TaxTMI 
TaxTMI 
2025 (9) TMI 164
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.... account of the appellant firm that the appellant firm is allegedly engaged in unaccounted cash sales or other business, receipt of which is recorded in its books of accounts in the grab of cash sales (b) the Id CIT(A) is further wrong and has erred in law in confirming finding recorded by the Id. AO that out of cash sale of Rs. 85,88,827/- declared by the appellant during demonetisation period in the month of October, 2016, there is allegedly unexplained cash credit to the extent of Rs. 49,51,541/-. The addition of Rs. 38,64,714/- made by the AO on these counts to the income of the appellant u/s 68 of the IT Act, 1961 and sustained by the Id. CIT(A) is wrong, unwarranted, based on misappreciation of facts and bad in law. 2. That the Id. CIT(A) is further wrong and has erred in law in confirming action of the Id. AO is charging addition of Rs. 38,64,714/- upheld vide ground no. 1 above u/s 115BBE of the IT Act, 1961. 3. The appellant craves permission to add to or amend to any of grounds of appeal or to withdraw any of them. 3. The brief facts of the case are that the assessee firm M/s Sitaram Badri Narain Mawawale filed its return of income o....
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....al increase in cash sales, which is not possible for any business and business of the assessee. Similarly, on perusal of cash sales from 01.11.2016 to 08.11.2016 and in the month of October 2016, there are boom in cash sales as compared to cash sales of last year. The percentage rate of growth of cash sales as compared to last year for the month of October is found @213.79% and during the period from 01.11.2016 to 08.11.2016 is found @199.45%, which are exceptionally high and not possible to the business of the assessee. The cash sales shown by the assessee for the month of October, 2016 are Rs. 85,88,827/-, which are exceptionally high and not possible for the business of the assessee as compared to cash sales shown by the assessee for the month of October, 2015 which are of Rs. 27,37,125/-. Thus, it is evident and self-explanatory that the assessee intentionally manipulated his books of accounts, i.e. sales book, purchases book, stock register, etc. for escaping from tax liability for its unaccounted cash being SBNs and under these circumstances, it has not been relied upon the books of accounts of the assessee for the year under consideration. On comparison of Cash deposited dur....
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....ge cash sales from January, 2017 to March, 2017 comes to Rs. 16,82,956/- [50,48,867/3] only and on compare with these cash sales, the cash sales for month of October, 2016 and 01.11.2016 to 08.11.2016 is found exceptionally increased. Thus, it is evident and concrete evidence that the assessee engaged unaccounted cash sales or other business, from which cash have been receiving by the assessee and from avoiding its tax liability, the assessee made accommodation entries in the garb of cash sale in its books of accounts. Thus, it can't be relied upon the books of accounts of the assessee for the year under consideration. So far as Cash withdrawal is concerned, the assessee withdrew cash including SBNs. Non-OHD and Non-SBNs from bank accounts amounting to Rs. 25,05,000/- only during the year under consideration, which is very low as compared to cash withdrawal in the last year. Thus, there is no question arises to cash deposits during the demonetization period are out of cash withdrawals. So far as Festival and Marriage season are concerned, the assessee took plea that the cash sales increased due to festival and marriage season, therefore, it is established facts that festival an....
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....s books of account as the explanation of the assessee is not satisfactory. Ld. AO noted that the assessee declared amount of Rs. 5,00,000/- under PMGKY. So far as cash being SBNs deposits are concerned, the assessee deposited cash being SBNs during demonetization period in the bank account amounting to Rs. 80,02,000/-, therefore, looking to the view of principle of natural justice, the credit of difference amount between bogus cash sales and cash deposits being SBNs, which comes to Rs. 5,86,827/- [85,88,827 80,02,000], was given. Thus, credit of such declaration under PMGKY and difference amount are given and therefore, the unexplained cash credit comes to Rs. 38,64,714/-[49,51,541 less 5,00,000 less 5,86,827], which is liable to be taxed u/s 68 of the Act and accordingly completed the assessment. 4. Aggrieved from the order of Assessing Officer, an appeal was preferred before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A)/NFAC is reiterated here in below: In the light of overall facts of case, on perusal of appellant grounds of appeal, it is noticeable that appellant is contending the order of AO as bad in law as it involves ass....
