TaxTMI 
TaxTMI 
2025 (9) TMI 1021
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....sessing Officer has issued summons to the parties to whom sales stated to have been made in cash. Since, most of the parties has not responded to the notices issued by the Assessing Officer, he was of the opinion that cash deposited during demonetization is unexplained money of assessee and made the additions of Rs. 78,00,000/- u/s 69A r.w.s 115BBE of the Act. 3. Against this order, assessee preferred an appeal before the Ld. CIT(A) wherein Ld. CIT(A) after considering the submissions made by the assessee and facts of the case deleted the addition made. 4. Aggrieved by the said order, the Revenue is in appeal before us by taking following grounds of appeal: "i. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in granting relief of Rs 78,00,000/- in respect of the addition made u/s 68 of the Act on the ground that the cash deposits stood explained. ii. That on the facts and in the circumstances of the case, the Ld. CIT(Appeal) erred in accepting the sales made by the assessee during the year under consideration irrespective of the fact that four out of five notices issued u/s 133(6) of the Act for verification of sale invoices on s....
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....with showrooms in Uttam Nagar and Dwarka, New Delhi. It filed its return of income declaring income of Rs. 4,35,580/- for A.Y. 2017-18. 2. The case was selected for complete scrutiny under CASS on the issue of abnormal increase in cash deposits during the demonetisation period." 3. During the period 09.11.2016 to 30.12.2016, the assessee deposited Rs. 98,00,000/- in its Kotak Mahindra Bank account. This was almost entirely deposited on 10.11.2016, immediately after demonetisation was announced. 4. A significant portion-Rs. 97,42,130/ was claimed to be cash sales dated 08.11.2016, which constituted more than 100 times the average daily cash sales of the earlier week. This sale spike lacked sufficient third-party corroboration. 5. Based on principles of human probability, lack of confirmation in 4 out of 5 sample verification notices under section 133(6), and other circumstantial deficiencies, the AO treated Rs. 78,00,000/- as unexplained money under section 69A of the Act and taxed it under section 115BBE. CIT(A) order:- The assessee preferred an appeal challenging the reassessment order passed under section 143(3) of the Income-....
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....ction in view of the special circumstances prevailing after announcement of demonetization. Revenue's appeal (i) The Ld. CIT(A) erred in granting blanket relief despite clear evidence that out of Rs. 97.42 lakhs of cash sales claimed on 08.11.2016, confirmations were received only for Rs. 2.57 lakhs (2.64% of total). The remaining 97.36% stood unverified despite issuance of section 133(6) notices. This raises serious doubts on the genuineness of the entire day's sales. (ii) The reliance by the CIT(A) on market sentiment and public behaviour lacks evidentiary value in the absence of corroborative confirmations from buyers. In fact, the unusually high sales of Rs. 97.42 lakhs recorded on a single day-more than 106 times the average daily cash sales of Rs. 91.571/-warranted deeper scrutiny, not such an easy acceptance. (iii) The CIT(A) failed to address the core issue of whether such a large quantity of goods could realistically have been sold, invoiced, recorded, and cash collected all on the same day in a lawful manner, particularly when most of it involved SBNs, which had ceased to be legal tender by midnight of 08.11.2016. (iv) ....
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.... was not doubted which includes cash sales made and deposited in SBN during demonetization in the bank account. Thus, holding the same as unexplained is double addition of an income, firstly as profit on cash sales and secondly by making addition of entire amount as unexplained. Ld. AR submits that Ld. CIT(A) appreciated these facts and deleted the addition made. He, therefore, prayed for confirmation of the order of Ld. CIT(A). Ld. AR also filed details submission which is reproduced as under: "1. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in aunting relief of Rs. 78,00,000/- in respect of addition made u/s 68 of the Act on the around that the cash deposits stood explained. As per the Assessment Order (page no. 8 of the order), the Ld. A.O has made addition to income u/s 69A of the Income Tax Act. (however the Ld. ACIT has mentioned sec 68 at point #1of grounds of appeal). Section 69A comes into play in case the following two conditions are satisfied: * If the assessee is found to be the owner of any money, bullion, jewellery or other valuable article and such money, bullion, jewellery or valuable article is not....
