TaxTMI 
TaxTMI 
TaxTMI 
2025 (12) TMI 619
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.... to amend or alter the existing grounds of appeal on or before the date of hearing. 2. The brief facts of the case are that the assessee is Proprietor of M/s Spllendid Jewellery engaged in business of Manufacturer and Reseller in Gold Bar and Ornaments. The order of assessment was passed u/s 144 r.w.s 143(3) on the ground that there was abnormal increase in cash deposit during demonetization period as compared to predemonetization period. Although assessee preferred appeal but the additions made were upheld and consequently the appeal was partly allowed. 3. Aggrieved by the order of Ld. CIT(A), the assessee has preferred appeal before us on the grounds mentioned herein above: 4. The assessee has filed an application for raising additional grounds, which is reproduced herein below: 1. "On the facts of the appellant's case and under the law, The Ld Assessing Officer has erred in rejecting books of account without issuing show cause notice and therefore the rule of natural justice has been grossly violated the assessment order passed under section 144 rws 143(3) dated 29.12.2019 and demand notice issued under section 156 raising whooping demand of Rs 3,61,30,639/....
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....d the material placed on record, judgments cited before us and also the orders passed by the revenue authorities. From the records, we found that the additions in this case was made by the AO on account of cash deposited by the assessee during the demonetization period. In this regard Ld. AR has specifically submitted that the assessee is dealing in the business of manufacturer and reseller of gold bar and ornaments and the amount deposited in the bank is out of the cash sales and in this regard had placed on record all the required documents along with detailed submissions to counter the contentions of the AO. The addition was made by the AO primarily on the basis of statement and documents which had shown cash sales in the month of November 2016 amounting to Rs. 3,49,00,000/- and in one table the assessee has shown cash sales in the month of November 2016 at Rs. 3,44,86,172/- and arrived at a conclusion that assessee is manipulating books and also not presenting true and fair picture before revenue. It was further pointed out by the AO that the assessee had manipulated books accounts to adjust his undisclosed money and therefore the AO was satisfied that books of accounts of the ....
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....r. 8. Assessee purchases are sold to customers and balance are lying as closing stock. 9. Copy of cash book for AY 2017-18. (Pg. No. 111-121 of Paper Book) 10. Copy of Stock Statement for AY 2017-18. (Pg. No. 86 of Paper Book) 11. Copy of daily stock statement for AY 2017-18. (Pg. No. 87-110 of Paper Book) 12. Copy of Monthly purchase and sales register for A.Y 2017-18 (Pg. No 123 -150 of Paper Book). 11. The Ld. AR also submitted that the provisions of Section 68 of the Act cannot be applied in respect of cash deposits which have been duly recorded in the books of account and have already been considered as income in the return of income filed by the assessee. In assessee's case the assessee had duly recorded the cash sales of Rs. 3,44,86,172/- excluding VAT in his books of account and had also considered it as income in the return of income and taxes have also been paid on the said amount. It was submitted that onus then shifts on the department to prove the cash deposits are not part of sale consideration. 12. We noticed that the assessee had deposited cash and had claimed the same to be the sale consideration for the period upt....
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.... Sales & Purchase details like Sales Register, Purchase Register, Sales and Purchase Invoices, Stock Register and in this regard the AO had not made any further enquiry. The assessee had also submitted following documentary evidences during assessment proceedings:- 1. Copy of Relevant Bank Statement of the assessee Copy of ITR Acknowledgement, Computation of Total Income & Balance sheet with schedules of the assessee. 2. The assessee's books of Accounts are audited and were submitted to the learned AO and there were no adverse remarks of the auditors in the said Report. Therefore, the transaction entered into by the assessee cannot be doubted. 3. Details of purchases and sales register for AY 2017-18 Details of sample sales bill 4. Details of Top ten parties wherein sale made including Name, Postal Address, PAN and amount of sales. 5. Details of top ten parties wherein Purchase made including Name, Postal Address, PAN and amount of purchase. Monthly stock summary 6. Monthly Cash Statement 20. Thus in this way the assessee has discharged its initial onus of proving nature and source of cash deposits which are duly recorded in ....