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.... prior to declaration of demonetization by the Govt. of India. That is to say, appellant is never holding cash on hand as per his regular practice of business/modus operendi as observed by AO for earlier AY 2015-16 as well as for earlier period of demonetization and in view of the same, AO has categorically concluded that such abnormal increase in cash sales during the months of Sep. Oct and up to 8th November 2016 clearly makes it a case of unexplainable nature of the appellant in explaining all the cash deposits with its supporting sale invoices / bills and consequent stock reconciliations as needed to explain the same to justify such abnormal increase in cash sales. Accordingly, AO computed such unexplained cash credits by duly giving credit to appellant average sales as computed scientifically by AO up to Sep 2016 as at Rs. 36,37,286/- and also appellant admitted income on account of PMGKY scheme out of these total sales admitted for the month of Oct 2016 of Rs. 85,88,827/-. Accordingly, AO computed such unexplained cash credit as at Rs. 38,64,714/- as per arithmetic workings as appellant is unable to explain such abnormal increase in cash sales during the month of Oct 2016 whi....
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....appellant to hold the order of OA as unjust is neither reasonable nor substantiated as per the provisions of I.T Act and in the result, appellant appeal is dismissed as not maintainable as per facts available on record on merits as reasoned and discussed supra. Accordingly, appellant appeal is dismissed as not maintainable as per facts available on record on merits as analyzed above read with assessment orders of AO. 6. Accordingly, appellant appeal against the assessment order u/s. 143(3) of I.T Act dated 21.12.2019 for AY 2017-18, is dismissed on merits as not maintainable as per law as above. 7. In the result, appellant appeal against the assessment order dated 21.12.2019 for AY 2017-18, is dismissed. 5. Since the appeal so filed before the ld. CIT(A) was dismissed aggrieved with that order the assessee preferred the present appeal before this tribunal on the grounds as reiterated herein above in para 2. Apropos to the grounds so raised ld. AR of the assessee filed a detailed written submission which reads as follow : The above appeal has been filed by assessee firm against the appeal order dated 27-01-2025 passed by Ld. CIT(A), NFAC, Delhi in appea....
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....ed from time to time. The Ld. A.O. thereafter completed assessment of appellant u/s 143 (3) at an income of Rs. 59,28,034/- by making addition of Rs. 38,64,714/- in declared income by holding that said amount of cash deposited by assessee in its Bank A/c in SBNs during demonetization period is unexplained cash credits in its books of accounts which was shown in the grab of cash sales and so is to be added to the total income of assessee u/s 68 of the Act and taxed it @ 60% invoking provisions of section 115BBE. Order of CIT (A) The assessee firm filed appeal before CIT(A) against said assessment order and in course of hearing filed written submissions which reproduced in appeal order of CIT(A). The Ld. CIT(A), NFAC Delhi in his order dated 27-01-2025 after considering reply filed by appellant confirmed the addition made by Ld. AO. The present appeal is against the addition so confirmed by Ld. CIT(A). Ground wise submissions Ground No. (1) (a) That on the facts and in the circumstances of the case the ld. CIT(A) is wrong, unjust and has erred in law in upholding finding recorded by the ld. AO on account of deposit of cash in the bank acco....
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....ober, 2016, there are boom in cash sales as compared to cash sales of last year. The percentage rate of growth of cash sales as compared to last year for the month of October is found @ 213.79% and during the period from 01.11.2016 to 08.11.2016 is found @ 199.45%, which are exceptionally high and not possible to the business of the assessee. The cash sales shown by the assessee for the month of October, 2016 are of Rs. 85,88,827/-, which are exceptionally high and not possible for business of the assessee as compared to cash sales shown by the assessee for the month of October, 2015 which are of Rs. 27,37,125/-. Thus, it is evident and self explanatory that the assessee intentionally manipulated his books of accounts, i.e. sales book, purchases book, stock register, etc. for escaping from tax liability for its unaccounted cash being SBNs and under these circumstances, it has not been relied upon the books of accounts of the assessee for the year under consideration." 1.3 The assessee on these observations of A.O. filed its explanations which are discussed in assessment order. The Ld. A.O. did not found the reply of assessee as acceptable for reasons given in assessment or....
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....ts could not have been rejected without pointing out any specific defect or deficiencies in the books of account maintained by the assessee. There is no dispute to the well settled legal proposition that the books of account regularly maintained by the assessee in the normal course of business, which are subject to audit as per the provisions of I T Act should be taken as correct unless there are strong and sufficient reasons to indicate that they are unreliable. 1.5 It is thus submitted that there is no justification in the case for holding by the Ld. A.O. that books of accounts of appellant cannot be relied which is unwarranted, based on misappreciation of facts and without any cogent material on record. 1.6 The sale of assessee depends on demand of sweets and other milk products in the market which suddenly increase on festivals, marriages and inflow of tourists in city. The Ld. A.O. compared cash sale of assessee in the month of October, 2015 with cash sales in Oct. 2016 and of 1-11-2015 to 8-11-2015 with sale of 1-11-2016 to 8-11-2016 and gave finding that increase is 213.79% from Oct. 2015 as compared to October, 2016 and increase is 199.45% from 1-11-15 to ....
