TaxTMI 
TaxTMI 
2025 (10) TMI 803
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....it filed its return of income on 06.11.2017 declaring total income of Rs. 2,94,500/-. The case was selected for scrutiny under CASS on account of large cash deposits made during the demonetisation period. 2.2 In the course of assessment proceedings, the Assessing Officer noted that the assessee had deposited an aggregate amount of Rs. 9,37,76,500/- in specified bank notes between 09.11.2016 and 30.12.2016, comprising Rs. 9,27,76,500/- in Indusind Bank and Rs. 10,00,000/- in Kotak Mahindra Bank. The Assessing Officer issued several notices under section 142(1) requiring the assessee to furnish supporting evidences regarding the source of cash deposits, including ledger accounts, stock registers, confirmations of creditors and loans, monthly stock statements, copies of invoices, and other relevant particulars. However, according to the Assessing Officer, the assessee only filed partial details such as audited accounts, balance sheet, profit and loss account, and certain VAT returns. 2.3 On verification of the details submitted, the Assessing Officer found that the assessee had shown cash sales of Rs. 11,51,28,255/- in the financial year 2016-17 as against Rs. 5,67,06,406/- in t....
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....its books of account. It was submitted that the sales were supported by day-to-day stock register, quantitative tally, and VAT returns, which had been duly accepted by the Department. It was further urged that the Assessing Officer had not pointed out any defect in the maintenance of books or quantitative records and had made the addition merely on the basis of doubts and suspicions regarding the timing and volume of sales. The assessee submitted that rejection of books of account under section 145(3) was not justified when no discrepancy was established in the stock records and when the accounts were duly audited. 2.8 The learned CIT(A), after considering the submissions, examined the material on record and deleted the addition. The relevant para from the order of CIT(A) is reproduced as follows: 5.1.8 The appellant has explained the cash deposits during demonetization as being from cash sales in the preceding months, and such sales are duly recorded in the books and evidenced by sale bills. The appellant has, before the A.O, furnished sales and purchase registers, stock registers, cash book, bank statement, purchase bills, month-wise purchase details, sales bills, mon....
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....ITAT" while challenging the findings of the first appellate authority. On perusal of the context, it is evident that such reference is a typographical error, and the grievance of the Revenue is in fact directed against the order of the learned Commissioner of Income Tax (Appeals). Accordingly, wherever the expression "ITAT" occurs in the grounds, the same shall be read as "CIT(A)". 3. The learned Departmental Representative supported the order of the Assessing Officer and submitted that the assessee had failed to discharge the burden of proving the genuineness of the cash deposits. He drew our attention to para 7.4 at page 13 of the assessment order, where the Assessing Officer categorically recorded that despite issuance of notices, the assessee did not comply and failed to furnish requisite details of cash sales with supporting evidences. 4. The learned DR further referred to para 7.5 of the assessment order (page 13) and pointed out that even when the assessee was again requested to furnish details of purchases, sales, sundry debtors, creditors and other related particulars, in response the assessee merely submitted a copy of the audit report, financial statements and cert....
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....Assessing Officer, the order of the learned CIT(A) was wholly unsustainable. He submitted that the CIT(A), while granting relief to the assessee, deleted the addition merely on the basis of brief observations recorded in para 5.1 to 5.18 at pages 42 and 43 of his order, without adequately rebutting or addressing the detailed findings of the AO or without calling for a remand report from the AO. 4.5 According to the learned DR, the CIT(A) accepted the assessee's version of maintaining stock register and VAT compliance at face value, and simply held that suspicion cannot replace evidence, while ignoring the cogent reasoning advanced by the AO. The learned DR thus urged that the order of the CIT(A) be set aside and the assessment order passed by the AO be restored. 5. Per contra, the learned Authorised Representative of the assessee strongly supported the order of the learned CIT(A). He submitted that the assessee had duly complied with the notices issued by the Assessing Officer and placed on record all necessary details, including audited accounts, financial statements, VAT returns, and quantitative stock registers. According to him, the allegation of non-compliance is unfo....
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....efore the CIT(A) all details of sales, purchases, stock registers, VAT returns and audited accounts. The assessee also highlighted that quantitative details of stock as appearing in Form 3CD, at page 44 of the paper book, clearly demonstrate availability of stock for effecting sales. This quantitative tally has not been doubted by the Assessing Officer at any stage. The AO has merely reproduced the comment of the auditor from Form 3CD without bringing any contrary evidence on record. Thus, the very foundation of rejection of books was based on suspicion and surmise, rather than on identification of any defect in quantitative records. 6.2 The learned CIT(A), after examining the submissions and evidences, recorded detailed findings in para 5.1 onwards of his order. In particular, the following observations are noteworthy: 5.1.6 On due consideration of the facts on record, the A.O's observations in the assessment order as well as the appellant's submissions, it is noted that the A.O had rejected the appellant's books under Section 145 stating that there were defects and discrepancies in books of account. However, no specific observations have been brought on record in the ....
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....re rejected and assessment is made to the best of judgment. For such rejection, it is incumbent on the Assessing Officer to point out patent, latent or glaring defects in the books, such as omission of transactions, absence of supporting vouchers, lacunae in the system of accounting, unverified stock, bogus purchases or other material discrepancies. In the present case, however, no such defect has been pointed out. The Assessing Officer has merely proceeded on the basis of comparative financial data of the current year and the preceding year, and on the abnormality of cash sales prior to demonetisation, to presume that the sales were inflated to justify the cash deposits. All the books of account, vouchers and stock register were produced before him, and not a single entry or transaction has been shown to be incorrect. The assessee also demonstrated that sales were backed by corresponding purchases and supported by quantitative stock records. Yet, instead of identifying defects, the Assessing Officer proceeded purely on surmise and conjecture. 6.14 These observations are fortified by the fact that the quantitative stock details, as reflected in Form 3CD at page 44 of the paper b....