TaxTMI 
TaxTMI 
2025 (11) TMI 226
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....r had applied an estimate of 20% gross profit on alleged cash sales of Rs.99,67,150/- made to 13 parties. The Revenue, on the other hand, has preferred its appeal against the deletion of the balance addition, contending that once there was a Tax Evasion Petition complaining of misuse of third-party PANs and denial of transactions by certain parties in response to notices under section 133(6), the addition of the entire cash deposits ought to have been sustained. 3. The relevant facts are that the assessee company is engaged in the business of purchase and sale of branded watches. It filed its return of income for the year on 27.10.2017 declaring total income of Rs.51,07,430/-. Thereafter, on the basis of a TEP filed on behalf of a lady complaining that an invoice of Rs.16,88,000/- dated 02.11.2016 had been issued on her PAN without her knowledge, enquiries were initiated. In the course of these enquiries, it was noted that the assessee had deposited in its YES Bank account cash aggregating to Rs.5,10,64,500/- in old currency notes during the demonetisation period between 09.11.2016 and 31.12.2016. 4. The Assessing Officer issued notices under section 133(6) to 48 persons in w....
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.... the time of cash sales viii) Out of 48 buyers, only 12 buyers have declined the transactions and one buyer sought more time without declining, meaning that 36 buyers have accepted the transactions ix) Buyers might have declined the transactions to save themselves from the income tax inquiries. x) As per the Comparative Chart of three years, which was filed during scrutiny assessment, it is evident that the total cash sales in the year of demonetisation for Sep-Nov was in lines with cash sales in earlier years. In the festive months where there is higher Sales are May-June and Sep-Nov where there is marriage season and festivals including Navratri and Diwali and the purchase of watches during these occasion in cash is not an abnormality. The above chart is reproduced below for the sake of convenience- MONTH F.Y.2014-15 F.Y.2015-16 F.Y.2016-17 CASH SALES CREDIT SALES TOTAL SALES CASH SALES CREDIT SALES TOTAL SALES CASH SALES CREDIT SALES TOTAL SALES SEPTEMBER 2,18,02,965 1,02,42,484 3,20,45,449 3.03,23,475 1,20,61,500 4,23,84,975 22.20,328 3,17,23,909 3,39,44,237 OCTOBER 3,81,30,721....
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....3,20,45,449 3,03,23,475 1,20,61,500 4,23,84,975 22,20,328 3,17,23,909 3,39,44,237 OCTOBER 3,81,30,721 1,81,47,770 5,62,78,491 2,11,79,892 1,03,63,451 3,15,43,343 2,83,82,465 4,75,00,732 7,58,83,197 NOVEMBER-1 to 8 4,00,80,331 1,19,49,336 5,20,29,667 3,59,81,133 1,63,89,951 5,23,71,084 12,29,73,500 1,88,40,737 4,18,14,237 NOVEMBER-9 to 30 2,80,671 2,40,66,062 2,43,46,733 DECEMBER 4,09,48,800 1,72,15,982 5,81,64,782 8,64,48,970 1,61,24,019 10,25,72,989 18,31,550 2,26,54,325 2,44,85,875 JANUARY 3,34,41,698 1,09,68,267 4,44,09,965 82,55,289 53,93,412 1,36,48,701 20,12,945 3,05,92,241 3,26,05,186 FEBRUARY 3,42,91,212 1,39,11,753 4,82,02,965 72,86,479 1,38,13,672 2,11,00,151 9,15,484 3,98,40,481 4,07,55,965 MARCH 3,18,76,364 1,29,48,946 4,48,25,310 3,43,84,085 1,18,33,054 4,62,17,139 12,53,774 4,11,27,752 4,23,81,526 TOTAL 35,67,27,324 14,41,18,561 50,08,45,885 34,22,95,907 13,92,64,828 48,15,60,735 ....
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....ssessee's line of business. 10. The Assessing Officer, while alleging fabrication, has not pointed out a single specific discrepancy in the assessee's books. Purchases are through verifiable banking channels, duly supported by invoices, VAT returns, and stock registers. Sales are recorded in the cash book, reflected in the VAT returns, and tallied with the audited accounts. Unless and until the books of account are rejected under section 145 by recording cogent reasons as to their incorrectness or incompleteness, the accounts cannot be brushed aside. Here, the AO did not reject the books, but still chose to discard the entries by merely observing that they "appear to be fabricated." Such a bald and unsubstantiated remark is not a legally sustainable foundation for an addition. 11. The reliance placed on the denial by 13 parties who responded to notices under section 133(6) also does not advance the Revenue's case materially. In commercial reality, it is not uncommon for buyers, when faced with official notices, to disown transactions in order to shield themselves from further scrutiny. Indeed, many of the notices elicited requests for time rather than outright denials. More i....