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....and which suddenly increase on festivals, Marriages etc. In 2016 Diwali festival was from 28th day of October, 2016 to 1-11-2016 ('Dhanteras on 28- 10-2016). While in 2015 Diwali festival was from 09-11-2015 to 13-11-2015 (Dhanteras on 09-11-2015). There are always very high sale of sweets in Diwali fortnight and that is the reason that in October, 2016 and from 1-11-2016 to 08-11- 2016 the sale of Mawa (main component of sweets) and paneer increased as compared to same period in the year 2015. Furthur in Gopalji Ka Rasta, Jaipur from where assessee carries its business there are 3-4 more shops. A shop keeper doing major sales was found by authorities selling adulterated Mawa etc. in 2015-16 and so shop was closed which resulted in increase in sales of assessee. The finding of Ld. A.O. that 'Festival and Marriage season did not come only in the month of October, it come in various months then why only cash sales are only exceptionally increased in the month of October, 2016' is not correct. The biggest festival and auspicious day for Hindus and public in general is Diwali festival days which was in October, 2016 and so the sale of assessee in October, 2016 increased and it is not o....
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....n October, 2016, the cash in SBNs which remained available on 08-11-2016 should be allowed as credit in SBNs deposited after 08- 11-2016 to 31-12-2016. The Ld. A.O. in assessment order held "So far as Cash withdrawal is concerned, the assessee withdrew cash including SBNs, Non-OHD and Non-SBNs from bank account amounting to Rs. 25,05,000/- only during the year under consideration, which is very low as compared to cash withdrawal in the last year. Thus, there is no question arise to cash deposits during the demonetization period are out of cash withdrawals". The above finding of A.O. is wrong in as much as the question is not 'low cash withdrawals as compared to cash withdrawal of last year' but was cash available out of said cash in hand on 1- 10-2016 & withdrawals made in Oct. 2016 which remained available which was deposited in the period 08-11-2016 to 31-12-2016 in Bank A/c. Thus Ld. A.O. is wrong and has erred in law in not considering the claim of assessee properly that deposit of SBNs of Rs. 10,03,465/- (Rs. 1,42,464.88 + Rs. 8,40,000) is out of earlier Bank withdrawals in SBNs made by assessee. In view of above facts of the case and submissions made it is evident th....
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....D THAT:- The assessee produced the newspaper clippings of The Hindu, The Tribune and demonstrated that there was huge rush of buying the jewellery in the cities consequent to declaration of demonetization of 1000 and Rs. 500 notes on 08.11.2016. As cash receipts represent the sales which the assessee has rightly offered for taxation. We have gone through the trading account and find that there was sufficient stock to effect the sales and we do not find any defect in 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 [2010 (4) TMI 1070 Delhi High Court] and Vishal Exports Overseas Ltd. [2012 (7) TMI 1110- Ahmedabad High Court] (iii) The case of CIT v/s. Kailash Jewellery House ITA No. 613/2010 was decided by the Hon'ble Delhi High Court on 09.04.2010 wherein it was held that "In the facts of above case, cash of Rs. 24,58,400/- was deposited in bank account. The Assessing Officer made the addition on the ground that n....
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....deposited substantial amount of cash in his bank accounts - Assessee claimed that source for cash deposits was out of advance received from customers for gold scheme - Assessing Officer treated cash receipts as unexplained cash credit under section 68 on ground that assessee had failed to prove genuineness of credits found in his bank account - It was noted that assessee had filed necessary books of account, including cash book, sales register, sale bills, purchase details along with bills and stock details to prove that there was no discrepancy in books of account -Whether since assessee received trade advances in cash and same had been subsequently converted into sales by issuing sale bills, then, said trade advance could not be examined in light of provisions of section 68 - Held, yes. (vi) Hinima Atul Shah Vs ITO [2024] 164 taxmann.com 439 (Ahmedabad - Trib.) - head notes - "Section 68 of the Income-tax Act, 1961 - Cash credit (Cash deposit) - Assessment year 2017-18 - Assessee had made cash deposit during demonetization period in her bank account - Assessing Officer held that cash sales shown by assessee during period of 10 days just before demonetization was not genu....
