TaxTMI 
TaxTMI 
2025 (8) TMI 1731
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....crutiny for the reason that huge cash was deposited during demonetization in SBN. The AO issued notices from time to time asking the assessee for filing certain information with respect to the source and genuineness of the cash deposited in SBN during the period of demonetization and after considering the replies by assessee, the AO observed that there was abnormal increase in sales in the month of October, 2016 which is not possible looking to past history of assessee and therefore, he made the addition of INR 43,50,250/- being 25% of cash deposit of INR 1,74,01,000/- in SBN during the demonetization as unexplained cash deposits u/s 68 of the Act and further invoked the provision of section 115BBE of the Act. 3. Against this order, the assessee filed appeal before Ld. CIT(A) who dismissed the appeal of the assessee. Therefore, the assessee is in appeal before the Tribunal by taking following grounds of appeal:- 1. "On the facts and circumstances of the case, the order passed by the Ld. Commissioner of Income Tax (Appeals) ('CIT(A)') and Assessing Officer ('AO') is ex-facie arbitrary, illegal and bad in law, without affording proper opportunity of being ....
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....ales during the demonetisation when compared to earlier period, the Appellant could not prove its case with necessary evidence" without appreciating that principally no addition can be made merely on comparing the results with earlier year and without placing on record any incriminating material and in the business there is always a variation from year to year and such an addition is in the realm of conjecture and surmise. (iv) The CIT(A) erred in giving his observation on Page 53 of his order that "recording of cash balance in the cash book on 09.11.2016 is an afterthought" merely on comparing the sales with earlier years and other observations on Para of Page 53 & 54 defies any logic and challenging the business decision of the Appellant and the decisions of Hon'ble Supreme court Shiv Raj Gupta Vs. Commissioner Of Income Tax(Supreme Court) 425 ITR 420 (SC) who held "The test of commercial expediency would have to be adjudged from the point of view of the businessman." and the case laws relied upon on pages 54 and 55 of his/her order are out of context that have no bearing on the case of the Appellant. (v) The CIT(A) has erred in making observations at Pg 55 ....
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....e the AO. (viii) The CIT(A) has erred in arriving at a conclusion at Page 56 that "there is increase in sales in the month of October 2016 and justifying the addition" without noticing that there is no certainty in any business about spurt in sales in any of the month and moreover, there is no reason to make an addition on such understanding and without prejudice to above, the Appellant gave sufficient reasons before AO and thus ignoring the details submitted by way of a paper book dated 01.05.2024 and by not appreciating the steps taken by the assessee to increase the business which included getting registration as a Govt. Registered Valuer with effect from 04.10.2016, participation in International Diamond, Gem and Pearl Fair held at Hongkong, introduction of new design and variety of jewellery, advertisement, establishing social contacts, and increasing credibility which are very crucial in trade of Jewellery and hence, CIT(A) erred in calling the explanation as general in nature without understanding the nature of business of the Appellant. (ix) The CIT(A) has erred in ignoring the chart of year wise cash sales and gross sales mentioned in Para viii on page 8 ....
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....s alongwith Annexures. According to Ld.AR, the assessee has filed the sale ledger accounts of the parties from whom purchases of above INR 5 Lakhs was made, GST returns, tax audit report and the stock details etc. which were filed from time to time. He further submits that the assessee got registered with the Income Tax Department registered valuer in terms of certificate of registration issued by Ld. Pr. CIT, New Delhi dated 04.10.2016 and accordingly, after getting this registration, the assessee made extensive advertisement through public media which has inspired confidence of the customers and thus, resulted into higher sales in the month of October, 2016 & November, 2016 upto the date of demonetization. He further submits that the assessee was on pleasure trip with his family during the period from 6th to 9th November, 2016 during which the demonetization was announced and therefore, it cannot be said that there was substantially high sales on the day when demonetization was announced by the Hon'ble Prime Minister. He submits that during the course of assessment proceedings vide reply dated 11.12.2019, the assessee has also filed the stock summary, copy of the same is placed a....
