AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 173
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....assessment loss of (-) Rs. 34,51,40,922/- by making addition of Rs. 5,65,23,941/- as unexplained cash credits under section 68 r.w.s 115BBE of the Income Tax Act, 1961 ('Act'). The assessee had disclosed the sum of Rs. 5,65,23,941/- as cash sales. However, the Ld. Assessing Officer ('AO') held the said cash sales deposited in the bank during the course of demonetization period as non-genuine and taxed it. Aggrieved, the assessee preferred appeal before the Ld. CIT(A) and succeeded there. The Revenue challenged the impugned order of Ld. CIT(A). 4. The Ld. Sr. Departmental Representative ('Sr. DR') vehemently argued the case emphasizing the details mentioned in the assessment order wherein the cash sales had been held non-genuine. He, placing emphasis on following part of the assessment order, prayed for setting aside the impugned order to restore the assessment order: "6.1. The assessee has claimed that the material sent on consignment basis before 01.04.2016 was defective due quality complaints and consignment agents were not able to sell that material and was lying on their site and the said material was sold in cash during the year under assessment at a discounted pri....
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....t in one go. 7. From the above facts and findings it is clear that the cash sales claimed to have been made by the assessee are bogus and the bills relating to cash sales were fabricated to explain the source of cash deposited into the bank accounts of the assessee which was actually unaccounted cash of the assessee. 8. As the explanation given by assessee for the nature and source of cash credits amounting to Rs. 5,65,23,941/- shown as cash sales receipt against sale of defective material is not found satisfactory, the provisions of Section 68 of I T Act, 1961 are clearly attracted to said cash deposits." 5. On the other hand, the Ld. Counsel, placing reliance on the factual finding of the Ld. CIT(A), prayed for dismissal of appeal. He contended that the Ld. CIT(A)'s order being self-explanatory, supported the assessee. He contended that the Ld. AO held cash deposits of Rs. 5,65,23,941/- as unexplained under section 68 of the Act solely on the reasoning that the cash sales were non-genuine. He contended that the assessee had filed detailed submission along with corroboratory evidence before the Ld. CIT(A), who remanded the matter back to the AO. In remand report; the A....
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....efective goods sold through consignment agents as unexplained income u/s 68 of the Act. 8.1.1 The appellant further submitted that while making the said addition, the Ld. AO has alleged that the assessee has made cash sales without having corresponding stock available in financials and non-availability of details of outward freight/carriage. The Ld. AO has failed to take cognizance of the fact that cash sales as well as corresponding purchases have already been disclosed in the audited financial statements of the assessee company. The addition has been made by the Ld. AO by ignoring the documentary evidences and submissions with regard to explanation of cash deposits furnished by the assessee company during the course of assessment proceedings and by ignoring the fact that provisions of section 68 of the Act are not applicable in the case of assessee. On going through the provisions of Section 68 of the Act, it is discernible that the provisions of section 68 are applicable where any sum is found credited in the books of an assesses maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offer....
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.... neither doubted on the total sales nor the total purchases disclosed by the assessee in its audited financial statements. This is further substantiated by the fact that the business income of the assessee has been duly accepted by the Ed. AO which is evident from the fact that the addition has been made to the returned income of the assessee. On going through the above documentary evidences furnished by the assessee company, your Honors will acknowledge that there is no dispute as to availability of stock, cash balance and cash deposited in the bank account out of the cash available in hand. Further, when there is no discrepancy in the goods sent on consignment and availability of the same for sale then it cannot be presumed that the cash available with the assessee has not been generated out of cash sales and assume that the cash deposited by the assessee in the bank account represents unexplained cash credits of the assessee. 8.1.3 The appellant submits that in the present case under consideration, it is not the case of the Ld. AO that cash sales declared by the assessee company have not been reported in the ITR or not offered to tax in the computation of incom....
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....al is not found satisfactory since M/s Shiv Enterprises to which cash sales of Rs. 4,25,32,257/- is shown to be made by the appellant has not been found at the given address and all the cash sales bills were serially numbered from 1 to 326 and bills were made in same handwriting and possibly made at a single point of time, however, it is not possible that goods are lying at different locations with different consignment agents and the sale bills were issued from same sale bill book. 8.3 From the submission of the appellant and the assessment order, it has b that the show- cause notice issued by the AO wherein only 2 days' time was given and the appellant the allegations raised in the final assessment order did not find place in show cause notices issued and accordingly, the assessee could not submit any further document at the time of assessment proceedings to further substantiate its claim, Howe, the supporting documents has been submitted by the appellant as additional evidences under Rule 46A of the Income Tax Rules in order to prove the genuineness of the sales. Considering the same a remand report was called from the AO. 8.3.1 In the remand report the AO ....
