TaxTMI 
TaxTMI 
2025 (9) TMI 558
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.... on 22.12.2017 admitting total income of Rs. 3,30,450/-; and the RoI was later selected for scrutiny under CASS mainly to verify the nature & source of cash deposits made during demonetization period. The AO noted that during the year assessee had deposited SBNs of Rs. 50,73,000/- after 08.11.2016 (demonetization period). So, the AO asked the assessee to explain the nature and source of the cash/SBN's deposited; and the assessee explained that out of the said amount Rs. 7,07,903/- was cash available as on 08.11.2016 and the balance of Rs. 43,65,097/- was received from the debtors who had purchased the fireworks on credit-basis mainly during Diwali festival that was celebrated Pan-India on 30.10.2016 in the relevant year. The AO verified and found that Rs. 7,07,903/- was closing balance as on 08.11.2016, which he accepted. But in respect of balance amount of Rs. 43,65,097/-, the assessee filed the name/details of the customers/debtors from whom assessee retrieved the sale-receipts; and the AO acknowledged that assessee had furnished the list of debtors from whom the collections were said to have been received, but found fault for non-filing of confirmation from the respective debtor....
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.... of the AO that assessee didn't had sufficient stock as on 31.10.2016 (Diwali day) for sale of firecrackers, whereas, we note that assessee had sufficient stock for making the sale in the last week of October, 2016; and it is not the case of the AO that assessee had any other source of income other than the business income from sale of firecrackers. Thus, it is noted that assessee's total sale of firecrackers during the year under consideration is to the tune of Rs. 49,32,929/- which included the cash deposited/sale of Rs. 43,65,097/- and the assessee has paid taxes on the said income. And we note that assessee has been regularly filing GST/VAT returns and has filed the relevant details before the AO. [CST sales Rs. 44,05,196/-, as per CST order Rs. 1,06,015/-] [TNGST-TN Sales Rs. 5,27,745/-, as per VAT returns Rs. 59,290/-]. In the light of the discussion (supra), it can be safely inferred that the profits embedded in Rs. 49,32,929/- has been accepted by the AO. However, the AO has made separate addition of Rs. 43,65,097/- which has already been considered for the purpose of Income Tax by adding the entire cash/SBNs which was sales of Rs. 43,65,097/- u/s.69A of the Act by alleging....
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....filed by that person. Therefore, it is presumed that once assessee filed all these details before the AO and the AO have not found any adverse material against them, the action of the AO to have rejected the same/relevant- evidences can't be countenanced. Thus, it is noted that assessee has placed before the AO the primary facts to prove the nature and source of SBNs, which has not been found by him to be incorrect or false. Therefore, the action of the AO to make addition u/s.69A of the Act, is not acceptable for the aforesaid reasons and stated (infra). 7. And as noted, the AO has not found any infirmity in the details filed by assessee to prove the nature & source of SBN's (supra) rather it is noted that the AO had acknowledged that assessee had filed the names of approximately 200 customers, but didn't enquire the veracity of the assessee's assertion that money/SBNs have been deposited by them in his bank account, instead he has only stated that mostly "assessee has deposited the SBNs and that assessee has not filed any confirmation from them (debtors)". However, we don't accept such contention of the AO for the simple reasons that the assessee has furnished the name of the ....
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....e of business, the majority of the sales is in cash during festivals, marriages, etc., and therefore, from the business model of the assessee and the trade practice, there is no doubt whatsoever with regard to the explanation offered by the assessee that it has collected cash from debtors towards sales made in cash before demonetization period. Further, it is noted that the assessee has also regularly filing GST/VAT returns and there is also being no change or deviation in the VAT returns filed for the period i.e. before the announcement of demonetization. And note that the assessee also declared sales made in cash in their books of accounts and filed necessary return of income and paid tax of the said income. Moreover, we note that the assessee has also made cash deposits regularly before and during demonetization period and therefore, it is not a case of amount deposited in SBNs as come out of undisclosed source or under any circumstances only to change colour of the money. From the details filed by the assessee, it is evident that during the month of Diwali festival, assessee used to have the maximum sale made (on credit). From the analysis of earlier or subsequent years reveal ....
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....re is no significant change in cash deposits during demonetization period, then merely for the reason that the assessee has accepted specified bank notes in violation of circulation/notification issued by Government of India and RBI, the source explained for cash deposits cannot be countenanced. 11. We also note from the financials filed by the assessee that assessee had enough stock of the fireworks to sale same to the customers on credit during the Diwali Festival i.e. 30.10.2016. Thus, we find that the assessee had sufficient stock as on 30.10.2016 (Diwali period) and for sale of the goods on credits which generated amount of Rs. 52,69,779/- (out of which, the AO accepted Rs. 7,07,903/-) to be deposited during the demonetization period and there are no defects in the stock registers. Every purchase and sale match with inflow and outflow of the stock and as assessee has placed on record that the purchased goods have already inflicted with VAT/Sales Tax and the AO has not found any infirmity in the books of accounts of the assessee. Therefore, on the basis of facts discussed supra, we set aside the impugned order of the Ld.CIT(A) and direct the deletion of addition of Rs. 43,65....
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....ster concern M/s.Vinayaka Fire Works & Others in Sivakasi; and following transactions are evident from perusal of the ledger copies from Page Nos.49-82 of the Paper Book which are noted as under in chart format: Sl.No. Name of the Company Amount 1 Vinayaga Fireworks Industries 338000.00 2 Vinayaga Fireworks 128000.00 3 Sonny Fireworks Private Limited 391000.00 4 Amar Sparklers Factory 51000.00 5 Micky Paper Caps Works 50000.00 6 Sony Pyro International 150000.00 7 Sony Ring Caps 121000.00 8 Sqny Fireworks Industries 25000.00 9 Micky Fireworks Industries 835000.00 10 Sqny Fireworks 290000.00 11 Sony Trading Corporation 163000.00 12 Sqny Granites 3165000.00 13 Sqny Stones P Ltd 50000.00 14 Amar Trading Corporation 22000.00 15 Abi Fireworks Agencies 1750000.00 16 Panjurajan Amaravathy Trust 216000.00 17 K.Grahalakshmi 10000.00 18 P.K.G.Appearls P Ltd 143000.00 Total 7898000.00 16. The Ld.AR also brought to our notice that the aforesaid relevant documents from Page Nos.49-82 [ledgers of the sister c....