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....ted during Q3 of FY 2016-17). iv. The Ld. A.O. relied on the following judicial precedents and applied section 69A nevertheless in the given case the assessee has already offered the income to tax and earned such income from normal business transaction backed by sufficient documentary evidence. a. The Hon'ble Supreme Court in the case of Chuharmal Vs CITc while affirming the view of the Madhya Pradesh High Court has held that 'the expression 'INCOME' as used in Section 69A of the Act, 1961 had a wide meaning which meant anything which came in or resulted in gain and on this basis, concluded that the assessee had income which he had invested in purchasing article and he could be held to be owner and the value could be deemed to be his income by virtue of Section 69A of the Act.' b. The Hon'ble Supreme Court in the case of Smt. Srilekha Banerjee and others v. CIT, Bihar & Orissa, held that the source of money not having been satisfactorily proved, the Department was justified in holding it to be assessable income of the assessee from some undisclosed source. c. In the case of Sajjan Dass& Sons v. CIT Their Lordships of the H....
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....by her in response to notice issued u/s 133(6) of the Income Tax Act as the assessee maintained adequate details to comply with Rule 114B. 3. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in ignoring the concept of "human probability" of receiving and entering cash of Rs. 98,00,000 within three and half hours in its business premises. a) The Ld. A.O. in his order (on page #3, para 3.11) has conceded that there was a mad rush to the jewellery stores as soon as demonetization was announced. In view of such circumstances the A.O hasv factored in phenomenal sale of gold jewellery and granted a lump sum benefit of Rs. 20,00,000 also for two retail outlets of the assessee. However, exemption of Rs. 20,00,000lacks rationality and is unjustified in view of sudden rush on 8th November 2016 as soon as demonetization was announced around 8 P.M. There was a panic in the market and customers sought to convert their old currency into gold and jewellery swiftly. Cash Sales of Rs. 98.00.000 on 8th November, 2016 can be corroborated with purchases and inventory maintained by the assessee and there is no adverse finding to that effect by the A.O in hi....
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....in the bank account for demonetization in SBN as unexplained money and invoked the provisions of section 69A r.w.s. 115BBE of the Act. However, in the grounds of appeal taken by the Revenue, the Revenue has challenged the action of CIT(A) in the deleting the same as considering it as addition u/s 68 of the Act which was not invoked by the Assessing Officer, thus, the grounds of appeal taken by the Revenue to this extent is not emanated from the orders of the lower authorities. With respect to other grounds taken, wherein Revenue has challenged the deletion of the addition of Rs. 78 lacs. We find that assessee has made total sale of Rs. 5,08,24,448/- in the year under appeal as compared to sales of Rs. 6,43,57,557/- in immediate proceeding years. Further in the instant year cash sales was of Rs. 2,49,11,940/- as against corresponding cash sales of Rs. 5,29,87,783/- in preceding year and cash deposited in the bank was of Rs. 2,63,40,000/- in the year under appeal as against 6,13,23,600/- in preceding year. These comparative data of two years clearly shows that as against the cash sales of 82% in preceding year, in the year under appeal, assessee has made cash sales of 49% of the tota....
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....bability, rejected the appellant's explanation for a significant portion of the cash deposits. The AO allowed a relief of Rs. 20,00,000/- but added Rs. 78,00,000/- to the income, invoking section 69A of the Act, treating it as unexplained money. The AO also invoked section 115BBE and initiated penalty proceedings under section 271AAC(1). 9.2. The AO observed that the appellant reported average daily sales of Rs. 91,571/- during the first seven days of November 2016, but on 08.11.2016, the appellant recorded cash sales of Rs. 97,42,130/- a significant increase. The AO deemed such a spike in cash sales as improbable under normal circumstances, using statistical assumptions and human probability. The AO issued notices under section 133(6) to confirm the sales, receiving responses for only a small portion of the total sales, which led the AO to question the overall genuineness of the cash sales. The AO made an addition of Rs. 78,00,000/- under section 69A, concluding that the cash deposits during demonetization were unexplained money. 9.3. The appellant, in its submission, argued that Cash sales have been a regular feature of its business in previous years, and th....