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....s. 1000 and Rs. 500 were declared as illegal tenders. The Appellant filed its return of income on 29th October 2017. The case of the appellant was selected for scrutiny under CASS and notice under section 143(2) was issued on 09.08.2018. The AO asked a specific query about the cash deposits made during the period between 8th November 2016 to 31st December 2016. He further asked the cash deposit details for the preceding as well as the subsequent previous years. The specific query relating to the details sought was the source of cash deposits of Rs. 5,07,96,000/- which were made between 8th November 2016 and 31st December 2016. In response, the appellant submitted that the source of such deposits was cash sales of Rs. 5,65,23,941/- to various customers. To substantiate its claim, the appellant filed the following details during the assessment proceedings and by way of additional evidence: I. Copy of excise return II. Copy of service tax return II. Copy of ledger account of consignment commission IV. Copy of ledger account of freight outward V. Copy of details of opening and closing stock VI. Copy of details and invoices ....
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....hat the closing balance of stock disclosed in the balance sheet is as per the VAT returns filed by the appellant. The assessee has been reporting stock on aggregate basis in earlier years also and the same was never doubted. Further, there is no legal requirement under the statute that provides that the assessee is required to provide the location wise details of stock. In Form 3CD the bifurcated details of stock is provided considering the nature of stocks. There is no evidence on record which shows that the stock with the consignment agents was not part of the total stock declared in the audit report. This means that though there may be lapse in disclosure, the existence of such stock cannot be denied altogether. Further, the proof of delivery of such stock from the appellant to the consignment agent establishes that the stock was transferred to the agent. 3. On existence of a single cash sales book and the same handwriting on it, other than the observation the AO has not brought on record any discrepancy in such book vis a vis the cash book or stock register or sale register. The appellant submits that the argument of consignment agents being at different locations is a....
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....t the current address of such party while all the evidence produced by the appellant establish the existence of such party when the impugned transactions were undertaken. 6. The AO in the remand report has not disproved any evidence filed by the Appellant and rather chose to rely on the assessment order itself. In this case, the material evidence furnished by the Appellant cannot be ignored as it proved the physical delivery of goods and in turn establishes the genuineness of the transactions. 7. The averment made by the AO that the appellant has fabricated its cash sales to prove or explain its cash deposits made during the demonetization period is disproved from the facts of the case itself. In other words, the appellant had already filed its excise returns for the period between April 2016 to October 2016 while the announcement of demonetization was made on 8th November 2016. Hence, there was no scope of any manipulation or fabrication in any records for that period. 8.5 It is also important to examine the legal position on the issue ie. treatment of cash deposited after demonetization. Hon'ble ITAT in the case of Agons Global (P.) Ltd. vs ACIT [Ap....
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....about the opening stock, closing stock and audited books of accounts maintained by the appellant. If the AO had taken the view that the sales are bogus then the AO should have also rejected the books of accounts by invoking the provisions of the section 145(3) of the Act. But the same has not been done in this case by the AO. When the purchases made by the appellant have been found to be genuine and were accepted during assessment proceedings then there should be either corresponding sales or same should reflect in closing stock. Further, no discrepancy has been found in VAT returns filed, wherein opening and closing stock, production of manufactured items and sales turnover are declared by the appellant Hence, the cash deposited by the appellant was out of the cash sales made during the year under consideration and the same was duly recorded in the books of account and in the VAT returns. Merely because sales have been made in cash cannot be the sole reason for making additions. In view of the above stated facts and considering the judicial views, I am of the view that the assessing officer was not justified in making the addition on account of cash deposited by the appel....
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....s/submission of the Ld. Counsel that: (i) The excise/VAT returns for the period from April 2016 to October 2016 before the date of announcement of demonetization; i.e. before 08.11.2016. In these returns, the assessee has disclosed the details of the opening balance, manufacturing, clearing and closing stock of all goods. Hence, it cannot be said that the assessee was indulged into fabrication of sales when these goods had already been sold and cleared before the announcement of demonetization. The sales duly declared in the VAT returns has been accepted by the VAT Department. (ii). There is no dispute on the quantity of stock shown in the stock register. Only place of stock has been questioned. The assessee has been reporting stock on aggregate basis in earlier years also and the same has never been questioned/doubted. Further, there is no legal requirement under the statute that provides that the assessee is required to provide the location wise details of stock. At most, there may be lapse in disclosure but not the existence of such stock. Further, the proof of delivery of such stock from the assessee to the consignment agent establishes transfer of stock to th....