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....further of the view that the entire sale including the sale pointed out by AO is supported by corresponding purchase whose payment had been made through banking channel. The AO had also not disputed the purchase because complete ledger of purchase as well as sale account was furnished to the AO at the time of assessment itself. In this regard reliance was placed upon the following judicial precedents. RELIANCE PLACED ON FOLLOWING JUDICIAL PRECEDENTS:- Sr. No. Citation Observation 1. IN THE ITAT JAIPUR BENCH 'SMC' Jitendra Kumar Tahilramani v. Income-tax Officer IT APPEAL NO. 928 (JP.) OF 2024 [ASSESSMENT YEAR 2017-18] INCOME TAX : Where assessee, engaged in trading of gold and diamond jewellery deposited cash of Rs. 50 lakhs during demonetization period in his bank accounts and claimed that said cash was proceeds of cash sales, since assessee furnished all sales invoices with complete year cash book, names, addresses and telephone numbers of person to whom cash sales were made, such sales could not be considered as unexplained money and that too when profit derived from those sales proceeds was already taxed as part of sales Section 68, read....
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....tial that credit should be from the books of account of the assessee maintained for that year. Once, the books of account maintained by the assessee is treated as no longer in existence by rejecting those books u/s.145(3) of the Act, then for all purposes including for the purpose of section 68 of the Act, said books of account ceased to exist and hence, those books cannot be relied upon to make addition towards unexplained credit u/s.68 of the Act. This legal position is supported by the decision of Hon'ble High Court of Rajasthan in the case of CIT vs. G.K. Contractor, supra, where it was clearly held that "AO having estimated the profit by applying a higher net profit rate to total contract receipts after rejecting assessee's books of account by invoking the provisions of section 14(3), no separate addition can be made on account of cash credit u/s.68, even though the assessee has failed to discharge its onus of proof in explaining the amount shown in the books of account". The Hon'ble High Court of Punjab and Haryana, in the case of CIT vs. Aggarwal Engg. Co., (2008) 302 ITR 0246 had considered an identical issue and held that "no separate addition on account of cas....
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....picious. The Commissioner of Income Tax (Appeals) as well as the Tribunal Dharmendra Doshi, Indore. have rightly held that as books of accounts were rejected in their entirety, the Assessing Officer could not rely upon any entry in the books of accounts for making an addition of Rs. 1,98,298/-. A bare reading of Section 68 of the Act would reveal that it would not apply to a situation where account books have not been rejected. 10. Therefore, in view of above discussion, we are of the considered view that the addition made by AO in present case is neither tenable on merit nor on legal provisions of section 68. Therefore, the AO is directed to delete the addition. The assessee succeeds in this appeal. 11. Resultantly, this appeal is allowed. 4. Income Tax Officer 22(3)(6), Mumbai vs Sambhav Shelter, Mumbai I.T.A. No.811/Mum/2023 Assessment Year: 2018-19 Books of Account cannot be rejected for mere Inadvertent Error in TAR 5. HIGH COURT OF RAJASTHAN Commissioner of Income Tax v. Ceramic Industries D.B. IT APPEAL NOS. 117 OF 2008 AND OTHERS Section 145 of the Income-tax Act, 1961 - Method of accounting - Rejection of accounts When inconsistency in inpu....