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....ness. The VAT returns filed by the appellant for both FY 2015-16 and FY 2016-17 further corroborate the consistency in sales, with no discrepancies noted. This consistency across different financial documents supports the appellant's claim that the cash deposits during demonetization were from legitimate business activities. 9.6. AO has applied section 69A which is when the assessee fails to satisfactorily explain the source of cash deposits or assets. In this case, the appellant has provided detailed sales invoices, VAT returns, and ledger entries to explain the source of the cash deposited during the demonetization period. The AO's reliance on statistical assumptions and the principle of human probability does not suffice to reject the appellant's explanation when documentary evidence has been provided. In CIT v. K. Y. Pilliah & Sons, the Hon'ble Supreme Court held that suspicion or conjecture alone cannot be the basis for making additions. The revenue authorities must provide concrete evidence to disprove the assessee's explanation, which the AO has failed to do in this case. 9.7. The appellant's VAT returns for the relevant period corro....
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....assessee has already included the entire cash sales in the total sales and the profits have been derived which were offered for tax, thus taxing the same income twice once in the sales and other when the sale consideration was realized and deposited in the bank account which is doubted on conjectures and surmises. 10. The Hon'ble Delhi High court in the case of CIT v. Kailash Jewellery House in ITA No. 613/2010 (Delhi High Court) has held as under: "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 nexus of such deposit was not establish with any source of income. The assessee claimed that it was duly recorded in the books on account of cash sales and was considered in the Profit and Loss Account. The Assessing Officer had verified the stock and cash position as per books and had accepted the same. Complete books of account and cash book was submitted to the Assessing Officer and no discrepancy was pointed out. On this basis CIT(A) deleted the addition. Tribunal also observed that it is not in dispute that sum of Rs. 24,58,400/- was credited in the sale account and had been duly i....
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....lanation is found not satisfactory to the AO" is purely relates to the money found with the assessee which are not recorded in the books of account. In this case, the above expression has no relevance since the assessee had already declared the cash sales in its books. In the similar situation, the coordinate bench has held in the case of J.R.Rice India (P) Ltd as under: "At the cost of repetition, to the extent of sales made, the stock position is also correspondingly reduced by the assessee which goes to prove the genuineness of the claim of the assessee. On examination of the cash book of the assessee, it is found that the assessee had cash balance of Rs. 55.94 lakhs as on 8-11-2016, i.e., the date on which demonetization was announced, which sufficiently explains the source of deposit of Rs. 52.60 lakhs in specified bank notes. Apart from this, the assessee had duly furnished the month wise details of sales, month wise details of purchase, corresponding freight charges incurred month wise, month wise power and fuel expenses and month wise selling expenses in the form of rebate and discount. The assessee also furnished the quantitative details of goods month wise for ri....
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....o the Assessing Officer, it is duty of the Assessing Officer to examine the same in the light of the available evidence. In the present case the Assessing Officer and the ld CIT(A) have concluded the findings on the basis of conjectures and surmises. The Assessing Officer has to establish the link between the evidence collected by him and the addition to be made. The entire case has to be dependent on the Rule of evidence, the assessee in this case explained the source of bank deposits are from cash sales. The Assessing Officer proceeded to disbelieve the explanation of the assessee on the presumption basis without bringing the corroborative material on record. The Assessing Officer is required to act fairly as reasonable person and not arbitrarily capriciously. The assessment should have been made based on the adequate material and it should stand on its own leg. The Assessing Officer without examining any parties to whom the goods are sold by the assessee, came to conclusion that the sales are not genuine, without even rejecting the books of account which is in our opinion is erroneous. 21. Respectfully, following the above decisions, we are inclined to allow the grounds....