it is also claimed that out of the total sales of the year 2016-17, 35.82% of the total sales on single day of 08.11.2016 alone itself. 7.2 Another interesting aspect is noticed from the purported part cash book furnished by the assessee and referred to as well as discussed hereinabove. It is further noticed that all the purported sales bi....
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.... 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 disputed is that they were really the winnings of the appellant from the races. 7.11 In the case in hand the jewellery business is not disputed. But what is disputed is the fact of making 38.55% of the total cash sale of the FY 2016-17 on single day on 08.11.2016, fact of making 96.58 % of the total sales of the November 2016 on single day of 08.11.2016 is also disputed. And by disputing such facts, the claim and fact of single day cash sales amounting to Rs. 2,06,55,451/- on 08.11.2016 by way of raising 206 bills along with rais....
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....en 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/- plus purported cash advances of Rs. 1,29, 19,190/-) on 08.11.2016 made by the assessee company during the period of demonetization is being added to the income of the assessee as unexplained cash credit under the provisions of section 68 of the Income Tax Act, 1961. Besides, the remaining cash credit, which is shown in the books of accounts as advance from customers, i.e. sum of Rs. 1,66, 13,734 which is shown as payable to customers as on 31/03/2017, less Rs. 1,29, 19, 190/- which was shown as advance received on 08/11/2016 (has already been treated as unexplained cash cr....
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....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 as disclosed by the assessee and, on the other hand, held cash deposited in bank account from realization of the very same accepted sales to be unexplained. It was noted that the appellant has submitted stock details to Ld. AO. No mistake in the stock or purchases have been identified by the Ld. AO to show manipulation in sales on 8th November, 2016. The Ld. AO failed to pinpoint any mismatch in stock or purchase to demonstrate that the cash sales as claimed by appellant could not be effected. The cash deposited during demonetization was pursuant to cash sales made by the appellant, which has been duly recorded ....
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....alabar 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, sales book etc except entertaining suspicion in his mind with a pre-conceived notion in order to reach a pre-determined destination. Moreover, we find that the assessee had made a categorical submission that it had not entertained receipt of cash in specified bank notes from 9th November 2016 onwards from any customers due to the ban announced by the Government. This fact has not been controverted by the revenue. Effectively, the assessee had only recorded huge cash sales and cash advance received from customers on 8th November 2016 in demonetized currency (as the said currency was valid upto 12 AM of 8th November 2016) and had merely deposited the same th....
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....g 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 2016-17, extract of cash book for that entire Financial Year 2016-17, bank statement, VAT returns of sales of the relevant assessment year, the assessment order for the year under consideration in support of VAT paid and confirmation of acceptance of accounts books turnover along with copy of challan paid for 31.03.2017, detailed working of opening stock month wise and closing stock with specimen copy of purchase invoices and price tags were duly submitted. Relevant to mention that the Ld. AO has not disputed this particular fact of cash sales effected during the year having been duly recorded in the regular books of accounts, quantitative or details stock maintai....
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....o 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 materials available on record. It is the case of the assessee that the provision of Section 40A(3) is not applicable in the case in hand which is subject to exception provided in Rule 6DD of the Income Tax Rules, 1962 clause 1 whereof provides exception of payment in cash in case made on Sunday or holidays. While deleting the addition the Ld. CIT(A) observed as follows: "In view of the above, it has been contended that the assessing officer erred in invoking provisions of section 40A(3) of the Act when the case of the appellant clearly fell within the exception provided in Rule 6DD(i) of the Rules. The reasoning provided by the assessing officer in the assessment order fo....
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....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 enough to visualize all kinds and nature of business expediency in all possible situations and thus, the onus is on the assessing officer to ensure that genuine business expenditure should not suffer disallowance. 6.10 The assessee is into jewellery business and genuineness of expenditure is not at all in dispute while purchases of jewellery from unregistered persons. The seller refused to accept account payee cheque/ bank draft and since it was a Sunday/holiday cash payment was made. Thus, it is under such unavoidable circumstances, the appellant had no option but to pay cash to the seller. The source of payment is identified inasmuch as the same is fully recorded in the books of the assessee. The audit report in Form 3CD....