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....posits) - Assessment year 2017-18 - Assessee-company was engaged in business of selling dry fruits - Post demonetization, assessee deposited cash amounting to Rs. 180.53 crore in its bank accounts - Assessing Officer held that cash deposits made by assessee represented unaccounted income and accordingly, made additions - Tribunal analysed data pertaining to cash sales and cash deposits made in relevant assessment year as against two earlier assessment years and noted that in year of demonetization percentage increase in sales was less than earlier year - He, thus, held that growth in sales compared to earlier two years showed similar trend, and it could not be said that assessee had booked non-existing sales in its books post-demonetization - Furthermore, revenue made no allegation that assessee had backdated its entries - Whether since assessee placed material on record that cash deposits made with banks more or less corresponded with cash sales, it could only be concluded that there was growth in assessee's business and impugned addition was to be deleted - Held, yes [Paras 16.9 and 17.6] [In favour of assessee] 7. HIGH COURT OF MADRAS R.C. Auto Centre (S.I.) v. Income ....
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....y Sales Tax/VAT Department and not doubted by Assessing Officer - There was sufficient stock available with assessee to make cash sales - Whether therefore, sales made by assessee out of existing stock were sufficient to explain deposit of cash (obtained from realization of sales) in bank account and could not have been treated as undisclosed income of assessee and accordingly, impugned addition made by Assessing Officer was not justified - Held, yes [Paras 10.5, 10.7, 10.9, 10.11 and 10.13] [In favour of assessee] 8. IN THE ITAT HYDERABAD BENCH 'A' Meena Jewellers Extension (P.) Ltd. v. ACIT IT APPEAL NOS. 328 TO 330 & 385 (HYD.) OF 2024 [ASSESSMENT YEARS 2017-18 & 2018-19] INCOME TAX : Before going for best judgment assessment under section 144, Assessing Officer needs to reject books of account of assessee with valid reason and unless Assessing Officer rejects books of account with valid reasons, he cannot resort to estimation of profit even in case of best judgment assessment I. Section 144, read with section 145, of the Income-tax Act, 1961 - Best Judgment assessment (Estimation of) - Assessment year 2017-18 - Whether before going for best judgment as....
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....ons only on basis of bank statements, this issue needed to be remanded back to file of lower authorities Section 69A of the Income-tax Act, 1961 - Unexplained moneys (Demonetization period) Assessment year 2017-18 - Whether in order to make additions under section 69A, Assessing Officer has to give a clear finding that assessee is owner of money and can not explain source of said money to satisfaction of Assessing Officer - Held, yes - Assessing Officer made additions towards cash deposits during demonetization period as unexplained money under section 69A - Assessee claimed that cash deposited during demonetization period was out of sales recorded in books of account of assessee during relevant period Whether since Assessing Officer had not recorded any findings as to how money was in nature of unexplained money and made additions only on basis of bank statements, this issue needed to be remanded back to file of lower authorities for reexamination of facts Held, yes [Para 12] [Matter remanded] 9. IN THE ITAT JAIPUR BENCH 'A' Income-tax Officer v. Raj Kumar Nowa IT APPEAL NO. 165 (JP.) OF 2022 [ASSESSMENT YEAR 2017-18] INCOME TAX : Where assessee engaged in j....
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.... by payment of VAT - Held,yes - Whether further, since sales were below prescribed limit so it was not compulsory or mandatory under Income-tax Act to collect information related to full name, address and PAN of customer especially when, in preceding financial years, subsequent financial years and other periods of this same financial year, same practice was being followed by assessee- Held, yes - Whether therefore, sales could not be doubted on surmises and conjectures merely due to non-furnishing of address and PAN of customer Held,yes - Whether therefore, addition made under section 68 in respect of unaccounted sale was to be deleted - Held, yes [Para 5] [In favour of assessee] 10. IN THE ITAT JAIPUR BENCH 'A' ACIT v. Chandra Surana IT APPEAL NO. 166 (JP.) OF 2022 [ASSESSMENT 2017-18 INCOME TAX : Where assessee-jeweller claimed that cash deposited in bank account during demonetization period pertained to cash sale transaction of gold jewellery, since assessee had maintained regular books of account, bills, vouchers and day-to day stock register having complete quantitative details of cash sale transaction of jewellery, addition under section 68 could not be ma....