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....ade to the customers. The question of sustaining the addition would not arise". (ix) Asstt. CIT v. Dewas Soya Ltd. [IT Appeal No. 336/Ind/2012], wherein the Hon'ble ITAT has observed as under:- "The claim of the appellant that such addition resulted into double taxation of the same income in the same year is also acceptable because on one hand cost of the sales has been taxed (after deducting gross profit from same price ultimately credited to profit & loss account) and on the other hand amounts received from above parties has also been added u/s 68 of the Act. This view has been held by the Hon'ble Supreme Court in the case of CIT v. Devi Prasad Vishwanath Prasad [1969] 72 ITR 194 that "It is for the assessee to prove that even if the cash credit represents income, it is income from a source, which has already been taxed. The assessee has already offered the sales for taxation hence the onus has been discharged by it and the same income cannot be taxed again". Thus the ratio decidendi of the aforesaid case laws is that when the assessee has already shown the amount under the sales, meaning thereby, the amount generated in cash has already been of....
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....g any show cause notice when the issue are disputed that whether the higher rate of tax applicable or not on the alleged income or the nature of income falls u/s 68/69 and 115BBE. Hence, it was mandatory on the part of the ld. AO to issue show cause before invoking the provisions u/s115BBE, in absence of the same the rate cannot be charged more than to normal rate of tax, if the addition if any sustained. As now, it is a settled legal position that a person (assessee) is entitled to opportunity to show cause as to why not the income of the assessee is determined and charged or taxed in the manner as proposed by the Assessing Officer but in the instant case no such type of opportunity had been provided hence the addition so made may kindly be deleted. But the learned AO has failed to do so, which is against the principal of natural justice and against the law. Thus, how the learned AO can taxed the income under u/s 115BBE. Hence, the entire addition is liable to be deleted in full kindly refer Sanghi Brothers (Indore) Limited Vs Inspecting ACIT 122 CTR 19(MP), Malik Packaging Vs CIT 284 ITR 374 (All), T.C.N. Menon Vs ITO 96 ITR 148 (Ker). The submissions of the assessee are....
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....missioner of Income Tax, Central Circle-1, Visakhapatnam Vs. Hirapanna Jewellers (ITA No. 253/VIZ/2020, A.Y. 2017-18) ITAT Visakhapatnam Bench 12-05-2021 148-153 7. The ld. AR of the assessee in addition to the written submission so filed vehemently argued that how the part of the cash sales can be accepted and part denied. He also submitted that as held in the case of our High Court in the case of Harshila Choradia that once it is on record that the receipt is supported by cash sales same cannot be denied. He submitted the books of accounts of the assessee are maintained in accordance with law and are audited. The said books were not rejected before rejecting the sales proceeds. Ld. AO did not find any defect in the books of accounts maintained by the assessee. Be that it may so how the sales and the proceeds both can be taxed by the ld. AO and that partly cash sales accepted and partly not. The same cash cannot be given two different treatment by the ld. AO without bringing anything contrary to the records. Thus, the addition so made by the ld. AO merely based on the arbitrary based on surmises and conjectures required to be quashed. When the matter carried before the....
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....or by the ld. AO. After considering the replies filed by the assessee and details so made available ld. AO noticed that the assessee deposited cash being Specified Bank Notes [SBNs] amounting to Rs. 80,02,000/- in bank account maintained by the assessee in HDFC bank. As announced by the Government of India by in accordance with the Specified Bank Notes (Cessation of Liabilities) Act, 2017 w.e.f. 09.11.2016 the specified bank notes were banned from circulation and thereby the Government has given time to deposit those bank notes in the bank account, and nobody was allowed to accept those currency notes. As there was huge cash deposit of Rs. 80,02,000/- in the bank account, ld. AO asked the assessee to disclose the source of such cash deposits. The assessee was also asked to furnish the cash book for the FY 2016-17. On examination of the cash book for the FY 2016-17, various cash sales have been mentioned and on comparison of the cash sales for the F.Y. 2015-16 it was found unreasonable and exceptionally excessive cash sales. On examination of the details of cash deposits being SBNs during demonetization period so tabulated above, ld. AO noted that that there is exceptional increa....
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....sessee intentionally manipulated his books of accounts so as to adjust his unaccounted cash being SBNs in his regular books of accounts like an accommodation entry. As the above finding of the ld. AO clearly spell out that it was not the case of the assessee that he has accepted the cash after the demonetization. The cash was on account of sales recorded in the books of accounts of the assessee upto 08.11.2016 and that fact was neither rejected nor any contrary material placed on record by the ld. AO through ld. DR even though sufficient time was allowed as prayed by ld. DR even after the hearing was concluded. Thus, it is beyond doubt that the cash so deposited was out of the proceeds of sales and the same was in turn recorded after giving delivery to the goods. The cash sales so recorded was not reduced while computing the income. Thus, the ld. AO not disputed the cash sales recorded in the books of accounts. Thus, the cash sales proceeds so recorded cannot be considered as unexplained income of the assessee as held by our Rajasthan High Court while dealing with the case of Smt. Harshila Chordia v. ITO [2008] 298 ITR 349 in which it was held that "Addition u/s 68 could not be ....