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....is observed by the AO that cash sales in the month of October is increased in unusual manner. He thus, requested for the confirmation of the addition made. 6. Heard the contentions of both the parties and perused the material available on record. In the instant case, AO has doubted cash sales during the month of October, 2016 claim at INR 1,71,99,974/- as against cash sales of 4,23,067/- declared in the preceding years. It was the allegation of the AO that this exorbitant high cash sales in the month of October, 2016 was a makeup affair to support the cash deposited in SBN, during the period of demonetization which is nothing but the unexplained cash of the assessee. On the other hand, it was submitted by the assessee that the sales was made for the reasons that he has received registration from the Income Tax Department which inspired confidence in the public and further submits that the AO has accepted, the sales as well as the profits declared, based on the books of accounts wherein such cash sales was recorded. Overall perusal of the facts, it is seen that the assessee had regularly shown the cash sales ranging between 31% to 60% of the total sales as has been tabulated in t....
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....at previous year." 8. From the perusal of the provisions of section 68 of the Act it is very clear that assessing officer can make addition u/s 68 only under two circumstances, i.e. (i) Appellant does not offer any explanation about nature and source of such credit; or (ii) Explanation offered by Appellant is not upto the satisfaction of Ld. AO. 9. In other words, whenever Appellant provides explanation, before rejecting the same ld. AO has to record dissatisfaction as to why the explanation furnished by Appellant is not acceptable. As is evident that assessee not only offered explanation regarding nature and source of such credits but also substantiated the same with documentary evidences in the shape of Audited Financial Statements, Sale Register, Purchase Register, Stock Register and Cash book. No specific defects whatsoever has been brought out on record by the ld. AO in those evidences and books of accounts so furnished. Therefore, addition so made u/s 68 of the Act without finding out any specific defects in books of account and also without rebutting the evidences produced is unjustified. Thus provisions of section 68 of the Act are not applicable. ....
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....spute that sum of Rs. 24,58,400/- was credited in the sale account and had been duly included in the profit disclosed by the assessee in its return. Therefore, cash sales could not be treated as undisclosed income and no addition could be made once again in respect of the same. The Hon'ble High Court dismissed the appeal filed by the Department." 12. The Co-ordinate Bench of ITAT Delhi in the case of S. Balaji Mech-Tech Private Ltd Vs. ITO in ITA No. 556/Del/2024 vide order dt. 25.09.2024 has observed as under: 18. "Coming to the issue of stock movement and excess sales, we observed that the assessee has submitted relevant stock reconciliation and auditors report of stock movements and there is no negative stock movement which will indicate that the assessee has booked excess sales without there being proper purchases. 19. In our considered view, there are chances that during the demonetization period the regular customers may have choose to buy the spare parts and bearing by making payment by cash so that their excess SBN is transferred. We noticed that the credit sales has come down during this period and the sales of the assessee is more or less maintained d....
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....scount. The assessee also furnished the quantitative details of goods month wise for rice, sugar, chana dal and wheat flour before the Assessing Officer. All these facts clearly go to prove the genuineness claim made by the assessee that cash deposits of Rs.52.60 lakhs has been made out of cash balance available with the assessee and, hence, there is absolutely no case made out by the revenue for making addition under section 68." 13. Further, in the case of Fine Gujaranwala Jewellers Vs. ITO (ITA No. 1540/Del/2022) dated 27.03.2023, wherein it was held as under: 22. "In the case in hand the reason for disbelieving the cash deposit is that the assessee has been deposited below Rs. 2 lakh in every transactions that lead to the conclusion of the Assessing Officer that the same has been done to avoid the application of provision of section 285BA read with Rule 114E of the Act. The said observation made by the Assessing Officer without any material in his hand. There is no prohibition under law to make sale transaction below Rs. 2 lakhs as such the assessee had at liberty to manage his own affairs. From the action of the assessee in raising the sales bill below Rs. 2 lakhs ....
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....ectfully, following the above decisions, we are inclined to allow the grounds raised by the assessee with the observation that the AO/CIT(A) cannot invoke the provisions of section 68 or 69A when the assessee is already declared the source for cash deposits in the books of accounts and the lower authorities without their being any material to support on their contrary view, the provisions of section 68 or 69A cannot be invoked. 24. In the result, appeal filed by the assessee is allowed." 14. The Co-ordinate Benches of ITAT, in the following case laws has held as under: [i] M/S Godwin Tourism Pvt. Ltd. V. DCIT 2024 (8) TMI 1173 (ITAT, Delhi), dated- August 21, 2024, held that- 19. "Considered the rival submissions and material placed on record, we observed that the assessee has submitted cash book in the Paper Book wherein assessee has received share application money on various dates and received the same by way of cash on verification of the cash book submitted before us. We observed that on various dates, the assessee has maintained sufficient cash which are out of share k withdrawals and it is substantiated that sufficient source application money and som....