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....nk accounts - Assessee claimed that source for cash deposits was out of advance received from customers for gold scheme - Assessing Officer treated cash receipts as unexplained cash credit under section 68 on ground that assessee had failed to prove genuineness of credits found in his bank account - It was noted that assessee had filed necessary books of account, including cash book, sales register, sale bills, purchase details along with bills and stock details to prove that there was no discrepancy in books of account - Further, assessee had reported sales made before date of demonetization to GST authorities - Whether since assessee received trade advances in cash and same had been subsequently converted into sales by issuing sale bills, then, said trade advance could not be examined in light of provisions of section 68- Held, yes - Whether furthermore assessee had furnished name and address of customers from whom it had received cash for sale of jewellery and law did not mandate assessee to collect PAN details of persons, if sale value of jewellery did not exceed Rs. 2 lakhs, assessee had satisfactorily discharged onus cast upon to furnish name and address of persons and thus, ....
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....x Act, 1961 - Cash credit (Deposits during demonetization period) - Assessment year 2017-18 - Assessing Officer based on statement of financial transactions data noted that assessee had deposited cash amounting to Rs. 1.96 crores during demonetization period in her bank accounts and treated entire amount as unexplained cash credit under section 68 on ground that assessee had failed to provide satisfactory evidence for these deposits - Commissioner (Appeals) having found that actual deposits during relevant period amounted to Rs. 1.11 crores as supported by bank statements and opening balance of Rs. 1.20 crores on 911-2016 was more than sufficient to cover cash deposits made during demonetization period deleted addition made under section 68 - Whether since findings of Commissioner (Appeals) were based on a detailed examination of documents submitted by assessee and cash deposits were fully explained as part of assessee's regular business turnover, Commissioner (Appeals) was justified in deleting addition - Held, yes [Paras 7.6 and 7.7] [In favour of assessee] 14. IN THE ITAT CHANDIGARH BENCH 'A' Smt. Charu Aggarwal v. Deputy Commissioner of Incometax IT APPEAL NOS.....
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....s year, it was liable to be included in the total income and an enquiry whether for the purpose of bringing the amount to tax it was from a business activity or from some other source was not relevant". 18. Hon 'ble Rajasthan High Court Smt. Harshila Chordia vs ITO (2008) 298 ITR 349 (Raj.) Wherein it was held that - "Addition u/s 68 could not be made in respect of the amount which was found to be cash receipts from the customers against which delivery of goods was made to them" 19. CIT v. Vishal Exports Overseas Limited (Gujarat High Court) Tax Appeal No. 2471 of 2009 in Para 5/7 it was held that 5. Revenue carried the matter in appeal before the Tribunal. The Tribunal did not address the question of correctness of the C.I.T. (Appeals)'s conclusion that amount of Rs. 70 lakhs represented the genuine export sale of the assessee. The Tribunal however, upheld the deletion of Rs. 70 lakhs under section 68 of the Act observing that when the assessee had already offered sales realisation and such income is accepted by the Assessing Officer to be the income of the assessee, addition of the same amount once again under section 68 of the Act would tantamount to double ....
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.... of the assessee. When a receipt is accounted for as income, no separate addition of the same amount as income of the assessee under any other Section of the Act can be made as it would be a double addition. In the result, we delete the addition made and allow its claim of the assessee. 23. * Nilkantha Narayana Singh's case (supra); * Kanpur Steel Co. Ltd. v. CIT [1957] 32 ITR 56 (All), approved in LalchandBhagatAmbica Ram v. CIT [1959] 37 ITR 288 (SC); * Asstt. CIT v. Dr. Anil Kumar Verma [IT Appeal No. 274 (Agra) of 2013, dated 4-9-2019]; * Salem SreeRamavilas Chit Co. (P.) Ltd. v. Dy. CIT [2020] 114 taxmann.com 492 (Mad)] Once the assessee is able to explain the sources of deposits in the bank based on the cash book, which is not disputed and rejected by the Revenue, no addition on the basis of the bank deposits can be made out 24. ITO v. Vishan Lal's ITA 634/LKW/2014 ; Subash Chand Sharma v. ITO -ITA No.327/Agra/2017, dtd.31.5.19 The assessee has no other sources of income The gross receipts and the income Subash Chand earned there from, as admitted in the Sharma v. ITO -ITA assessee's Income Tax return under No.327/Agra/2017, the he....
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....upply them as and when called for cannot be regarded as a circumstance giving rise to a suspicion with regard to the genuineness of the transactions. Kishore Jeram Bhai Khaniya Vs Income Tax Officer (ITAT Delhi) (ITA No. 1220/Del/2011) b. The Vishakapatnam ITAT in the matter of M/ S Hirapanna Jewellers I.T.A. No.253/Viz/2020 and CO No.02/Viz/2021, A.Y.2017-18 dated 12.05.2021 has held on identical facts and of the case has held as under: " In the instant case, the facts clearly support that the assessee has made the sales and there were sufficient stocks to meet the sales. Thus, the facts of the assessee's case are clearly distinguishable. The Ld.DR further relied on the decisions of Kale Khan Mohammad Hanif, 50 ITR1 (SC), wherein, the Hon'ble Supreme Court held that the AO is permitted to make addition of unexplained cash credits even though the income is estimated on sales. In the instant case, the AO had accepted the sales and no unexplained cash credits were found, thus, the case law relied upon by the Ld.DR is also distinguishable on the facts of the case. The Ld.DR relied on the decision of CIT Vs P.MohanaKala, 161 Taxmann 169, CIT vs Devi Prasad Vishwanath ....
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....gh Court in the case of Kailash Jewellery House (Supra) and the Hon'ble Gujarat High Court in the case of Vishal Exports Overseas Ltd. (supra),Hence, we do not see any reason to interfere with the order of the Ld. CIT(A) and the same is upheld. The assessee filed cross objections supporting the order of the ld. CIT(A). Since, the appeal of the revenue is dismissed, the cross objection filed by the assessee becomes infructuous, hence, dismissed." The Ld. Delhi Tribunal in the case of AGONS GLOBAL P LTD v/s ACIT (Appeal No 3741 to 3746/Del/2019 has held that mere addition made on this ground that there is deviation in ratio is not proper. When the assessee had regular cash sale and deposit of cash in bank accounts and if nothing incrementing is found contrary then addition u/s 68 of such cash sale would tantamount to double taxation. The whole purpose of the Departmental Authorities in singling out the cash deposited during the demonetization period as arising out of unexplained sources(as against the accepted position in the past and the subsequent periods) is to somehow trigger the provisions of section 115BBE read with section 68 of the Act to the income....
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....t in the case of Addl. CIT vs. Ghai Lime Stone Co. (1983) 144 ITR 140(MP). It is evident from these judicial rulings that trade advances or cash received against which goods is supplied subsequently is not a cash credit as contemplated by section 68. f. Shree Sanad Textiles Industries Ltd. V. DCIT (Ahmedabad ITAT) ITA No. 1166/Ahd/2014 in paras 9.6/9.7 it was held that "We also note that the provisions of section 68 cannot be applied in relation to the sales receipt shown by the assessee in its books of accounts. It is because the sales receipt has already been shown in the books of accounts as income at the time of sale only." We are also aware of the fact that there is no iota of evidence having any adverse remark on the purchase shown by the assessee in the books of accounts. Once the purchases have been accepted, then the corresponding sales cannot be disturbed without giving any conclusive evidence/finding. In view of the above we are not convinced with the finding of the learned CIT(A) and accordingly we set aside the same with the direction to the AO to delete the addition made by him." g. New Pooja Jewellers v. ITO (Kolkata ITAT) ITA No. 1329/Kol/....
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.... assessing officer or the Commissioner that apart from depositing this cash into bank as explained by the assessee, there was any other purposes it is used by the assessee of these amounts k. CIT vs. Goa Sponge and Power Ltd (13/02/2012) Tax Appeal No. 16 of 2012 (High Court-Bombay)" Once the authorities have got all the details, including the name and addresses of the shareholders, their PAN/GIR number, so also the name of the Bank from which the alleged investors received money as share application, then, it cannot be termed as "bogus". The controversy is covered by the judgements rendered by the Hon'ble Supreme Court in the case of Lovely Exports Pvt Ltd, vs. CIT, (2008) 216 CTR (SC) 195, as also by this Court in CIT vs. Creative World Tele films Ltd, (2011) 333 ITR 100 (Bom). In such circumstances, we are of the view that the Tribunal's finding that there is no justification in the addition made under Section 68 of the Income Tax Act, 1961 neither suffers from any perversity nor gives rise to any substantial question of law." l. CIT vs. Creative World Tele films Ltd (2011) 333 ITR 100 (Born-High Court) "The question sought to be raised in the appeal wa....
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.... held that the identity of the shareholder alone is required to be proved, in case of the capital contributed by the shareholders. Accordingly CIT(A) and the Tribunal has not committed any illegality in allowing the appeal of the assessee. We do not find any illegality in the judgment of the CIT(A) and the Tribunal." o. CIT vs. JayDee Securities & Finance Ltd (2013) 32Taxmann.com91 (All-High Court) "The Tribunal recorded findings that the assessee had produced the return of income filed by the relevant shareholders who had paid share application money. The assessee had also produced the confirmation of shareholders indicating the details of addresses, PAN and particulars of cheques through which the amount was paid towards the share application money. The Tribunal thereafter relied upon the judgment of the Supreme Court in CIT V. Lovely Exports (P.) Ltd wherein it was held that if the assessee produces the names, addresses, PAN details of the shareholders then the onus on the assessee to prove the source of share application money stands discharged. If the Assessing Authority was not satisfied with the creditworthiness of the shareholders, it was open to the Assessing Auth....
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.... regard to their creditworthiness, the Revenue could always bring the sum in question to tax in the hands of the creditors or sub- creditors." r. CIT vs. Al Anam Agro Foods (P.) Ltd (2013) 38 Taxmann.com 375 (All- High Court) Tribunal, however, held that since identity of share holders stood proved on record, amount of share application money could not be added to income of assessee. According to Tribunal, in such a case amount could be taxed in hands of persons who had invested" s. CIT vs. Dwarkadhish Investment (P) Ltd (2011) 330 ITR 298 (Del-High Court) "Just because the creditors/share applicants could not be found at the address given, it would not give the Revenue the right to invoke s. 68- Revenue has all the power and wherewithal to trace any person-Moreover, it is settled law that the assessee need not to prove the 'source of source'- In the instant case, the Tribunal has confirmed the order of the CIT(A) deleting the impugned addition holding that the assessee has been able to prove the identity of the share applicants and the share application money has been received by way of account payee cheques." t. CIT vs. Namastey Chemicals Pvt Lt....
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.... was found in absence of any illegality much less any perversity too to interfere with the order of the both these authorities, who had concurrently held the due details having been proved. The assessee company had presented the necessary worth proof bef ore both the authorities and it was not expected by the assessee company to further prove the source of the deceased." w. CIT vs. NikunjEximp Enterprises (P.) Ltd (2013) 35Taxmann.com384 (Bom) "Whether merely because suppliers had not appeared before Assessing Officer or Commissioner (Appeals), it could not be concluded that purchases were not made by assessee - Held, Yes. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were in fact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent- assessee" x. CIT vs. Samir Bio- Tech Pvt Ltd (2010) 325 ITR 294 (Del High Court) "Identities of the subscribers are not in doubt. The transactions have also been undertaken th....